-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bc4ULyf2qORuU/5Pt57KeFNyXqP6Q+m1kuYGc1QUxLeJphyUFE6GMGeMWFVdK/ho dZmzIYncQbCPvenTpA4UiQ== 0000891020-02-000193.txt : 20020415 0000891020-02-000193.hdr.sgml : 20020415 ACCESSION NUMBER: 0000891020-02-000193 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOICESTREAM WIRELESS CORP /DE CENTRAL INDEX KEY: 0001097609 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 911983600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-29667 FILM NUMBER: 02566432 BUSINESS ADDRESS: STREET 1: 12920 SE 38TH STREET CITY: BELLEVUE STATE: WA ZIP: 98006 BUSINESS PHONE: 4253784000 MAIL ADDRESS: STREET 1: 3650 131ST AVENUE SE STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 FORMER COMPANY: FORMER CONFORMED NAME: VOICESTREAM WIRELESS HOLDING CORP DATE OF NAME CHANGE: 19991025 10-K 1 v79584e10-k.txt FORM 10-K FOR PERIOD ENDING DECEMBER 31, 2001. ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO ____________. COMMISSION FILE NUMBER 000-29667 VOICESTREAM WIRELESS CORPORATION -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 91-1983600 -------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 12920 - 38TH STREET S.E. BELLEVUE, WASHINGTON 98006 -------------------- ----- (Address of principal executive offices) (Zip Code) (425) 378-4000 -------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. TITLE SHARES OUTSTANDING AS OF MARCH 1, 2002 ----- -------------------------------------- Common Stock, par value $.000001 per share 269,738,185 This registrant meets the conditions set forth in General Instruction I (1) (a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format. ================================================================================ VOICESTREAM WIRELESS CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001 TABLE OF CONTENTS
PART I Item 1. Business (Abbreviated pursuant to General Instruction I (2).) ...................................... 3 Item 2. Properties................................................................................. 17 Item 3. Legal Proceedings.......................................................................... 17 Item 4. Submission of Matters to a Vote of Security Holders (Omitted pursuant to General Instruction I (2).) .......................................... 17 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters (Omitted pursuant to General Instruction I (2).)........................................... 17 Item 6. Selected Consolidated Financial Data (Omitted pursuant to General Instruction I (2).) .......................................... 17 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (Abbreviated pursuant to General Instruction I (2).)....................................... 18 Item 7A. Quantitative and Qualitative Disclosures About Market Risk................................. 26 Item 8. Financial Statements and Supplementary Data................................................ 27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... 27 PART III (Omitted pursuant to General Instruction I (2).): Item 10. Directors and Executive Officers of the Registrant......................................... 27 Item 11. Executive Compensation..................................................................... 27 Item 12. Security Ownership of Certain Beneficial Owners and Management............................. 27 Item 13. Certain Relationships and Related Transactions............................................. 27 PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.......................... 27
2 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995. Information contained or incorporated by reference herein that is not based on historical fact, including without limitation, statements containing the words "believes," "may," "will," "estimate," "continue," "anticipates," "intends," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and regionally; technology changes; competition; changes in business strategy or development plans; the high leverage of VoiceStream; the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted against VoiceStream; and other factors referenced in VoiceStream's filings with the Securities and Exchange Commission. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. VoiceStream disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. Unless the context requires otherwise, "VoiceStream," "we," "our" and "us" include us and our predecessors and subsidiaries. PART I ITEM 1. BUSINESS INTRODUCTION VoiceStream Wireless Corporation ("VoiceStream" or "we") provides personal communications services ("PCS") primarily in urban markets in the United States using the Global System for Mobile Communications, or GSM, technology. We are one of the six largest, nationwide, PCS service providers, currently operating in 20 of the top 25 markets and 37 of the top 50 markets in the United States. We are a wholly-owned subsidiary of T-Mobile International AG ("T-Mobile"). T-Mobile is a wholly-owned subsidiary of Deutsche Telekom AG ("Deutsche Telekom"), and is the holding company for Deutsche Telekom's principal GSM wireless operations in Europe and the United States. We are a member of the North American GSM Alliance LLC ("North American GSM Alliance"), a group of United States and Canadian digital wireless PCS carriers. The North American GSM Alliance helps provide seamless GSM wireless communications for their members in North America and internationally. The North American GSM Alliance also sponsors working standards groups for GSM North America, which is a regional body of the GSM Association. The members of the GSM Association provide digital GSM wireless services to over 600 million customers across five continents. GSM systems account for more than two-thirds of the worldwide digital wireless telephone market. We have international roaming agreements with 187 of the major GSM operators worldwide, providing service in 84 countries, and we anticipate that we will enter into roaming agreements with operators in additional countries to increase world coverage and convenience for our customers. 3 VoiceStream was incorporated in June 1999 as a Delaware corporation to act as the parent company for business combinations involving our predecessor, now named VS Washington Corporation ("VS Washington"). On February 25, 2000, pursuant to a reorganization agreement approved by the shareholders of VS Washington and Omnipoint Corporation ("Omnipoint"), VoiceStream, as a holding company, became the parent of VS Washington and of Omnipoint. On May 4, 2000, VoiceStream completed the acquisition by merger of Aerial Communications, Inc. ("Aerial"). On December 14, 2000, we acquired controlling interests in VoiceStream PV/SS PCS, L.P. ("VS PCS"); VoiceStream GSM I, LLC ("VS GSM"), VoiceStream GSM II Holdings, LLC ("VS GSM II") and VoiceStream GSM III Holdings, LLC ("VS GSM III"). On February 14, 2001, we acquired the remaining minority interests in VS PCS and VS GSM. On May 31, 2001, Deutsche Telekom acquired 100% of the common shares of VoiceStream. The merger qualified as a tax-free reorganization. Upon consummation of the merger and the transfer by Deutsche Telekom of all of its VoiceStream common shares to T-Mobile (referred to herein as "the T-Mobile merger"), VoiceStream common shares were deregistered and delisted from NASDAQ and are no longer publicly traded. Prior to May 3, 1999, VS Washington was an 80.1% owned subsidiary of Western Wireless Corporation ("Western Wireless"). The remaining 19.9% was owned by Hutchison Telecommunications PCS (USA) Limited, a subsidiary of Hutchison Whampoa Limited, a Hong Kong company. On May 3, 1999, VS Washington was formally separated in a spin-off transaction from Western Wireless' other operations. Powertel, Inc. ("Powertel"), another subsidiary of T-Mobile, provides PCS service primarily in the southeastern United States under the VoiceStream brand name. Powertel also advertises, supports and bills for its services under the VoiceStream brand name. Powertel's wireless network is also fully integrated with our network such that, from a customer's perspective, its services are indistinguishable from ours. We do not compete with Powertel in the markets it serves nor does Powertel compete in our markets. Following the T-Mobile Merger, Powertel's employees became employees of VoiceStream and we charge Powertel for the compensation and benefit costs of our employees working exclusively on Powertel business. We perform certain administrative and other functions on behalf of Powertel where cost or operating efficiencies can be achieved through centralization of those functions and allocate a portion of our costs of providing these services to Powertel. Strategy Our business strategy continues to be focused on capturing an increasing share of the growing United States market for wireless services in order to become one of the leading United States providers of such services over the long term and a key part of T-Mobile's international network. To accomplish this we will: - - Establish the T-Mobile brand in the United States: In 2002 we will focus on building equity in the T-Mobile brand. During the year, we intend to launch new services and markets using the T-Mobile brand and by the end of the year plan to complete the consolidation of our wireless operations and marketing efforts under the T-Mobile brand name. - - Penetrate the rapidly growing, broad consumer market segment: We will seek to further penetrate the consumer segment of the market by striving to provide the best value in wireless services with more minutes, more features and more services than other wireless providers in the markets we serve. We will continue to market such features and services under the "Get More" message. This marketing message is currently conveyed, in part, by company spokesperson, actress Jamie Lee Curtis. - - Establish a leadership position in the mobile data market: In 2001 we launched our General Packet Radio Service ("GPRS"), high-speed wireless data services across our entire network, providing our customers with wireless Internet access and the ability to use multimedia applications. We will build on the technical advantages of GSM/GPRS, the timing advantage of our nationwide launch and increase adoption of this service over the next year by: (1) delivering a range of unique, improved devices including phones, Palm and Windows-based PDAs and data cards, (2) providing enhanced content and functionality that is relevant to the consumer and business mobile consumer, and (3) effectively reaching targeted market segments through our extensive and diverse distribution network. 4 Additionally, we acquired the wireless broadband communications assets of MobileStar Network Corporation in January 2002. We will begin commercially marketing these services under the T-Mobile brand by the end of 2002 as a complement to our nationwide GSM/GPRS service. - - Build high quality networks with nationwide coverage: We will continue to build out our GSM/GPRS network to increase capacity and enhance call quality within and around the urban markets we currently serve. Our network, including that of Powertel and non-consolidated affiliates in which we hold minority interests, covers over 54% of the United States population. In addition, we will seek to expand the coverage of our network through the entry into additional markets to capitalize on our nationwide license footprint. - - Increase our spectrum holdings: We have assembled a nationwide PCS license footprint covering over 96% of the United States population, including Powertel licenses and licenses controlled and held by non-consolidated affiliates in which we hold minority interests. We will continue to seek opportunities to acquire additional PCS licenses, systems and/or operators, which are additive to our current footprint or increase our spectrum capacity. - - Expanded distribution network: We will continue to expand the existing extensive and diverse distribution network for selling our services and products as we enter new markets and expand our presence in existing markets. This distribution network features a mix of company-owned stores, exclusive and non-exclusive dealers, national retailers, on-line retailers (including VoiceStream's on-line store), value-added resellers, and a direct sales force targeting general business and national and strategic accounts. - - Achieve cost efficiencies through centralization and size: We will continue to centralize key business functions as we complete the integration of the operations of T-Mobile's United States affiliates. Such functions include marketing and customer care as well as administrative functions such as accounting and human resources in order to achieve greater economies of scale. We expect that our size and relationship with Deutsche Telekom will enable us to negotiate more favorable pricing and financing terms for the purchase of services, handsets and network equipment. - - Balance customer growth and operating cash flow: We will strive to balance our rate of subscriber growth with improvements in EBITDA and operating cash flow in order to operate and grow the business over the long term. Marketing, sales and customer service Our sales and marketing strategy is to increase our market penetration through continued growth for voice, data and messaging services in both new and existing markets. In addition, we target a customer base that we believe is likely to generate high monthly service revenues, while attempting to achieve a low cost of adding new customers. - - Marketing: As a result of our merger with T-Mobile, we are leveraging the success of our "Get More" marketing strategy in the United States to introduce "Global Wireless by T-Mobile" as part of the VoiceStream brand logo. We plan to phase out the VoiceStream brand name over the next year, forming a cohesive international wireless brand using the T-Mobile name. We believe the continued use of our "Get More" strategy, combined with the introduction and use of the global T-Mobile brand, will positively affect our subscriber growth. Our marketing efforts are focused primarily on the consumer market. We will expand these efforts to also target business and enterprise consumers with the introduction of new wireless data devices designed to take advantage of our high-speed wireless data network offerings. We market the "Get More" philosophy to both consumers and businesses by emphasizing that customers get more value for their money from our competitive pricing, enhanced features, functionality and applications, and by promoting the benefits of integrated voice, data and messaging services. 5 - - Sales: We sell our products and services through an extensive and balanced distribution network featuring company-owned stores, exclusive and non-exclusive dealers, national retailers, on-line retailers (including VoiceStream's on-line store), value-added resellers, and through a direct sales force targeting general business and national and strategic accounts. We believe that our local sales offices and retail stores provide the physical presence in local markets necessary to position VoiceStream as a quality local service provider, and give us greater control over both our costs and the sales process. Our training programs provide our sales employees with an understanding of our systems, products and services so that they, in turn, can provide information to prospective customers. Sales commissions generally are linked to subscriber revenue, type of service, activation levels and subscriber retention. We are both a retail and wholesale distributor of handsets and other wireless data devices, and we maintain inventories of these items. Although customers are generally responsible for purchasing or otherwise obtaining their own handsets or wireless data devices, we sell handsets and other wireless data devices below cost to respond to competition for new subscribers. We expect these handset subsidies to remain common industry practice for the foreseeable future. - - Customer service: Quality customer service is a significant element of our operating philosophy. We are committed to attracting and retaining customers by providing customer service that consistently exceeds the norm for wireless service providers. We maintain a customer service and technical assistance system with a well-trained staff to handle both routine and complex questions as they arise, 24 hours a day, 7 days a week. Customers can also manage their accounts on-line, adding features to their service, viewing and paying their bills through our web site. We continuously monitor customer churn (the rate of subscriber attrition) as a key indicator of customer satisfaction. We manage our churn rate through a program implemented by our sales force and customer service personnel that is intended to enhance customer loyalty and increase add-on sales and customer referrals. The program allows the sales staff to check customer satisfaction, as well as to offer additional calling features, such as voicemail, call waiting and call forwarding to achieve customer satisfaction. We also have an in-depth customer relationship marketing program that reaches customers at many points during their life-cycle, rewarding them for their loyalty as a VoiceStream customer. - - Intellectual property: We hold federal trademark registrations for the marks "VoiceStream," "VoiceStream Wireless and Design" (the VoiceStream logo), "Get More From Life," "Get More Plus," "The Get More Promise," "Familytime" and "MyVoiceStream.com". We have pending applications to register our other trademarks and service marks with the United States Patent and Trademark Office. Deutsche Telekom holds federal trademark registrations for the mark "T-Mobile" and numerous other trademarks and service marks. Products and services We provide a variety of wireless products and services designed to match a range of needs for business and personal use. As part of our Get More value offering, we include an array of features with every service plan. These features include built-in paging, voicemail, message alert, caller ID, call waiting, call hold and conference calling. Additionally, a hands-free device is included with every VoiceStream handset we package for sale. Through our PCS systems and GSM network, we offer several distinct services, features, and benefits including: - - Data Services: We offer a range of mobile data services aimed at both the general and business consumer at prices consistent with VoiceStream's "Get More" promise. These services are continually enhanced with greater and more refined content and increased functionality, applications and integration options. We will continue to bring a range of new wireless devices to market including handsets, Palm and Windows-based personal digital assistants ("PDAs") and data cards that will allow customers to take advantage of our high speed wireless data network. 6 - - iStream: We were the first United States carrier to launch high-speed wireless data services across our entire network. Our high-speed data service, called iStream, is based on GPRS technology -- an extension of GSM -- and provides consumers with an `always-on' connection to the Internet at speeds up to 56 kilobytes per second. The need to log on or dial up to a data session is eliminated, and customers pay for the amount of data sent and received, not the length of their session. iStream has many uses and benefits. Customers can access corporate and personal e-mail, contacts and calendar using ViAir's WirelessInbox(TM) Solution. Customers can download content such as movie times, traffic, weather and more to their wireless data devices and can use enabled phones as a modem to access the Internet and securely access their corporate Intranets via their laptop computers or PDAs. - - Ping Pong(TM): This two-way e-mail service gives customers the ability to send and receive text messages and e-mail to and from their wireless data devices. Customers can filter, forward and reply to home or office e-mails via their wireless data devices. - - MyVoiceStream.com Personal Portal -- We offer wireless Internet services through a personal portal called MyVoiceStream.com. The portal was built to fully integrate Internet functionality with wireless service in a manner that complements both technologies and provides a superior customer experience. Services offered through MyVoiceStream.com include but are not limited to: - AOL Instant Messenger(TM) Service -- Via MyVoiceStream.com, customers can sign up for AOL Instant Messenger(TM) and create Buddy Lists(R). With this service customers can see when their buddies are on-line, and have text conversations in real time via their handsets or wireless data devices. - Alerts -- Customers can choose from a broad array of Internet news and information services to be delivered to their handsets or wireless data devices. Message alerts can include stock prices, sports scores, daily horoscopes, weather and other news services. Customers personally select what information they want and schedule delivery when they want. - Ring tones -- Customers can choose from a large variety of personal ring tones to be downloaded to their handset. Custom faceplates and accessories are also available, allowing personalization of VoiceStream service that can be seen and heard. - On-line account management -- Customers can manage their VoiceStream account via the Internet. They can update their phone directory, view and pay their bill online and add features and services to their account. - - Prepaid wireless: Our prepaid wireless service requires advance payment for airtime in specific dollar denominations. Once the available airtime is consumed, the customer must "replenish" or prepay for additional airtime in order to continue using our service. - - Roaming: Our customers are able to roam throughout the United States and internationally, either on other GSM-based PCS systems or through the use of certain dual-mode handsets that can be used on 800 MHz analog cellular systems. GSM communications technology is the dominant world standard for digital wireless communications, which allows VoiceStream customers to enjoy one-handset, one-number worldwide service using a dual-mode or tri-band handset (900/1800/1900 MHz frequencies). As part of T-Mobile, VoiceStream customers with this type of handset are able to roam while in Europe and other parts of the world at a uniform cost per minute. We have international roaming agreements with more than 185 of the major operators worldwide, providing service in over 87 countries. We plan to continue to further expand our international coverage through new roaming agreements with international GSM providers. 7 - - Wireless Broadband: Through the acquisition of the assets of MobileStar on January 22, 2002, we have entered into the wireless broadband communications business, this service allows customers to access the Internet and their corporate Intranet remotely, using WiFi enabled laptops or PDA's, in public locations such as hotels, airports, restaurants, conference centers and coffeehouses. VoiceStream will expand the existing 802.11 WLAN network and commercially market these services under the T-Mobile brand by the end of 2002 as a complement to our nationwide GSM/GPRS service. - - Smart Card: We provide a "Smart Card" with every VoiceStream handset and wireless data device. Each Smart Card is a microchip programmed with the customer's billing information and a specified service package, as well as the customer's contact list and other preferences. This allows customers to obtain PCS connectivity automatically using a variety of terminal devices simply by inserting their Smart Card microchip into compatible PCS devices. - - Call security and privacy: The VoiceStream Smart Card, in association with GSM technology, provides increased security against fraud and eavesdropping by encoding every voice and data transmission. Each time a VoiceStream phone is turned on, information on the VoiceStream Smart Card is checked to ensure that it is a genuine subscription card. A Personal Identification Number ("PIN") can be stored on the Smart Card to prevent the use of stolen or lost cards or phones. In addition, each transmission is sent using a random code, making eavesdropping and over-the-air theft of phone and identification numbers extremely difficult. Only VoiceStream switches can read the encoded information, and therefore attempts to break into the system are more likely to be detected and eliminated. - - Over-the-air activation and over-the-air customer profile management: We are able to transmit changes in the customer's feature package, including mobile number assignment and personal directory numbers, directly to the customer's handset or wireless data device. - - Handsets and wireless data devices: We do not manufacture the handsets or wireless data devices used in our operations. The high degree of compatibility among different manufacturers' handsets and wireless data devices allows us to operate without being dependent upon any single source of such devices. We purchase handsets and wireless data devices primarily from major vendors including Motorola Inc., Samsung Electronics Co., Ltd. and Nokia Mobile Phones, Inc. A growing number of new vendors also manufacture specialized mobile data transmission devices including Palm and Windows-based PDAs, laptop data cards and other devices. These new devices will complement our high-speed wireless data services and will be introduced throughout the next year, as quantities are available. Markets and systems We currently own 344 PCS licenses covering over 237.9 million people. Together with Powertel, and through joint ventures in which we and Powertel have non-controlling ownership interests, we hold additional spectrum in 71 license areas covering 27.2 million people for a combined total of 265.1 million people, or 96% of the United States population. We also have a pending acquisition of a non-controlling interest in a new corporation that will control several PCS and cellular licenses in Puerto Rico. In exchange for this equity interest, we will contribute two PCS licenses, namely San Juan, PR (which we currently own) and Mayaguez, PR (over which we anticipate acquiring control during the second half of 2002), covering 3.9 million people. Additionally, we, together with the joint ventures noted above, have pending acquisitions of nine additional licenses covering 0.6 million people. We are one of the six largest, nationwide, PCS service providers, currently operating in 20 of the top 25 markets and 37 of the top 50 markets in the United States. Through our ownership of licenses as noted above, we have a covered population of 133.5 million people. Together with Powertel, and through joint ventures in which we and Powertel have non-controlling ownership interests, we have an additional covered population of 18.8 million people for a total covered population of 152.3 million people, or 54% of the United States population. 8 Joint ventures and other entities in which we hold interests We have entered into joint venture agreements and made other equity investments in operating companies primarily to obtain coverage for our customers in geographic areas where we ourselves could not otherwise obtain licenses, to share the cost of building and operating wireless networks and to promote the continued growth and expansion of GSM networks in North America. Since these entities are often in the early stages of building and operating wireless networks, they are generally expected to incur significant operating losses for an extended period of time and have significant capital requirements for the purchase of licenses and the build-out of the networks. The entities are typically funded initially with investments by the partners, but in some cases may also incur substantial third party debt to acquire licenses and build networks. Where we do not control the ventures or other entities, we generally use the equity method of accounting to reflect our interests in the results of operations of the entities. Where control exists through voting rights or other means, we consolidate the results of operations with our own. Cingular Joint Venture (GSM Facility) On November 1, 2001, pursuant to formation and contribution agreements, we entered into a joint venture with Cingular Wireless LLC ("Cingular") to share certain GSM network infrastructures in two major markets. Under the terms of the agreement, VoiceStream contributed its network assets in the New York Basic Trading Area ("BTA") and Cingular contributed its network assets in the Los Angeles and San Francisco Major Trading Areas ("MTAs") that cover most of California and parts of Nevada. VoiceStream and Cingular did not contribute licenses to the joint venture. Both VoiceStream and Cingular will independently market services under their respective brand names and bill and support their own customers in each of the markets. Network assets necessary for each party to perform proprietary customer-related functions were not contributed to the joint venture. The venture may be terminated under certain circumstances including mutual agreement of the parties. In the event the joint venture is terminated, under certain circumstances, the parties may have the right to exchange certain licenses with the other member. We account for the joint venture using the equity method. The joint venture will operate and continue to expand the network infrastructure in the two markets. Network operating costs incurred by the joint venture will be recovered from the partners based on the minutes of usage by the customers of each member in the respective markets. The joint venture will generate losses generally equal to the depreciation charges on network assets. Network capital costs will be shared by the members based on expected usage and will be funded through future capital contributions. Under the terms of the agreement, Cingular is required to fund the first $450.0 million of VoiceStream's share of future capital costs. The joint venture will enable us to enter the California market earlier and more cost effectively than would otherwise be possible. We expect to launch our services and begin adding customers in the California markets by mid 2002, provided the networks in both markets meet certain technical standards. Until we launch the market, VoiceStream's services in California will be limited to roaming for VoiceStream customers traveling from other VoiceStream markets. The pre-launch services provided by Cingular in New York will be similarly limited. 9 Designated Entities The Federal Communication Commission ("FCC"), which regulates the sale and use of radio spectrum by which PCS service is provided in the United States, has granted a narrow category of entities ("Designated Entities") the exclusive right to bid for and own "closed" C and F Block licenses for the initial five-year period following the award of the licenses. VoiceStream does not qualify as a Designated Entity, and so in order to continue expanding service to VoiceStream customers, we currently hold non-controlling ownership interests in two companies that qualify as Designated Entities, Cook Inlet/VS GSM IV PCS Holdings, LLC ("CIVS IV") and Cook Inlet/VS GSM V PCS Holdings, LLC ("CIVS V"). These two companies (hereafter referred to as the "CIRI Designated Entities") are controlled by Cook Inlet Region, Inc. ("CIRI"). Through wholesale reseller and other contractual arrangements, VoiceStream customers can obtain service in territories covered by the C and F Block licenses that are owned and operated by the CIRI Designated Entities. Our partners in these entities have the right to put their ownership interests in these entities, to VoiceStream in exchange for cash and Deutsche Telekom stock. Subsequent to December 31, 2001, CIRI has submitted their put exercise notice to VoiceStream for the conversion of their ownership interest in CIVS IV. The exchange is pending approval by the FCC and is expected to close by the end of the second quarter, 2002. Other entities in which we hold interests We hold non-controlling interests in the following entities that provide PCS service using GSM technology: Iowa Wireless Services, L.P.; NPI-Omnipoint Wireless, LLC; Wireless Alliance, L.L.C.; D&E/Omnipoint Wireless Joint Venture, L.P. ("D&E"); and Microcell Telecommunications, Inc. ("Microcell"), a publicly traded Canadian wireless service provider. We have entered into an agreement to acquire the controlling interest in D&E, subject to FCC approval, which is expected to close by the end of the first quarter of 2002. We do not expect these entities to generate income from their operations in the foreseeable future due to the high level of capital expenditures and high costs associated with expansion and operation of their networks. THE WIRELESS COMMUNICATIONS INDUSTRY Overview Since its introduction in 1983, wireless service in the United States has grown dramatically. The Cellular Telecommunications & Internet Association reports that there were 118 million wireless subscribers in the United States as of June 30, 2001. This represents a nationwide penetration rate of wireless services of more than 40%. The wireless communications industry generally includes one-way radio applications, such as paging or beeper services, and two-way radio applications, such as cellular, PCS and enhanced specialized mobile radio ("SMR") networks. Wireless communications systems use a variety of radio frequencies to transmit voice and data signals, which are licensed in distinct radio frequency blocks. PCS uses digital technology, which converts voice or data signals into a stream of digits that are compressed before transmission. A single radio channel may carry multiple simultaneous signal transmissions, enhancing capacity and allowing digital-based wireless carriers to offer new and enhanced wireless services. Such services include robust data transmission features, which allow "mobile office" applications such as facsimile, e-mail, wireless connections to computer/data networks, Internet capabilities and improved conversation privacy. Packet-switched digital technology, which underlies GPRS, further provides for substantially higher data transmission rates and continuous connectivity to data networks. As further discussed below, PCS competes directly with existing cellular telephone and data services, paging and SMR services. Cellular service initially used only analog-based technology, however, some carriers now provide both digital-based voice and wireless data services utilizing the cellular frequency band. Analog cellular providers generally offer a more limited number of voice features and do not offer the robust data transmission features available with digital technologies. PCS is increasingly competing with wired local communications services as PCS costs decline and the quality and range of services increases. 10 Operation of wireless communications systems Wireless communications system service areas, whether cellular or PCS, are divided into multiple "cells." In both cellular and PCS systems, each cell contains a transmitter, a receiver and signaling equipment (collectively referred to as the "cell site"). The cell site is connected by microwave or landline telephone lines to a switch that uses computers to control the operation of the wireless communications system for the entire service area. The signal strength of a transmission between a handset or wireless data device and a cell site declines as the handset or wireless data device moves away from that cell site. The system coordinates all aspects of call transmission to and from handsets and wireless data devices and ensures the "hand off" of calls to other cell sites, which prevents calls from being dropped as customers travel between coverage areas of individual cell sites. Wireless communications providers also establish interconnection agreements with local exchange carriers ("LECs") and interexchange carriers. Wireless system operators often enter into "roaming" agreements by which the operators will provide service to customers of other wireless service providers with compatible wireless systems who are temporarily located in or traveling through their service areas and where the customer's provider does not have service. Although PCS and cellular systems utilize similar technologies and hardware, they generally operate on different frequencies and use different technical and network standards. Dual-mode handsets, however, make it possible for users of one type of system to "roam" on a different type of system outside of their service area. PCS systems operate under one of three principal digital signal transmission technologies, or standards, that have been deployed by various operators and vendors: GSM, Time Division Multiple Access ("TDMA"), or Code Division Multiple Access ("CDMA"). GSM is the most widely used wireless technology in the world, serving over 600 million customers. It offers an open system architecture, is supported by a variety of vendors and allows GSM operators to achieve cost economies in infrastructure and mobile terminal equipment. GSM provides the benefit of a single phone number and transparent services on a global roaming basis. GSM also has high capacity, high voice quality and utilizes industry-leading encryption and authentication technology that provides customers with a high level of subscription and conversation privacy. GSM has always supported wireless data and currently supports high-speed wireless packet-based data transmission. This allows GSM operators to provide customers with enhanced Internet and mobile data services. CDMA has been widely deployed in North America and parts of Asia. It has easier interoperability with North American analog cellular systems than GSM. It uses a closed architecture, and is dependent upon intellectual property rights owned by a few manufacturers, that increases the cost of network equipment, handsets and wireless data devices. It has limited global deployment, thus limiting the customer's ability to use services based upon CDMA technology outside of the United States. GSM and TDMA are both based upon time-division of spectrum and are currently incompatible with each other and with CDMA. Accordingly, a customer on a system that utilizes GSM technology is currently unable to use a GSM handset or wireless data device when traveling in an area not served by GSM-based PCS operators, unless the subscriber carries a dual-mode handset or wireless data device. Such handsets and wireless data devices are expected to be commercially available in late 2002. Under a Memorandum of Understanding between GSM operators in the United States and Canada and the association of TDMA operators in the United States and Canada, there are plans to promote the interoperability of GSM and TDMA standards. Competition We operate in highly competitive markets. Competition for customers among wireless licensees is principally based upon the selection of services and features offered, the technical quality of the wireless systems, customer service, system coverage, capacity and price. The FCC's allocation of spectrum currently provides for at least six PCS licenses in each geographic area that may be held by a minimum of three separate PCS licensees, and two cellular licensees in each market. There is currently a spectrum cap that limits the amount of spectrum that a licensee can hold in any one market to 55MHz. This cap will be removed on December 31, 2002, which may lead to further consolidation of PCS service providers. 11 Our principal competitors are the national PCS and cellular providers in our markets, many of which have been operational for a number of years. Earlier market entry by these competitors often provided them the opportunity to gain greater coverage within individual markets and larger customer bases. Most of these competitors provide services in a large number of markets, enabling them to offer no or low cost roaming and toll calls. Many of our competitors in the national market provide services comparable to our PCS services and have the advantages of greater geographical coverage and more customers. These competitors include Verizon Wireless, Inc.; Cingular; AT&T Wireless Services, Inc. ("AT&T Wireless"); Sprint Spectrum L.P. ("Sprint PCS"); and Nextel Communications, Inc. We also compete with local or regional PCS providers, paging, dispatch, cellular, wireless service resellers and landline telephone service providers. We also face increased competition from entities providing similar services using other currently operational technologies or developing new technologies for use in the future. GSM technology, which has not historically been widely deployed by North American wireless operators, is based on a different network protocol than other North American standards. Thus, our customers may not be able to roam conveniently or at all on other PCS or cellular systems while traveling in areas of North America outside our service areas. Our principal PCS competitors generally use standards other than GSM. For example, Sprint PCS uses the CDMA standard, and AT&T Wireless and Cingular use the TDMA standard. However, AT&T Wireless and Cingular have begun overlaying their TDMA networks with GSM networks and have recently announced a proposed joint venture to further expand their GSM networks. We expect that the expansion of the GSM networks by these competitors will make it possible for our customers to have expanded roaming capabilities. The FCC generally requires all cellular and PCS licensees to provide service to resellers. A reseller of wireless service buys blocks of telephone numbers and capacity from licensed wireless carriers and then resells those services to its own customers. Thus, a reseller is both a customer of a wireless licensee's services and also a competitor of that licensee. Several small resellers currently operate in competition with us. The obligation of PCS licensees to provide service to resellers terminates on November 24, 2002. Additional competition to our PCS services may come from Wireless Communications Services ("WCS"), which can provide fixed or mobile telecommunications service, SMR service, and local multipoint distribution service ("LMDS"). We currently hold nine WCS licenses and numerous LMDS licenses and will compete in that market. SMR dispatch system operators have constructed digital mobile communications systems on existing SMR frequencies in many cities throughout the United States, including some of the markets in which we operate. We cannot foresee how technological progress or economic incentives will affect competition for these new services or from the auction of new spectrum for competitive wireless services. In all instances, the FCC reserves the right to amend or repeal its service regulations and auction schedules. 12 GOVERNMENTAL REGULATION Our telecommunications systems and operations are regulated by the FCC pursuant to the Communications Act of 1934 (the "Communications Act") and the Telecommunications Act of 1996 (the "Telecommunications Act") (collectively, the "Acts"). The FCC allocates licenses for radio frequency spectrum through competitive bidding, or auctions. The FCC generally allows all qualified applicants to bid on PCS licenses, with the exception of certain PCS licenses that are reserved for Designated Entities. The FCC has divided the United States into separate PCS geographic markets, with six or more PCS licenses on separate frequencies in each market. Licensees are generally allowed to divide their licenses further, either spectrally ("disaggregation"), or geographically ("partitioning"), or both, in private transactions after an auction, subject to certain restrictions. PCS licensees are also subject to other FCC rules and various recent industry developments that may affect our business operations as follows: - - FCC wireless spectrum cap: A single person or entity (or related group) currently can hold an attributable interest in PCS, cellular and SMR licenses totaling no more than 55 MHz in all markets where there is a significant overlap in a particular geographic area. The FCC raised the restriction from 45 MHz in urban markets to 55 MHz for all markets during 2001, and the entire restriction will expire on December 31, 2002. - - Renewal and construction requirements of PCS licenses: PCS licenses have a ten-year term, after which they must be renewed with the FCC. The renewal generally will be granted to a PCS licensee that has: (1) provided substantial service during its past license term and (2) substantially complied with applicable FCC rules and policies and the Acts. The FCC also mandates that PCS licensees construct facilities that provide adequate service to a certain percentage of the population of their licensed service areas within five, and in some cases, ten years of the initial license grant. Failure to meet these construction deadlines may result in forfeiture of the license. - - Compliance with antenna structure and other technical requirements: PCS systems are subject to certain Federal Aviation Administration regulations with respect to location, lighting and construction of transmitter towers and antennas and are subject to regulation under the National Environmental Policy Act and environmental regulations of the FCC. The FCC also mandates various technical parameters, and state or local zoning and land use regulations also apply to wireless systems. - - Transfers and assignments of PCS licenses: Subject to certain exceptions, the FCC's approval must be obtained prior to assigning or transferring control of a PCS license. Any acquisition or sale of licenses may also require prior review by the Federal Trade Commission and the Department of Justice if the transaction is over a certain size, as well as state or local regulatory authorities having competent jurisdiction. FCC rules restrict the voluntary assignment or transfer of control of Designated Entity licenses. During the first five years of the license term, assignments or transfers affecting control are permitted only to assignees or transferees that meet the FCC's Designated Entity eligibility criteria for holding such licenses. However, a licensee may assign or transfer control of a Designated Entity license to a non-Designated Entity within the five year restricted period if it has satisfied the first construction benchmark for the license. Upon transfer or assignment of a Designated Entity license to a non-Designated Entity during the initial license term, any installment payment plans are accelerated, and during the first five years of the initial license term, all or a portion of any bidding credits received by the Designated Entity must be forfeited. The FCC has authority to conduct random audits to ensure that licensees are in compliance with the FCC's Designated Entity eligibility rules, and any violations could result in license revocations, forfeitures or fines. 13 - - Relocation of microwave incumbents: The spectrum acquired by a PCS licensee may be encumbered by the fixed microwave systems of existing licensees. In order for the PCS licensees to operate their PCS systems, they may need to relocate these incumbent microwave licensees to other spectrum. The FCC has adopted transition and cost sharing plans to facilitate the relocation of incumbents and to ensure that subsequent PCS licensees that benefit from the earlier relocation by another carrier share the cost of the relocation. The transition and cost sharing plans expire on April 4, 2005, after which any remaining incumbents in the PCS spectrum band will be responsible for their own relocation costs. - - Foreign ownership: The Communications Act limits direct foreign ownership in a FCC license to 20 percent. The Communications Act also mandates that no more than 25 percent of a FCC licensee's capital stock may be indirectly owned or voted by non-United States citizens or their representatives, by a foreign government, or by a foreign corporation, absent a FCC finding that a higher level of foreign ownership is not inconsistent with the public interest. Indirect ownership in excess of 25 percent by persons or entities from countries that are signatories to the World Trade Basic Telecom Organization Agreement are presumed to be in the public interest. However, the FCC has the right to attach additional conditions to a grant of authority, and, in the exceptional case in which an application poses a very high risk to competition, to deny an application. In connection with the T-Mobile merger, the FCC authorized VoiceStream to have 100 percent indirect foreign ownership. - - Enhanced 911: The FCC has established timetables for making emergency 911 services available by cellular, PCS, and other mobile service providers, including enhanced 911 ("E911") services that provide the caller's telephone number, location and other useful information. This requirement extends to callers with speech or hearing disabilities; however, digital wireless service providers need not be capable of transmitting 911 calls from text type ("TTY") devices until June 30, 2002. PCS is a type of commercial mobile radio service ("CMRS"). The FCC requires CMRS carriers to adopt either a handset-based or network-based approach for identifying the location of an E911 caller. CMRS carriers have an ongoing obligation to comply with various accuracy standards and implementation deadlines imposed by the FCC. In September 2000, the FCC granted VoiceStream a limited waiver of such accuracy standards. VoiceStream, by this waiver, is permitted to deploy a "hybrid" location solution called Enhanced Observed Time Difference of Arrival ("EOTD"), which combines both network-based and handset-based technologies, subject to certain conditions. Pursuant to the waiver, VoiceStream must meet various on-going deployment benchmarks by specific dates and must have a 95 percent penetration of location capable handsets among its subscribers by the end of 2005. VoiceStream is currently seeking approval from the FCC for a limited modification of those interim deployment benchmark dates. - - Local Exchange Carriers/CMRS interconnection: FCC rules require LECs to provide CMRS carriers interconnection within a reasonable time after it is requested, unless such interconnection is not technically feasible or not economically reasonable. Interconnection allows the completion of calls between wireless and wireline phones. CMRS providers are entitled to reciprocal compensation arrangements with LECs, in which CMRS providers can collect the same charges for terminating wireline-to-wireless traffic on their systems that the LECs charge for terminating wireless-to-wireline calls, and prohibits LECs from charging CMRS providers for terminating LEC-originated traffic. There is an on-going FCC rulemaking proceeding to reexamine all of its currently regulated forms of intercarrier compensation, including the existing reciprocal compensation mechanism for LEC-CMRS interconnection, which may result in substantial modification of the FCC's interconnection rules, and may materially affect our business. The impact of such modifications cannot be determined until the FCC issues its decision in this proceeding. - - Universal service: The goal of universal service is to ensure the provision of basic and enhanced telecommunications services to all areas in the United States, including high-cost and low-income areas. Wireless service providers are eligible to receive universal service subsidies, but also are required to contribute to both federal and state universal service funds. For the fourth quarter of 2001, the FCC's universal service contribution factor amounted to 6.9 percent of interstate and international telecommunications revenues. Many states are also developing state universal service fund programs to which CMRS carriers are required to contribute. 14 - - Wireless local number portability: CMRS carriers must provide wireless local number portability ("LNP"), which enables customers to migrate their landline and cellular telephone numbers to a PCS carrier and from a PCS carrier to another service provider. CMRS carriers are required to implement LNP in the top 100 Metropolitan Statistical Areas by November 24, 2002. The FCC is currently considering a petition filed by another carrier that seeks permanent forbearance for CMRS carriers from LNP. - - CALEA: The Communications Assistance for Law Enforcement Act ("CALEA") requires telecommunications carriers to ensure that their facilities are technically capable of assisting law enforcement officials' use of wiretaps and like devices to intercept or isolate customer communications. Although all CMRS carriers must comply with CALEA, the FCC has temporarily suspended some of its CALEA related rules because of a decision by the Court of Appeals for the District of Columbia questioning the adequacy of those rules. - - CMRS automatic roaming: The FCC is currently considering whether it should adopt "automatic" roaming rules for CMRS carriers and phase out the current "manual" roaming requirement. Manual roaming requires the customer to take additional action to establish a contractual relationship with a host carrier to carry a call that is placed outside the customer's home area. Most wireless carriers have already entered into voluntary automatic roaming agreements with other carriers so that their customers do not have to take such additional steps. The FCC has not yet issued a decision on this matter. - - Health effects of wireless handsets, wireless data devices and cell sites: Media reports have suggested that radio frequency emissions from handsets, wireless data devices and cell sites may raise various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Research and studies are ongoing. Whether or not such research or studies conclude there is a link between radio frequency emissions and health, these concerns over radio frequency emissions may discourage the use of handsets and wireless data devices and may result in significant restrictions on the location and operation of cell sites, all of which could have a material adverse effect on VoiceStream's results of operations. VoiceStream is also subject to current, and potential future, litigation relating to these health concerns. Several class action lawsuits have been filed against VoiceStream, several other wireless service operators and several wireless phone manufacturers, asserting product liability, breach of warranty and other claims relating to radio frequency transmissions to and from handsets and wireless data devices. The complaints seek substantial monetary damages as well as injunctive relief. The defense of these lawsuits may divert our management's attention, and we may be required to pay significant awards or settlements, and may incur significant expenses in defending these lawsuits. VoiceStream may be subject to potential litigation relating to the use of handsets and wireless data devices while driving. Some studies have indicated that using these devices while driving may impair drivers' attention. Litigation relating to accidents, deaths or serious bodily injuries allegedly incurred as a result of use of these devices by a driver could result in significant monetary damages awards and adverse publicity. Legislation regarding the use of handsets and wireless data devices while driving may adversely affect us. Legislation has been proposed in the United States Congress and many state and local legislative bodies to restrict or prohibit the use of wireless phones while driving motor vehicles. To date, the State of New York and a small number of localities in the United States have passed such laws, and similar laws have been enacted in other countries. These laws, or if passed, other laws prohibiting or restricting the use of wireless phones while driving, could reduce sales, usage and revenues, any or all of which could have a material adverse effect on our operations. 15 - - Regulation on the state and local level: Although the Acts generally preempt state and local governments from regulating the entry of, or the rates charged by, wireless carriers, some state public service commissions have taken action to regulate other aspects of wireless operations, including customer billing, termination of service arrangements, advertising, the filing of "informational" tariffs and certification of operations. At the local level, wireless facilities typically are also subject to zoning and land use regulation, and may be subject to fees for use of public rights-of-way. - - NextWave litigation: On January 26, 2001, upon completion of the FCC's Auction 35 bid process, we were the high bidder on 19 PCS licenses with bids totaling $482.7 million. Additionally, CIVS V, a Designated Entity in which we hold a non-controlling ownership interest, was the high bidder on 22 PCS licenses with bids totaling $506.4 million. Certain of these licenses have been granted. The ungranted licenses, for which we and CIVS V were the high bidders, were originally held either by NextWave Communications, Inc. ("NextWave") or Urban Communicators PCS Limited Partnership, both of which had declared bankruptcy. Pending administrative and judicial challenges related to the auction process, including a decision issued by the United States Court of Appeals for the District of Columbia Circuit on June 22, 2001, have prevented the grant of these licenses to the high bidders. The FCC, Nextwave and major auction participants had been pursuing a settlement that would result in a grant of these licenses to the high bidders; however, the settlement discussions have been suspended, and the status of any settlement and when or if the Auction 35 high bidders will receive the remaining licenses are uncertain. - - Leasing of spectrum: The FCC initiated a proceeding in late 2000 examining whether it should allow the leasing of spectrum to third parties either on a temporary or long-term basis to ease the current spectrum shortage faced by many carriers. The FCC's proposal would allow certain wireless licensees to enter into a variety of arrangements with third parties without the FCC's prior approval for assigning or transferring control of a license. The FCC has not yet issued a decision on this matter. EMPLOYEES AND LABOR RELATIONS We consider our labor relations to be good. None of our employees are covered by collective bargaining agreements. As of January 31, 2002, we had a total of 17,796 employees working in the following areas: NUMBER OF CATEGORY EMPLOYEES -------- ------------ Sales and marketing ................................... 4,582 Engineering and network operations .................... 2,139 General and administration ............................ 688 Headquarters and customer service ..................... 10,387 ------------ 17,796 ============ This includes former employees of Powertel which became VoiceStream employees in 2001. Of these employees, 2,242 perform services exclusively for Powertel, and their compensation and benefit costs are being charged directly to Powertel. 16 ITEM 2. PROPERTIES We operate 540 retail stores, including 110 Powertel stores, all of which are leased. The leases expire between February 2002 and February 2012. We operate 15,453 microwave, cell and switching equipment sites, including 2,235 Powertel sites. The majority of our sites are leased for an initial five-year period, with renewal options for up to five additional five-year periods. Our corporate headquarters consists of leased office space in three buildings in Bellevue, Washington, occupying 344,435 combined square feet. The leases expire between May 2005 and October 2010. We maintain 12 customer service centers occupying over 425,000 combined square feet in leased premises located in the following cities, one of which is maintained by Powertel: Albuquerque, NM Bethlehem, PA Bellingham, WA Fort Lauderdale, FL Salem, OR Lenexa, KS Wichita, KS Tampa, FL Colorado Springs, CO Thorton, CO Nashville, TN Jacksonville, FL The leases expire between February 2004 and January 2017. We lease or own 63 sales and administrative offices and five locations for inventory storage and distribution, including 11 offices and inventory storage and distribution locations owned or leased by Powertel. The leases expire between February 2002 and January 2010. ITEM 3. LEGAL PROCEEDINGS Except as referenced in the next sentence, there are no material, pending legal proceedings to which we or our affiliates is a party or of which any of our or their property is subject which, if adversely decided, would have a material adverse effect on our financial position, results of operations or cash flows. For discussion of certain legal proceedings relating to FCC license grants, see "Item 1. Business -- Governmental Regulation." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Omitted pursuant to General Instruction I (2).) PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS (Omitted pursuant to General Instruction I (2).) ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (Omitted pursuant to General Instruction I (2).) 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Abbreviated pursuant to General Instruction I (2). As a result, all comparisons presented are full year 2001 to full year 2000 results unless otherwise indicated.) The following discussion and analysis is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as unbilled revenues, allowance for doubtful accounts, sales and marketing programs and incentives, employee compensation programs, depreciation and amortization periods, taxes, inventory values, and valuations of investments and intangible assets. We base our estimates on historical experience, where applicable, and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates due to changing conditions or the validity of our assumptions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. We recognize service revenues based upon minutes of use processed and contracted fees, net of credits and adjustments for service discounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We base our estimates on the aging of our accounts receivable balances and our historical write-off experience, net of recoveries. If the financial condition of our customers were to deteriorate, actual write-offs may be higher than expected. We record accruals associated with sales and marketing promotions and incentives. These accruals are based primarily on historical take-rates of similar promotions or offers. When recording depreciation expense associated with our wireless communications equipment, we use estimated useful lives. As a result of changes in technology and industry conditions, we periodically evaluate the useful lives of our wireless communications equipment. These evaluations could result in a change in useful lives in future periods. We hold non-controlling investments in several entities for which we apply the equity or cost method of accounting. We record impairments associated with these investments when we determine that the market value of the investment is below our net book value and the decline is deemed to be other than temporary. Volatility in market prices of these investments, or poor operating performance of these entities could result in the future values of these investments declining below our carrying value. OVERVIEW We provide PCS services using GSM technology primarily in urban markets in the United States through the ownership and operation of PCS licenses and through contractual relationships with entities in which we have non-controlling ownership interests that own and operate similar licenses. Certain centralized costs are incurred by VoiceStream and are allocated to Powertel, a subsidiary of T-Mobile. Such allocations include the costs of customer service operations, accounting and other administrative functions. These costs are allocated to the respective operational units in a manner that reflects the relative time and associated costs devoted to each of the operational units. The following discussion highlights the key events in the periods covered by these financial statements: On February 25, 2000, pursuant to a reorganization agreement approved by the shareholders of VS Washington and Omnipoint, VoiceStream, as a holding company, became the parent of VS Washington and of Omnipoint. On May 4, 2000, VoiceStream completed the acquisition by merger of Aerial. On December 14, 2000, we acquired controlling interests in VS PCS, VS GSM, VS GSM II and VS GSM III. On February 14, 2001, we acquired the remaining minority interests in VS PCS and VS GSM. The operations of these entities are included in our results of operations subsequent to the closing date of the respective acquisitions. 18 On May 31, 2001, Deutsche Telekom acquired 100% of the common shares of VoiceStream in a transaction that qualified as a tax-free reorganization. Following the closing of the merger, Deutsche Telekom transferred all of its VoiceStream shares to T-Mobile (referred to herein as the "T-Mobile merger"). T-Mobile is a wholly-owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom's principal GSM wireless operations in Europe and the United States. The T-Mobile merger was accounted for as a purchase business combination and resulted in adjustment of the basis of our assets, liabilities and shareholders' equity to reflect fair value on the closing date of the merger. As a result of this new basis, our consolidated balance sheets, results of operations and cash flows for periods subsequent to May 31, 2001, the closing date of the merger, are not comparable to periods prior to the merger. The consolidated financial statements of VoiceStream for the year ended December 31, 2001 are presented as two distinct periods, the five months prior to the merger, and the period from June 1, 2001 to December 31, 2001, subsequent to the merger. The following discussion and analysis refers to the results and activities for the year ended December 31, 2001. Where necessary, we have provided explanations to improve comparability between the pre-merger and post-merger activity. For further discussion of our business, see Item 1. Operating markets We commenced operations in 1996 in various markets in the western United States and have expanded operations through the addition of numerous new markets in subsequent years. Through the Omnipoint, Aerial and CIRI Designated Entity acquisitions, we have added operational markets at varying stages of maturity and have converted the former Omnipoint and Aerial markets to the VoiceStream brand and otherwise integrated the operations of the acquired businesses. Due to these factors, revenues and expenses recognized during any period may not be comparable to other periods and may not be representative of future operations. 19 RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 The following table sets forth certain financial data as it relates to our operations (dollars in thousands):
YEARS ENDED DECEMBER 31, ----------------------------- 2001 (1) 2000 CHANGE % CHANGE ------------ ------------ ------------ ------------ Revenues: Subscriber revenues ............... $ 2,346,471 $ 1,172,748 $ 1,173,723 100.1% Prepaid revenues .................. 404,109 237,079 167,030 70.5% Roamer revenues ................... 175,229 110,245 64,984 58.9% Equipment sales ................... 386,559 281,130 105,429 37.5% Affiliate and other revenues ...... 66,933 133,871 (66,938) (50.0%) ------------ ------------ ------------ ------------ Total revenues ................. 3,379,301 1,935,073 1,444,228 74.6% ------------ ------------ ------------ ------------ Operating expenses: Cost of service ................... 757,705 526,493 231,212 43.9% Cost of equipment sales ........... 739,337 513,955 225,382 43.9% General and administrative ........ 1,137,408 689,994 447,414 64.8% Sales and marketing ............... 1,242,012 796,272 445,740 56.0% Depreciation and amortization ..... 2,091,345 810,827 1,280,518 157.9% Stock-based compensation .......... 12,080 51,029 (38,949) (76.3%) ------------ ------------ ------------ ------------ Total operating expenses ....... 5,979,887 3,388,570 2,591,317 76.5% ------------ ------------ ------------ ------------ Operating Loss ...................... (2,600,586) (1,453,497) (1,147,089) 78.9% Other income (expense) .............. (600,947) (628,357) 27,410 (4.4%) Income tax benefit .................. 587,831 -- 587,831 100.0% ------------ ------------ ------------ ------------ Net loss ............................ $ (2,613,702) $ (2,081,854) $ (531,848) 25.5% ============ ============ ============ ============ Adjusted EBITDA ..................... $ (497,161) $ (591,641) $ 94,480 (16.0%) ============ ============ ============ ============ Cash flows provided by (used in): Operating activities .............. $ (895,154) $ (1,214,426) $ 319,272 (26.3%) ============ ============ ============ ============ Investing activities .............. $ (1,065,734) $ (4,073,661) $ 3,007,927 (73.8%) ============ ============ ============ ============ Financing activities .............. $ 805,992 $ 6,207,550 $ (5,401,558) (87.0%) ============ ============ ============ ============ Other Data: Licensed population ................. 237,894,000 230,803,000 7,091,000 3.07% Covered population .................. 133,500,000 107,601,000 25,899,000 24.07% Subscribers/Users: Post pay subscribers ................ 4,557,900 2,908,000 1,649,900 56.7% Prepaid users ....................... 1,261,100 971,000 290,100 29.9%
- ----------- (1) Reflects the combination of results for the five months ended May 31, 2001 and the seven months ended December 31, 2001. REVENUES The overall $1.4 billion (92%) increase in service revenues (subscriber, prepaid and roamer revenues) to $2.9 billion in 2001 is due primarily to internal growth in both existing VoiceStream markets and the markets obtained through the acquisitions of Omnipoint on February 25, 2000, Aerial on May 4, 2000 and controlling interests in four of the CIRI Designated Entities on December 14, 2000. The increase is also due to the launch of several new markets in the central United States, including Chicago, in 2001. 20 Post pay service revenues increased $1.2 billion (100.1%) to $2.3 billion in 2001. The increase is primarily the result of growth in our post pay subscriber base from 2,908,000 at December 31, 2000 to 4,557,900 at December 31, 2001. This net increase of 1,649,900 subscribers in 2001, due almost entirely to internal growth, compares to 2,062,300 subscribers added during 2000, of which 757,000 were from the acquisitions noted above. The high rate of post pay subscriber growth is attributable primarily to our competitive rate plan offerings and the success of our advertising campaigns. Prepaid service revenues increased $167.0 million (70.5%) to $404.1 million in 2001. Our prepaid customers grew to 1,261,100 at December 31, 2001 from 971,000 at December 31, 2000. There were 290,100 prepaid customers added net during 2001, none of which were from acquisitions, compared to 961,300 net additions during 2000, of which 714,200 were from acquisitions. The lower rate of growth in prepaid customers reflects our business strategy that emphasizes post pay subscriber growth. We believe our "Get More" marketing strategy, including our advertising campaign featuring Jamie Lee Curtis, and the associated pricing strategy that was initiated in the second quarter of 1998, has contributed to the rapid subscriber growth throughout all of our markets. As a result of our merger with T-Mobile, we are leveraging the success of our "Get More" marketing strategy in the United States to introduce "Global Wireless by T-Mobile" as part of the VoiceStream brand logo. We plan to phase out the VoiceStream brand name by the end of 2002, forming a cohesive international wireless brand using the T-Mobile name. We believe the continued use of our "Get More" strategy, combined with the introduction and use of the global T-Mobile brand, will positively affect our subscriber growth. Total service revenue per average customer ("ARPU") was $50.17 in 2001, as compared to $49.30 in 2000. The increase in ARPU in 2001, as compared to 2000, is largely due to the increase in the proportion of post pay subscribers in the customer base from 75.0% at December 31, 2000 to 78.3% at December 31, 2001. Post pay ARPU increased from $49.53 in 2000 to $52.23 in 2001 as a result of certain high ARPU eastern markets representing a higher proportion of revenues and subscribers in 2001, while prepaid ARPU decreased from $33.12 in 2000 to $30.17 in 2001 due to additional competition in the prepaid market. Roamer revenues increased $65.0 million (58.9%) to $175.2 million in 2001. The increase is primarily due to the expansion of our network and new market launches which expanded our coverage area in 2001, relative to 2000. Equipment sales increased $105.4 million (37.5%) to $386.6 million in 2001. The increase is primarily due to subscriber growth in 2001, partially offset by lower revenue per unit as a result of competitive pricing primarily during the third and fourth quarters of 2001. Affiliate and other revenues decreased $66.9 million (50.0%) to $66.9 million in 2001. This revenue is primarily related to technical service agreements and reciprocal wholesale agreements with unconsolidated CIRI Designated Entities. The parties to these agreements are able to utilize air time on each other's spectrum, and/or utilize wireless network infrastructure, in certain agreed upon markets. Each party acts as a reseller for the other with related fees charged and paid between the parties. Affiliate revenues decreased in 2001 because we hold an interest in only one such unconsolidated entity during 2001, as compared to four during most of 2000, prior to our acquisition of the controlling interests in December 2000. 21 OPERATING EXPENSES Cost of service expenses represent network operating expenses incurred in operational markets including the cost of interconnection with LEC facilities, direct cell site costs (property taxes, insurance, site lease, utilities, and repair and maintenance expenses), third party roaming costs and long distance toll costs. The increase of $231.2 million (43.9%) to $757.7 million in 2001, is primarily due to the geographic expansion of our network and increases in network capacity to service our growing customer base. Cost of service as a percentage of service revenues decreased to 25.9% in 2001 from 34.6% in 2000, primarily due to a decrease in fees related to the technical service agreements and reciprocal wholesale agreements, as discussed above, with certain unconsolidated CIRI Designated Entities. Excluding these fees, cost of service as a percentage of service revenues was 24.5% and 25.6% in 2001 and 2000, respectively, reflecting efficiencies gained from the growing subscriber base. While cost of service expenses are expected to increase due to continuing growth in our subscriber base, we expect cost of service as a percentage of service revenues to generally trend downward as more subscribers are added in newly launched markets and greater economies of scale are realized. Cost of equipment sales increased $225.4 million (43.9%) to $739.3 million in 2001 primarily due to the increase in the number of handsets and wireless data devices sold. The volume increase correlates with the growth in our customer base. Although customers generally are responsible for purchasing or otherwise obtaining their own handsets or wireless data devices, we sell this equipment below cost to respond to competition for new customers. We expect these subsidies to remain common industry practice for the foreseeable future. General and administrative expenses increased $447.4 million (64.8%) to $1.1 billion in 2001. On a per average customer per month basis, general and administrative expenses decreased to $19.50 in 2001 from $22.38 in 2000. The decrease in 2001 is primarily attributable to improved economies of scale realized in our administrative functions following the integration of Omnipoint and Aerial and reductions in the costs associated with integrating the acquired companies. While general and administrative expenses are expected to increase due to continuing growth in customers, we expect the cost per customer to continue trending downward as greater economies of scale are realized. Sales and marketing costs increased $445.7 million (56.0%) to $1.2 billion in 2001. This increase is attributable to greater sales commissions and other compensation costs associated with our continued subscriber growth, together with additional advertising and other promotional expenses to launch new markets, including Chicago, which is our largest market launch to date. Sales and marketing costs per customer added, commonly referred to as Cost per Gross Add ("CPGA"), which includes the loss on equipment sales, totaled $344 in 2001, as compared to $370 in 2000. CPGA has been on a downward trend since 1998 with the current year decline reflecting the economies of marketing on a national scale. The current year decline also reflects the absence in 2001 of significant brand conversion costs related to the companies acquired in 2000. Sales and marketing cost per net customer added, including the loss on equipment sales, was $833 in 2001, as compared to $660 in 2000. The increase in 2001 is largely due to higher customer turnover, especially with respect to our prepaid customers. Depreciation and amortization expense increased $1.3 billion (157.9%) to $2.1 billion in 2001. This increase is primarily due to amortization expense related to the fair value adjustments related to the T-Mobile merger, which increased the recorded value of our intangible assets, including licenses, goodwill, tradename and subscriber list on June 1, 2001. Amortization expense also increased due to the change in the amortization period of licenses from 40 years prior to the T-Mobile merger, to 20 years subsequent to the merger. Depreciation and amortization charges are also trending upward due to our increasing asset base arising from acquisitions and capital expenditures related to the on-going expansion of our wireless network. 22 Stock-based compensation expense decreased $38.9 million (76.3%) to $12.1 million in 2001. The 2000 expense included $35.4 million for restricted stock granted to certain executive officers of VoiceStream at the time the Deutsche Telekom merger agreement was signed. These restricted stock grants were contingent on the achievement of certain corporate performance goals and were fully earned and expensed in 2000. In 2001, a non-cash accrual for stock-based compensation of $44.6 million was established to record the fair value of unvested stock options assumed in the T-Mobile merger. Compensation related to these options is being amortized over the remaining vesting period. As of December 31, 2001, $35.9 million of deferred compensation remains unamortized. ADJUSTED EBITDA Adjusted EBITDA represents operating loss before depreciation, amortization and non-cash stock-based compensation. We believe Adjusted EBITDA provides meaningful additional information on our operating results, our ability to service our long-term debt and other fixed obligations and to fund our continued growth. Adjusted EBITDA is considered by many financial analysts to be a meaningful indicator of an entity's ability to meet its future financial obligations, and growth in Adjusted EBITDA is considered to be an indicator of future profitability, especially in a capital-intensive industry such as wireless telecommunications. Adjusted EBITDA should not be construed as an alternative to operating income (loss) as determined in accordance with GAAP, as an alternate to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. Because Adjusted EBITDA is not calculated in the same manner by all companies, our presentation may not be comparable to other similarly titled measures reported by other companies. Adjusted EBITDA loss decreased $94.5 million (16.0%) to $497.2 million in 2001. The Adjusted EBITDA loss for 2001 includes $73.2 million in retention and bonus expenses related to the T-Mobile merger. Adjusted EBITDA loss as a percentage of revenue fell to 14.7% in 2001 including the merger related retention and bonus expenses, and 12.5% excluding those expenses, compared to 30.6% in 2000. The decrease in Adjusted EBITDA loss in 2001 is due to several factors including economies of scale, reduced costs associated with the integration of acquired companies and the earnings leverage achieved as the number of new customers added becomes proportionately smaller relative to the greater size of our customer base. This last factor results in sales and marketing costs growing at a lower rate than revenues, reducing the Adjusted EBITDA loss. The following table reconciles our Adjusted EBITDA loss as discussed above, to our net loss (dollars in thousands): YEARS ENDED DECEMBER 31, ------------------------------ 2001 2000 ------------ ------------ Adjusted EBITDA loss................. $ (497,161) $ (591,641) Depreciation and amortization...... (2,091,345) (810,827) Stock-based compensation........... (12,080) (51,029) Other income (expense)............. (600,947) (628,357) Income tax benefit................. 587,831 -- ------------ ------------ Net loss............................. $ (2,613,702) $ (2,081,854) ============ ============ OTHER INCOME (EXPENSE) AND NET OPERATING LOSS CARRYFORWARDS Interest and financing expense, net of capitalized interest, decreased $28.6 million (6.0%) to $449.0 million in 2001, primarily due to a decrease in the average interest rate of our debt in the second half of 2001, as we replaced third party debt with notes payable to Deutsche Telekom bearing interest at lower rates. The weighted average effective interest rate, before capitalized interest, was 7.9% in 2001, as compared to 10.4% in 2000. 23 Included in other income (expense) in 2001 is $120.4 million of costs to complete the T-Mobile merger. Also included in other income (expense) is equity in net losses of unconsolidated affiliates, which decreased $126.0 million (54.0%) to $107.5 million in 2001. Equity in net losses of unconsolidated affiliates decreased because we have an interest in only one unconsolidated CIRI Designated Entity in 2001, as compared to four during 2000, partially offset by an increase in losses related to our investment in Microcell during 2001. We had approximately $8 billion of net operating loss carryforwards ("NOLs") at December 31, 2001, which expire between 2008 and 2021. As a result of the T-Mobile merger, our FCC licenses were recorded at fair value giving rise to a deferred tax liability of $4.2 billion. An income tax benefit of $587.8 million has been recorded in 2001 due to the net deferred tax liability position. Prior to the T-Mobile merger, management believed that available objective evidence created sufficient uncertainty regarding the realization of the net deferred tax assets. Accordingly, a valuation allowance had been provided for our net deferred tax assets through May 31, 2001. Our ability to utilize the NOLs in any given year may be limited by certain events, including a significant change in ownership interest. NET LOSS Our net loss increased $531.8 million (25.5%) to $2.6 billion in 2001. The increase in 2001 is due to increases in the recorded cost basis of our goodwill, licenses and other intangible assets and the related amortization expenses associated with the T-Mobile merger, together with the costs of completing the merger. These expense increases are partially offset by a $587.8 million income tax benefit related to the differences between the financial statement and tax bases of our assets following the T-Mobile merger. The net loss in 2000 was driven primarily by the cost of high customer growth as well as the costs associated with the Omnipoint and Aerial mergers and the launch of our "Get More" marketing strategy in those markets. CAPITAL EXPENDITURES Capital expenditures increased $51.2 million (3.6%) to $1.5 billion in 2001 primarily for the continued build-out of our wireless network, including the Chicago market, which was launched on May 1, 2001. We expect to make significant additional capital expenditures in 2002, directly and through joint ventures in which we hold interests, for license purchases, coverage and capacity expansion of operating markets and the development and expansion of new markets. Actual capital expenditures could vary considerably depending on opportunities that arise over the course of the year and on funding availability. We expect that our future funding requirements will be provided by our parent company T-Mobile, Deutsche Telekom or its affiliates. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board ("FASB") approved SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires companies to cease amortizing goodwill and other intangible assets with indefinite lives after December 31, 2001. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. We expect the impact on 2002 net loss associated with the discontinuation of goodwill amortization to be a pre-tax reduction of the loss of $1.1 billion. We have not completed our initial assessment of goodwill impairment. Upon adoption of this standard, any resulting impairment charges recorded may have a material impact on our results of operations. In connection with the upcoming implementation of SFAS No. 142, discussions are currently underway among a number of the major United States wireless carriers and the SEC regarding whether FCC wireless spectrum licenses represent indefinite lived assets subject to the provisions of SFAS No. 142. While there are some indications that treating licenses as indefinite lived assets may be appropriate, a number of related issues are being explored including how testing for impairment would be conducted. The outcome of these discussions is uncertain at this time as is the potential impact on our future results of operations. 24 In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The statement provides accounting and reporting standards for recognizing the cost associated with obligations related to the retirement of tangible long-lived assets. Under this statement, legal obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs to be capitalized as part of the carrying amount of the long-lived asset and expensed using a systematic and rational method over the asset's useful life. Any subsequent changes to the fair value of the liability will be expensed. We will be required to adopt this statement no later than January 1, 2003. Based on our initial assessment, we do not expect the adoption of this statement to have a significant impact on our financial condition or results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and replaces the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of Segments of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of segments of a business. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. Impairment of goodwill is not included in the scope of SFAS No. 144 and will be treated in accordance with SFAS No. 142. Under SFAS No. 144, long-lived assets are measured at the lower of carrying amount or fair value less cost to sell. We are required to adopt this statement no later than January 1, 2002. Based on our current assessment, we do not expect the adoption of this statement to have a significant impact on our financial condition or results of operations. 25 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our discussion below provides information about our market sensitive financial instruments and constitutes "forward looking statements", which involve risks and uncertainties. Actual results could differ materially from those projected in the forward looking statements. All of our third-party long-term debt is fixed rate, and therefore we are not affected by fluctuations in interest rates relative to this debt. We are, however, subject to gains or losses resulting from changes in the fair value of the fixed rate debt if we redeem debt before the maturity date. We have approximately $1.7 billion of fixed rate debt with a weighted average interest rate of 10.9%. We do not enter into derivative instrument transactions for trading or speculative purposes. At December 31, 2001, we have $4.1 billion in variable rate long-term debt payable to affiliates. A ten percent increase in interest rates would cause approximately a $411.0 million increase in our annual interest expense related to the affiliated debt. The table below presents principal cash flows and the related average interest rates by expected maturity dates for certain financial instruments sensitive to interest rate fluctuations that we held at December 31, 2001 (dollars in thousands).
YEARS ENDED DECEMBER 31, ----------------------------------------------------------------------------------------------------- FAIR 2002 2003 2004 2005 2006 THEREAFTER TOTAL VALUE --------- --------- --------- --------- --------- ---------- --------- --------- LIABILITIES Long-term debt fixed rate.... $-- $-- $-- $-- $-- $1,736,037 $1,736,037 $1,823,243 Avg. interest rate........... -- -- -- -- -- 10.9% -- -- Long-term debt payable to affiliate variable rate...... $-- $-- $-- $-- $-- $4,110,393 $4,110,393 NA Avg. interest rate........... -- -- -- -- -- 6.4% -- --
26 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements required by this item are set forth on pages F-1 through F-27. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required by this item regarding a change in accountants is included in a Current Report on Form 8-K dated August 31, 2001. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Omitted pursuant to General Instruction I (2).) ITEM 11. EXECUTIVE COMPENSATION (Omitted pursuant to General Instruction I (2).) ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Omitted pursuant to General Instruction I (2).) ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Omitted pursuant to General Instruction I (2).) PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (A)(1) Financial Statements and Financial Statement Schedules The financial statements and schedule listed in the Index to Consolidated Financial Statements on page F-1, which is incorporated herein by reference, are filed as part of this Form 10-K. (2) Exhibits The following documents are filed as part of this report:
- -------------------------------------------------------------------------------- Exhibit Numbers Description - -------------------------------------------------------------------------------- 3.1 Amended and Restated Certificate of Incorporation of Bega, Inc. (became Amended and Restated Certificate of Incorporation of VoiceStream as a result of the T-Mobile merger) (incorporated herein by reference to Exhibit 3.1 of VoiceStream Wireless Corporation's Form 10-Q filed for the quarter ended June 30, 2001). - -------------------------------------------------------------------------------- 3.2 Amended and Restated Bylaws of Bega, Inc. (became Amended and Restated Bylaws of VoiceStream as a result of the T-Mobile merger) (incorporated herein by reference to Exhibit 3.2 of VoiceStream Wireless Corporation's Form 10-Q filed for the quarter ended June 30, 2001). - -------------------------------------------------------------------------------- 4.1 Certificate of Designation for the VoiceStream Convertible Voting Preferred Stock (incorporated herein by reference to Exhibit 4.1 to VoiceStream Wireless Corporation's Current Report on Form 8-K (File No. 000-29667), dated October 11, 2000). - -------------------------------------------------------------------------------- 4.2 Indenture dated as of November 9, 1999 between VoiceStream Wireless Corporation and Harris Trust, as Trustee, relating to the 10 and 3/8% Senior Discount Notes Due 2009 of VoiceStream Wireless Corporation. - -------------------------------------------------------------------------------- 4.3 Indenture dated as of November 9, 1999 between VoiceStream Wireless Corporation and Harris Trust, as Trustee, relating to the 11 and 7/8% Senior Discount Notes Due 2009 of VoiceStream Wireless Corporation. - -------------------------------------------------------------------------------- 4.4 Form of Indenture between VoiceStream Wireless Corporation and HSBC Bank USA, as Trustee, relating to the 11 and 1/2 % Senior Notes Due 2009 of VoiceStream Wireless Corporation (incorporated herein by reference to Exhibit 4.1 to Registration Statement on Form S-4, File No. 333-34438, filed on April 10, 2000). - --------------------------------------------------------------------------------
(B) Reports on Form 8-K There were no Current Reports on Form 8-K filed during the quarter ended December 31, 2001. 27
PAGE INDEX TO CONSOLIDATED FINANCIAL STATEMENTS VOICESTREAM WIRELESS CORPORATION CONSOLIDATED FINANCIAL STATEMENTS ---- Reports of Independent Accountants................................................... F-2 Consolidated Balance Sheets as of December 31, 2001 and 2000......................... F-5 Consolidated Statements of Operations for the period from January 1, 2001 through May 31, 2001, the period from June 1, 2001 through December 31, 2001 and the years ended December 31, 2000 and 1999. ................................. F-6 Consolidated Statements of Shareholders' Equity for the period from January 1, 2001 through May 31, 2001, the period from June 1, 2001 through December 31, 2001 and the years ended December 31, 2000 and 1999...... ....................... F-7 Consolidated Statements of Cash Flows for the period from January 1, 2001 through May 31, 2001, the period from June 1, 2001 through December 31, 2001 and the years ended December 31, 2000 and 1999................................... F-8 Notes to Consolidated Financial Statements........................................... F-9 Financial Statement Schedule II - Valuation and Qualifying Accounts.................. F-28
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholder of Voicestream Wireless Corporation: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Voicestream Wireless Corporation and its subsidiaries (the "Company") at December 31, 2001, and the results of their operations, cash flows and stockholders' equity for the period from June 1, 2001 through December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The financial statements of Voicestream Wireless Corporation for the years ended December 31, 2000 and 1999 were audited by other independent accountants whose report dated February 7, 2001 expressed an unqualified opinion on those statements. As discussed in Note 2, effective May 31, 2001, the Company was acquired and adopted a new basis of accounting whereby all assets and liabilities were adjusted to their estimated fair values. Accordingly, the consolidated financial statements for periods prior to May 31, 2001 are not comparable to consolidated financial statements presented on or subsequent to May 31, 2001. /s/ PricewaterhouseCoopers LLP Seattle, Washington January 18, 2002 F-2 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Voicestream Wireless Corporation: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the results of operations, cash flows and stockholders' equity of Voicestream Wireless Corporation and its subsidiaries (the "Company") for the period from January 1, 2001 through May 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The financial statements of Voicestream Wireless Corporation for the years ended December 31, 2000 and 1999 were audited by other independent accountants whose report dated February 7, 2001 expressed an unqualified opinion on those statements. As discussed in Note 2, effective May 31, 2001, the Company was acquired and adopted a new basis of accounting whereby all assets and liabilities were adjusted to their estimated fair values. Accordingly, the consolidated financial statements for periods prior to May 31, 2001 are not comparable to consolidated financial statements presented on or subsequent to May 31, 2001. /s/ PricewaterhouseCoopers LLP Seattle, Washington January 18, 2002 F-3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To VoiceStream Wireless Corporation: We have audited the accompanying consolidated balance sheet of VoiceStream Wireless Corporation (a Delaware corporation) and subsidiaries as of December 31, 2000 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the two years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VoiceStream Wireless Corporation and subsidiaries as of December 31, 2000 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP Seattle, Washington February 7, 2001 F-4 VOICESTREAM WIRELESS CORPORATION CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and per share amounts)
AS OF DECEMBER 31, ------------------------------- 2001 | 2000 ------------- | ------------- | ASSETS | | Current assets: | Cash and cash equivalents ............................................... $ -- | $ 1,154,896 Short-term investments .................................................. -- | 1,175,636 Accounts receivable, net of allowance for doubtful accounts | of $119,794 and $100,600, respectively .............................. 602,767 | 469,475 Inventory ............................................................... 153,432 | 340,284 FCC license deposits and other current assets ........................... 308,528 | 223,634 ------------- | ------------- Total current assets .............................................. 1,064,727 | 3,363,925 | Property and equipment, net of accumulated depreciation of | $384,372 and $740,956, respectively ..................................... 3,390,103 | 3,467,550 Goodwill, net of accumulated amortization of $488,529 and | $348,575, respectively .................................................. 16,265,790 | 9,075,605 Licensing costs and other intangible assets, net of accumulated | amortization of $632,400 and $118,923, respectively ..................... 19,487,269 | 3,827,317 Investments in and advances to unconsolidated affiliates ..................... 994,976 | 498,869 Other assets and investments ................................................. 37,055 | 44,477 ------------- | ------------- $ 41,239,920 | $ 20,277,743 ============= | ============= | LIABILITIES AND SHAREHOLDERS' EQUITY | | Current liabilities: | Accounts payable ........................................................ $ 198,530 | $ 150,632 Accrued liabilities ..................................................... 647,590 | 404,621 Deferred revenue ........................................................ 75,996 | 60,272 Construction accounts payable ........................................... 348,600 | 207,462 Current portion of long-term debt ....................................... -- | 32,113 ------------- | ------------- Total current liabilities ......................................... 1,270,716 | 855,100 | Long-term debt ............................................................... 1,861,518 | 5,719,886 Long-term notes payable to affiliates ........................................ 4,110,393 | -- Deferred tax liability ....................................................... 3,565,286 | -- Other long-term liabilities .................................................. 24,336 | -- Minority interest in equity of consolidated subsidiaries ..................... 51,287 | 16,563 Preferred stock of consolidated subsidiary ................................... -- | 312,513 | VoiceStream voting preferred stock; $0.001 par value; | 100,000,000 shares authorized; 3,906,250 shares issued and outstanding .. 5,000,000 | 5,000,000 | Commitments and contingencies (see Note 9) | | Shareholders' equity: | Common stock, $0.000001 and $0.001 par value, respectively, and paid-in | capital; 1.0 billion shares authorized, 269,738,185 and 250,791,145 | shares issued and outstanding, respectively .......................... 26,851,821 | 11,572,083 Deferred stock compensation ............................................. (35,891) | (8,412) Accumulated other comprehensive income (loss) ........................... 655 | (45,238) Accumulated deficit ..................................................... (1,460,201) | (3,144,752) ------------- | ------------- Total shareholders' equity ........................................ 25,356,384 | 8,373,681 ------------- | ------------- $ 41,239,920 | $ 20,277,743 ============= | =============
See accompanying notes to consolidated financial statements. F-5
VOICESTREAM WIRELESS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (dollars in thousands) FOR THE YEARS ENDED JUNE 1, 2001 JANUARY 1, 2001 DECEMBER 31, THROUGH THROUGH ------------------------------- DECEMBER 31, 2001 MAY 31, 2001 2000 1999 ----------------- --------------- ------------- ------------- | Revenues: | Subscriber revenues .............................. $ 1,477,804 | $ 868,667 $ 1,172,748 $ 364,307 Prepaid revenues ................................. 245,216 | 158,893 237,079 2,495 Roamer revenues .................................. 102,101 | 73,128 110,245 9,295 Equipment sales .................................. 235,601 | 150,958 281,130 78,025 Affiliate and other revenues ..................... 48,011 | 18,922 133,871 22,512 ------------- | ------------- ------------- ------------- Total revenues ............................ 2,108,733 | 1,270,568 1,935,073 476,634 ------------- | ------------- ------------- ------------- | Operating expenses: | Cost of service (excludes stock-based | compensation of $2,079, $610, $3,758 | and $12,237, respectively) .................... 470,808 | 286,897 526,493 115,112 Cost of equipment sales .......................... 473,708 | 265,629 513,955 136,584 General and administrative (excludes | stock-based compensation of $4,853, | $2,298, $44,138 and $38,255, respectively) .... 670,767 | 466,641 689,994 134,812 Sales and marketing (excludes stock-based | compensation of $1,732, $508, $3,133 | and $10,198, respectively) .................... 775,499 | 466,513 796,272 211,399 Depreciation and amortization .................... 1,531,936 | 559,409 810,827 140,812 Stock-based compensation ......................... 8,664 | 3,416 51,029 60,690 ------------- | ------------- ------------- ------------- Total operating expenses .................. 3,931,382 | 2,048,505 3,388,570 799,409 ------------- | ------------- ------------- ------------- | Operating loss ........................................ (1,822,649) | (777,937) (1,453,497) (322,775) ------------- | ------------- ------------- ------------- | Other income (expense): | Interest and financing expense ................... (224,493) | (224,471) (477,613) (103,461) Equity in net losses of | unconsolidated affiliates ........................ (44,046) | (63,477) (233,565) (37,514) Interest income and other, net ................... 44,695 | 35,968 99,939 9,011 T-Mobile merger related costs .................... (1,539) | (118,885) -- -- Accretion of preferred stock of | consolidated subsidiary ....................... -- | (4,699) (17,118) -- ------------- | ------------- ------------- ------------- Total other income (expense) .............. (225,383) | (375,564) (628,357) (131,964) ------------- | ------------- ------------- ------------- | Net loss before income taxes .......................... (2,048,032) | (1,153,501) (2,081,854) (454,739) | Income tax benefit .................................... 587,831 | -- -- -- ------------- | ------------- ------------- ------------- | Net loss .............................................. (1,460,201) | (1,153,501) (2,081,854) (454,739) | 2.5% junior preferred stock dividends ................. -- | -- (12,535) -- ------------- | ------------- ------------- ------------- | Net loss attributable to common | shareholders ....................................... (1,460,201) | (1,153,501) (2,094,389) (454,739) | Other comprehensive income (loss): | Foreign currency translation | adjustment .................................... 444 | (8,013) (7,474) -- Equity in net unrealized income | (loss) on investment in securities | held by unconsolidated affiliate .............. 243 | 21,727 (21,026) -- Net unrealized income (loss) on | available-for- sale securities ................... (32) | 15,333 (16,738) -- ------------- | ------------- ------------- ------------- Total other comprehensive | income (loss) ............................. 655 | 29,047 (45,238) -- ------------- | ------------- ------------- ------------- | Comprehensive loss .................................... $ (1,459,546) | $ (1,124,454) $ (2,139,627) $ (454,739) ============= | ============= ============= =============
See accompanying notes to consolidated financial statements. F-6
VOICESTREAM WIRELESS CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands) PAR VALUE ACCUMULATED AND DEFERRED OTHER COMMON PAID-IN STOCK COMPREHENSIVE ACCUMULATED STOCK CAPITAL COMPENSATION INCOME (LOSS) DEFICIT TOTAL ----------- ----------- ------------ ------------- ----------- ----------- Balance, January 1, 1999 ............... 95,541,623 $ 994,789 $-- $-- $ (608,159) $ 386,630 Shares issued: Stock compensation plans ........... 763,737 3,643 -- -- -- 3,643 Return of capital contribution ....... -- (20,000) -- -- -- (20,000) Deferred compensation ................ -- 86,543 (85,954) -- -- 589 Amortization of deferred stock compensation ................ -- -- 60,690 -- -- 60,690 Exchange rights granted .............. -- 30,564 -- -- -- 30,564 Net loss ............................. -- -- -- -- (454,739) (454,739) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1999 ............. 96,305,360 1,095,539 (25,264) -- (1,062,898) 7,377 Shares issued: Stock compensation plans ........... 3,909,652 61,832 -- -- -- 61,832 Private placements, net ............ 10,390,723 686,380 -- -- -- 686,380 Omnipoint acquisition .............. 52,952,399 2,247,115 -- -- -- 2,247,115 Aerial acquisition ................. 52,325,301 5,709,549 -- -- -- 5,709,549 Exercise of warrants ............... 328,762 55 -- -- -- 55 Restricted stock ................... 292,119 34,177 (34,177) -- -- -- Conversion of 2.5% junior preferred ......................... 26,227,586 773,135 -- -- -- 773,135 Conversion of preferred stock of consolidated subsidiary ....................... 146,376 3,779 -- -- -- 3,779 Exercise of exchange rights ........ 7,912,867 930,100 -- -- -- 930,100 Amortization of deferred stock compensation ................ -- -- 51,029 -- -- 51,029 Exchange rights granted .............. -- 42,957 -- -- -- 42,957 Accretion of 2.5% junior preferred dividends ............... -- (12,535) -- -- -- (12,535) Net unrealized loss on investment securities ............. -- -- -- (16,738) -- (16,738) Equity in unrealized loss on investment securities held by unconsolidated affiliate ....................... -- -- -- (21,026) -- (21,026) Foreign currency translation adjustment ........................ -- -- -- (7,474) -- (7,474) Net loss ............................. -- -- -- -- (2,081,854) (2,081,854) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2000 ............. 250,791,145 11,572,083 (8,412) (45,238) (3,144,752) 8,373,681 Shares issued: Stock compensation plans ............ 3,082,973 42,587 -- -- -- 42,587 Stock dividend ...................... 1,969,152 173,341 -- -- (173,341) -- Conversion of preferred stock of consolidated subsidiary ........................ 8,422,737 235,905 -- -- -- 235,905 Exercise of warrants ................ 274,844 441 -- -- -- 441 Exercise of exchange rights ......... 4,321,334 463,696 -- -- -- 463,696 Return of capital from Western Wireless .................. -- 24,500 -- -- -- 24,500 Return of cash from Omnipoint ......... -- 2,970 -- -- -- 2,970 Amortization of deferred stock compensation ................ -- -- 2,543 -- -- 2,543 Exchange rights granted ............. -- 17,377 -- -- -- 17,377 Net unrealized gain on investment securities ............. -- -- -- 15,333 -- 15,333 Equity in unrealized gain on investment securities held by unconsolidated affiliate ........................ -- -- -- 21,727 -- 21,727 Foreign currency translation adjustment ...................... -- -- -- (8,013) -- (8,013) Net loss .............................. -- -- -- -- (1,153,501) (1,153,501) ----------- ----------- ----------- ----------- ----------- ----------- Balance, May 31, 2001 .................. 268,862,185 12,532,900 (5,869) (16,191) (4,471,594) 8,039,246 ----------- ----------- ----------- ----------- ----------- ----------- Elimination of historical equity on acquisition ............. -- (12,532,900) 5,869 16,191 4,471,594 (8,039,246) Application of purchase accounting- VoiceStream acquisition ....................... -- 25,859,658 (44,555) -- -- 25,815,103 Shares issued (private issuance) ...... 876,000 876,000 -- -- -- 876,000 Tax effect on the exercise of stock options .................. -- 116,163 -- -- -- 116,163 Amortization of deferred stock compensation ..................... -- -- 8,664 -- -- 8,664 Net unrealized loss on investment securities, net of tax ........................... -- -- -- (32) -- (32) Equity in unrealized gain on investment securities held by unconsolidated affiliate, net of tax .......... -- -- -- 243 -- 243 Foreign currency translation adjustment, net of tax ............. -- -- -- 444 -- 444 Net loss .............................. -- -- -- -- (1,460,201) (1,460,201) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2001 ............. 269,738,185 $26,851,821 $ (35,891) $ 655 $(1,460,201) $25,356,384 =========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. F-7
VOICESTREAM WIRELESS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) JUNE 1, 2001 | JANUARY 1, 2001 FOR THE YEARS ENDED DECEMBER 31, THROUGH | THROUGH ------------------------------- DECEMBER 31, 2001 | MAY 31, 2001 2000 1999 ----------------- | --------------- ------------- ------------- | Operating activities: | Net loss ........................................... $ (1,460,201) | $ (1,153,501) $ (2,081,854) $ (454,739) Adjustments to reconcile net loss to net | cash used in operating activities: | Depreciation and amortization .................. 1,531,936 | 559,409 810,827 140,812 Income tax benefit ............................. (587,831) | -- -- -- Amortization of debt discount and premium ...... 14,527 | 22,783 48,166 3,925 Equity in net losses of unconsolidated | affiliates ................................... 44,046 | 63,477 233,565 37,514 Stock-based compensation ....................... 8,664 | 3,416 51,029 60,690 Allowance for bad debts ........................ 16,118 | 1,776 49,182 11,767 Other, net ..................................... (34,084) | (25,119) 28,458 1,528 Changes in operating assets and liabilities, | net of effects of purchase accounting: | Accounts receivable ........................ (143,199) | (6,264) (309,330) (84,740) Inventory .................................. 64,441 | 107,957 (254,498) (42,890) Other current assets ....................... (38,831) | 1,766 (26,727) (6,296) Accounts payable ........................... 94,250 | (52,429) 110,081 6,706 Accrued liabilities ........................ 14,942 | 56,797 126,675 70,465 ------------- | ------------- ------------- ------------- Net cash used in operating activities ........... (475,222) | (419,932) (1,214,426) (255,258) ------------- | ------------- ------------- ------------- Investing activities: | Purchases of property and equipment ................ (659,276) | (809,983) (1,418,068) (401,621) Acquisitions of wireless properties, net of | cash acquired .................................... (383,829) | (299,292) (589,631) (152,517) Sales (purchases) of short-term investments, net ... -- | 1,175,636 (1,175,636) -- Investments in and advances to affiliates, net ..... (134,927) | (37,193) (729,847) (356,030) Refund of deposit held by FCC (FCC deposits) ....... -- | 49,589 (150,758) -- Other, net ......................................... 6,678 | 26,863 (9,721) (24,058) ------------- | ------------- ------------- ------------- Net cash provided by (used in) investing | activities .................................... (1,171,354) | 105,620 (4,073,661) (934,226) ------------- | ------------- ------------- ------------- Financing activities: | Net proceeds from issuance of common and | preferred stock .................................. 876,000 | 43,468 6,358,865 3,643 Long-term debt borrowings .......................... -- | -- 3,540,000 2,622,526 Long-term debt repayments .......................... (4,271,357) | (32,113) (3,623,173) (1,155,000) Long-term debt borrowings from parent company ...... 4,108,550 | -- -- -- Outstanding checks in excess of bank balance ....... 135,685 | -- -- -- Cash entitlements on conversion of preferred | stock of consolidated subsidiary ................. -- | (81,711) -- -- Deferred financing costs ........................... -- | -- (68,142) (40,600) Other, net ......................................... -- | 27,470 -- (13,709) ------------- | ------------- ------------- ------------- Net cash provided by (used in) financing | activities .................................... 848,878 | (42,886) 6,207,550 1,416,860 ------------- | ------------- ------------- ------------- Change in cash and cash equivalents ................... (797,698) | (357,198) 919,463 227,376 Cash and cash equivalents, beginning of period ........ 797,698 | 1,154,896 235,433 8,057 ------------- | ------------- ------------- ------------- Cash and cash equivalents, end of period .............. $ -- | $ 797,698 $ 1,154,896 $ 235,433 ============= | ============= ============= =============
See accompanying notes to consolidated financial statements. F-8 VOICESTREAM WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION VoiceStream Wireless Corporation ("VoiceStream," "we" or "us") provides personal communications services ("PCS") in urban markets in the United States using the Global System for Mobile Communications, or GSM, technology. VoiceStream was incorporated in June 1999 as a Delaware corporation to act as the parent company for business combinations involving our predecessor, now named VS Washington Corporation ("VS Washington"). On May 31, 2001, Deutsche Telekom AG ("Deutsche Telekom") acquired 100% of the common shares of VoiceStream. The merger qualified as a tax-free reorganization. VoiceStream shareholders received for each VoiceStream common share either 3.6693 shares of Deutsche Telekom stock and $15.7262 in cash, 3.6683 shares of Deutsche Telekom stock and $15.9062 in cash or 3.7647 shares of Deutsche Telekom stock. Deutsche Telekom transferred all of its VoiceStream shares to T-Mobile International AG ("T-Mobile"). T-Mobile is a wholly-owned subsidiary of Deutsche Telekom and is the holding company for Deutsche Telekom's principal GSM wireless operations in Europe and the United States. Upon consummation of the merger and the transfer by Deutsche Telekom of all of its VoiceStream common shares to T-Mobile (hereafter referred to as "the T-Mobile merger"), VoiceStream common shares were deregistered and delisted from NASDAQ and are no longer publicly traded. VoiceStream is now dependent on funding from Deutsche Telekom and/or T-Mobile to meet its working capital and investment requirements, debt service and other obligations. On December 14, 2000, we acquired controlling interests in the following entities in exchange for approximately 7.9 million VoiceStream common shares and $51 million in cash: VoiceStream PV/SS PCS, L.P. ("VS PCS"); VoiceStream GSM I, LLC ("VS GSM"); VoiceStream GSM II Holdings, LLC and VoiceStream GSM III Holdings, LLC. On February 14, 2001, we acquired the remaining minority interests in VS PCS and VS GSM in exchange for approximately 4.3 million VoiceStream common shares. The operations of these entities are included in our results of operations subsequent to the closing dates of the respective acquisitions. The acquisitions were accounted for using the purchase method. Total consideration paid for the acquisitions, including liabilities assumed, was $1.9 billion. On May 4, 2000, VoiceStream completed the acquisition by merger of Aerial Communications, Inc. ("Aerial"). The merger was accounted for using the purchase method. Pursuant to the merger agreement, we exchanged 0.455 of a share of VoiceStream common stock for each outstanding share of Aerial Series A common stock. Total consideration paid for the acquisition, including liabilities assumed, was $6.3 billion. On February 25, 2000, pursuant to a reorganization agreement approved by the shareholders of VS Washington and Omnipoint Corporation ("Omnipoint"), VoiceStream, as a holding company, became the parent of VS Washington and of Omnipoint. The merger was accounted for using the purchase method. Pursuant to the merger agreement, we exchanged 0.825 of a share of VoiceStream common stock plus $8.00 in cash for each outstanding Omnipoint common share. Total consideration paid for the acquisition, including liabilities assumed, was $6.2 billion. In conjunction with the merger agreement signed on June 23, 1999, VoiceStream invested a total of $150.0 million in Omnipoint, of which $102.5 million was invested in Omnipoint preferred stock upon signing of the merger agreement in June 1999. The remaining $47.5 million was invested in Omnipoint preferred stock on October 1, 1999. F-9 Prior to May 3, 1999, VS Washington was an 80.1% owned subsidiary of Western Wireless Corporation ("Western Wireless"). The remaining 19.9% was owned by Hutchison Telecommunications PCS (USA) Limited ("Hutchison"), a subsidiary of Hutchison Whampoa Limited, a Hong Kong company. On May 3, 1999, VS Washington was formally separated in a spin-off transaction from Western Wireless' other operations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation and financial statement presentation The consolidated financial statements of VoiceStream and its consolidated subsidiaries include the accounts of all majority and minority-owned subsidiaries that are controlled by VoiceStream. Affiliates that are 20 percent to 50 percent owned are generally accounted for using the equity method. Intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements of VoiceStream for the years ended December 31, 2001, 2000 and 1999, reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows. Such adjustments include those of a normal, recurring nature and those related to the T-Mobile merger as described below. The T-Mobile merger was accounted for as a purchase business combination and resulted in adjustment of the basis of our assets, liabilities and shareholders' equity to reflect fair value on the closing date of the merger. As a result of this new basis, our consolidated balance sheets, results of operations and cash flows for periods subsequent to May 31, 2001, the closing date of the merger, are not comparable to periods prior to the merger. The consolidated financial statements of VoiceStream for the year ended December 31, 2001, are presented as two distinct periods, the five months prior to the merger, and the period from June 1, 2001 to December 31, 2001, subsequent to the merger. Cash equivalents and short-term investments As of December 31, 2001, outstanding checks in excess of bank balances of $135.7 million are included in accrued liabilities. Cash equivalents are stated at cost, which approximates market value. We include highly liquid interest-earning investments purchased with an original maturity at time of purchase of three months or less as cash equivalents. Short-term investments consist of certificates of deposits and commercial paper with maturities between three months and twelve months from the date of purchase. These short-term investments are classified as available-for-sale securities and are recorded at market. Capitalized interest Our PCS licenses and wireless communications systems represent qualified assets pursuant to Statement of Financial Accounting Standards ("SFAS") No. 34, "Capitalization of Interest Cost." Our policy is to capitalize interest in new markets during the build-out phase until service is initiated for customers. We capitalized interest of $37.5 million in 2001 and $2.5 million in both 2000 and 1999, respectively. Intangible assets Licensing costs primarily represent costs incurred to acquire PCS licenses issued by the Federal Communication Commission ("FCC"). Amortization begins with the commencement of service to customers. Effective June 1, 2001, we began amortizing licenses over a period of 20 years. Prior to June 1, 2001, we amortized licenses over a period of 40 years. Goodwill consists of the excess of the purchase price over the fair value of net assets acquired in purchase business combinations. At December 31, 2001, goodwill related primarily to the T-Mobile merger, and at December 31, 2000, related primarily to the Omnipoint and Aerial mergers. Goodwill is amortized over a period of 20 years. F-10 Property and equipment and depreciation Additions to property and equipment are recorded at cost. Major replacements and improvements are capitalized while general repairs and maintenance are expensed as incurred. Depreciation commences once the assets have been placed in service and is computed using the straight-line method over the estimated useful lives of the assets, which primarily range from three to forty years. Long-lived assets In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-lived Assets to be Disposed Of", VoiceStream periodically evaluates whether there has been any indication of impairment of its long-lived assets, including its licensing costs and other intangibles. As of December 31, 2001 and 2000, there has been no indication of such impairment. Inventory Inventory consists primarily of handsets, wireless data devices and accessories. Inventory is stated at the lower of cost or market, determined on an average cost basis where market is replacement cost. Revenue recognition Service revenues are based on customer usage and recognized at the time the service is provided. Access and special feature service revenues are recognized when earned. Sales of equipment, primarily handsets and wireless data devices, are recognized upon delivery to the customer. Prepaid coupon sales are deferred until service is provided. Customer activation fees are deferred and recognized over the average life of the customer relationship. Income taxes Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect when they are realized. A valuation allowance against deferred tax assets is recorded, if, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We had valuation allowances of zero and $1.6 billion at December 31, 2001 and 2000, respectively. Advertising expense We expense costs of advertising as incurred. Advertising expense was $171.3 million ($53.4 million from January 1, 2001 through May 31, 2001 and $117.9 million from June 1, 2001 through December 31, 2001), $123.8 million and $23.4 million in 2001, 2000 and 1999, respectively. Loss per common share VoiceStream no longer presents loss per share information as our common shares are not publicly traded. Stock-based compensation plans We account for our stock-based compensation plans under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. See Note 12 for discussion of the effect on net loss and other related disclosures had we accounted for these plans under SFAS No. 123, "Accounting for Stock-Based Compensation." F-11 Fair value of financial instruments At December 31, 2001 and 2000, the carrying values of cash, cash equivalents, short-term investments, receivables and accounts payable approximated fair value due to the short-term maturities of these instruments. The estimated fair values of other financial instruments with a carrying value materially different from their fair value based on quoted market prices or rates for the same or similar instruments, and the related carrying amounts are as follows (dollars in thousands):
AS OF DECEMBER 31, 2001 AS OF DECEMBER 31, 2000 ---------------------------- ---------------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------------ ------------ ------------ ------------ Long-term debt, including current portion ..... $ 1,861,518 $ 1,823,243 $ 5,751,999 $ 5,894,000 Preferred stock of consolidated subsidiary .... $ -- $ -- $ 312,513 $ 848,000
Supplemental cash flow disclosure Cash paid for interest (net of any amounts capitalized) was $418.1 million ($221.8 million from January 1, 2001 through May 31, 2001 and $195.3 million from June 1, 2001 through December 31, 2001), $401.8 million and $77.5 million for the years ended December 31, 2001, 2000 and 1999, respectively. Non-cash investing and financing activities, other than those discussed in Note 3, were as follows (dollars in thousands):
JUNE 1, 2001 JANUARY 1, FOR THE YEARS ENDED THROUGH 2001 THROUGH DECEMBER 31, DECEMBER 31, MAY 31, ---------------------------- 2001 2001 2000 1999 ------------ ------------ ------------ ------------ Capital contribution of license to unconsolidated affiliate .............................................. $ 1,400 $ 7,500 $ -- $ -- Capital contribution of property and equipment to unconsolidated affiliate ............................... $ 465,800 $ -- $ -- $ -- Capital contribution to CIVS IV (See Note 6) ............... $ 189,200 $ 38,000 $ -- $ -- Debt exchanges ............................................. $ -- $ -- $ 35,900 $ -- Exchange rights granted from additional paid-in capital (See Note 6) .................................. $ -- $ 17,400 $ 14,900 $ 30,600 License exchanged for debt forgiveness from unconsolidated affiliate ............................... $ 5,100 $ -- $ -- $ -- Tax effect on the exercise of stock options included in additional paid-in capital .............................. $ 116,200 $ -- $ -- $ -- Stock dividend issued from additional paid-in capital ...... $ -- $ 173,300 $ 12,600 $ -- Conversion of preferred stock of consolidated subsidiary ... $ -- $ 235,900 $ 777,000 $ --
Derivative instruments and hedging activities SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 137 and SFAS No. 138 requires that all derivative instruments be recorded on the balance sheet at their fair values. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction, and if so, the type of hedging transaction. We granted subsidiaries of Cook Inlet Region Inc. ("CIRI") exchange rights entitling them to certain rights, but no obligation, to exchange their ownership interests in Cook Inlet/VS GSM IV PCS Holdings, LLC ("CIVS IV"), and Cook Inlet/VS GSM V PCS Holdings LLC, ("CIVS V") for VoiceStream common shares, or cash, at VoiceStream's option (see Note 6). We do not enter into hedging activities for trading or speculative purposes and as of December 31, 2001, we are not a party to any derivative instruments or hedging activities that we believe will have a significant impact on our financial condition or results of operations. F-12 Concentration of credit risk Financial instruments that subject VoiceStream to concentrations of credit risk consist primarily of temporary cash investments, short-term investments, and accounts receivable. Our policy is to place our temporary cash investments with major financial institutions. The financial institutions have all been accorded high ratings by primary rating agencies. We limit the dollar amount on deposit with any one financial institution and continuously monitor their credit ratings. We have limited concentration of credit risk in accounts receivable as a result of the sale of handsets, wireless data devices and prepay cards to our dealer network. Our policy is to limit the amount of accounts receivable any one dealer carries and to continuously monitor the dealer account balances and agings. Estimates used in financial statements In preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States, we have made a number of estimates and assumptions in our reported asset and liability balances, and in our contingent asset and liability disclosures at the date of the financial statements and in our reported amounts of revenues and expenses for the reporting period. Some of the more significant estimates include the allowance for doubtful accounts, unbilled revenue accruals, inventory valuation reserves, and depreciation and amortization of long-lived assets. Actual results could differ from those estimates. Deferred compensation plan We have a deferred compensation plan ("the Plan") under Section 401(k) of the Internal Revenue Code of 1986, as amended. Substantially all full-time employees are eligible to participate. We match the participants' contributions to the Plan, subject to certain limits. During the years ended December 31, 2001, 2000 and 1999, we made matching contributions to the Plan of $7.0 million ($2.9 million from January 1, 2001 through May 31, 2001 and $4.1 million from June 1, 2001 through December 31, 2001) and $3.1 million and $1.7 million, respectively. Segment reporting We operate solely in one segment, wireless communication services. As of December 31, 2001 and 2000, essentially all of our assets are located in the United States. Our sales to international customers are currently not significant. Recently issued accounting standards In June 2001, the Financial Accounting Standards Board ("FASB") approved SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires companies to cease amortizing goodwill and other intangible assets with indefinite lives after December 31, 2001. SFAS No. 142 also establishes a new method of testing goodwill for impairment on an annual basis or on an interim basis if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying value. We expect the impact on 2002 net loss associated with the discontinuation of goodwill amortization to be a pre-tax reduction of the loss of $1.1 billion. We have not completed our initial assessment of goodwill impairment. Upon adoption of this standard, any resulting impairment charges recorded may have a material impact on our results of operations. In connection with the upcoming implementation of SFAS No. 142, discussions are currently underway among a number of the major United States wireless carriers and the SEC regarding whether FCC wireless spectrum licenses represent indefinite lived assets subject to the provisions of SFAS No. 142. While there are some indications that treating licenses as indefinite lived assets may be appropriate, a number of related issues are being explored including how testing for impairment would be conducted. The outcome of these discussions is uncertain at this time as is the potential impact on our future results of operations. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The statement provides accounting and reporting standards for recognizing the cost associated with obligations related to the retirement of tangible long-lived assets. Under this statement, legal obligations associated with the retirement of long-lived assets are to be recognized at their fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The fair value of the asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and expensed using a systematic and rational method over the asset's useful life. Any subsequent changes to the fair value of the liability will be expensed. We will be required to adopt this statement no later than January 1, F-13 2003. Based on our initial assessment, we do not expect the adoption of this statement to have a significant impact on our financial condition or results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which is effective for fiscal years beginning after December 15, 2001. This statement supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and replaces the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of Segments of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", for the disposal of segments of a business. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for the recognition and measurement of the impairment of long-lived assets to be held and used and the measurement of long-lived assets to be disposed of by sale. Impairment of goodwill is not included in the scope of SFAS No. 144 and will be treated in accordance with SFAS No. 142. Under SFAS No. 144, long-lived assets are measured at the lower of carrying amount or fair value less cost to sell. We are required to adopt this statement no later than January 1, 2002. Based on our current assessment, we do not expect the adoption of this statement to have a significant impact on our financial condition or results of operations. Reclassifications Certain of the comparative figures in the prior period financial statements have been reclassified to conform to the current period presentation. 3. BUSINESS COMBINATIONS AND OTHER TRANSACTIONS T-Mobile merger As a result of the T-Mobile merger, we adjusted the basis of our assets, liabilities and shareholders' equity to reflect the purchase allocations recorded by T-Mobile (see Note 2). These non-cash adjustments resulted in the following balance sheet allocations as of May 31, 2001, the acquisition date (dollars in thousands):
Fair value Book value Adjustments allocations ------------- ------------- ------------- ASSETS Current assets ................................. $ 1,791,477 $ (25,245) $ 1,766,232 Property and equipment ......................... 3,893,851 (535,030) 3,358,821 Goodwill ....................................... 8,879,259 7,841,798 16,721,057 Licensing costs and other intangible assets (excluding goodwill), ........................ 4,487,985 15,253,562 19,741,547 Other non-current assets and investments ....... 495,761 (21,340) 474,421 ------------- ------------- ------------- $ 19,548,333 $ 22,513,745 $ 42,062,078 ============= ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities ........................... $ 715,654 $ 30,035 $ 745,689 Long-term debt ................................ 5,742,670 415,438 6,158,108 Other long-term liabilities ................... -- 23,135 23,135 Deferred tax liability ........................ -- 4,269,280 4,269,280 Minority interest in equity of consolidated subsidiaries ................................ 50,763 -- 50,763 VoiceStream voting preferred stock ............ 5,000,000 -- 5,000,000 Common stock and paid-in capital .............. 12,532,900 13,326,758 25,859,658 Deferred stock compensation ................... (5,869) (38,686) (44,555) Accumulated other comprehensive loss .......... (16,191) 16,191 -- Accumulated deficit ........................... (4,471,594) 4,471,594 -- ------------- ------------- ------------- $ 19,548,333 $ 22,513,745 $ 42,062,078 ============= ============= =============
F-14 Other acquisitions and license exchanges Verizon (Trustee) On June 14, 2001, we purchased licenses and operating assets located primarily in Cincinnati and Dayton, OH (both 20 MHz of B Block spectrum) for approximately $200 million from the Department of Justice-appointed Trustee overseeing the operation and divestiture of the former GTE Cincinnati-Dayton PCS properties owned by Verizon Communications, Inc. ("Verizon"). Cingular license exchange On May 11, 2001, we completed the exchange of licenses covering approximately 35 million people with Cingular Wireless LLC ("Cingular"). Cingular acquired from VoiceStream 10 MHz of spectrum in the New York MTA, as well as 10 MHz in each of the St. Louis and Detroit Basic Trading Areas ("BTAs"). VoiceStream acquired from Cingular 10 MHz of spectrum in the Los Angeles and San Francisco Major Trading Areas ("MTAs"), which cover most of California and Nevada. No gain or loss was recognized from this transaction. AT&T Wireless On March 29, 2001, we exchanged certain D and E Block 10 MHz licenses in Detroit, MI, Flint, MI, Poplar Bluff, MO, Rolla, MO, Mt. Vernon-Centralia, IL, St. Louis, MO and Albany, NY for portions of certain A Block 10 MHz licenses held by AT&T Wireless PCS, LLC ("AT&T Wireless") in Phoenix, AZ, Bloomington, IL, Little Rock, AR and Puerto Rico and $11.7 million in cash. The licenses were recorded at $200.5 million and a gain of $11.7 million was recorded in other income for the three months ended March 31, 2001. Neither party assumed any liabilities related to the exchanged licenses. Pocket Communications and Leap Wireless On February 12, 2001, CIVS IV, an unconsolidated entity in which we hold a non-controlling interest, purchased 12 C Block licenses in Las Vegas, NV, New Orleans, LA, Houma-Thibodaux, LA, Omaha, NE, Sandusky, OH, Adrian, MI, Battle Creek, MI, Grand Rapids, MI, Jackson, MI, Muskegon, MI, Toledo, OH and Pittsburg-Parsons, KS from Pocket Communications for $195 million. In a separate agreement, 8 of these licenses were sold to Leap Wireless, Inc. for $51 million in cash and 348,878 shares of Leap Wireless common stock on April 5, 2001. The common shares were subsequently sold in April 2001, resulting in a gain of $2.3 million. FCC Auction 35 On January 26, 2001, upon completion of the FCC Auction 35 bid process, we were the high bidder on 19 PCS licenses with bids totaling $482.7 million. Additionally, CIVS V, a consolidated entity in which we hold a non-controlling ownership interest, was the high bidder on 22 PCS licenses with high bids totaling $506.4 million. The FCC announced on July 27, 2001 that it was prepared to grant seven of the 19 PCS licenses for which VoiceStream was the high bidder, and one of the 22 PCS licenses for which CIVS V was the high bidder. On August 10, 2001, VoiceStream and CIVS V paid the balances owed on the eight licenses of $7.4 million to the FCC and were granted the licenses. The ungranted licenses for which we and CIVS V were the high bidders were originally held either by NextWave Communications, Inc. ("NextWave") or Urban Communicators, both of which declared bankruptcy. The FCC has not granted these remaining licenses due to pending administrative and judicial challenges related to the auction process, including a decision issued by the United States Court of Appeals for the District of Columbia Circuit on June 22, 2001. The court held that the FCC had erroneously cancelled licenses previously acquired by NextWave in earlier auctions, when NextWave, upon declaring bankruptcy, failed to make installment payments for those licenses. On August 31, 2001, the Wireless Telecommunications Bureau of the FCC released a Public Notice announcing that NextWave's licenses returned to active status, although the Public Notice was qualified by a recognition that ongoing regulatory proceedings before the FCC could affect the status of the NextWave licenses. Further, the FCC as well as F-15 certain Auction 35 high bidders filed petitions with the United States Supreme Court seeking review of the Court of Appeals' decision, which are still pending. VoiceStream and CIVS V are part of a coalition that was attempting to negotiate a settlement by which the subject licenses would be granted to the Auction 35 high bidders; however, settlement discussions have recently been suspended. It is uncertain, whether any settlement will be finalized or whether the remaining Auction 35 licenses will be granted to the high bidders. STPCS On January 22, 2001, we purchased the assets of STPCS Joint Venture, LLC ("STPCS"). Through its operating company, SOL Communications Inc., STPCS held licenses and assets in South Texas. Pursuant to the terms of the agreement, we purchased STPCS's licenses and related assets for $297 million in cash. In addition, STPCS's F block licenses and certain related assets were purchased by CIVS IV for $9 million. 4. PROPERTY AND EQUIPMENT Our property and equipment were adjusted to fair value at May 31, 2001 (see Note 2). The accumulated depreciation balance at December 31, 2001, includes depreciation expense for the seven month period subsequent to the T-Mobile merger.
(dollars in thousands) AS OF DECEMBER 31, USEFUL ------------------------------- LIVES 2001 2000 ------------ ------------- ------------- Land, buildings and improvements ... 5 - 40 years $ 140,713 $ 108,510 Wireless communications systems .... 5 - 10 years 2,523,796 2,444,112 Furniture and equipment ............ 3 - 5 years 637,800 361,909 ------------- ------------- 3,302,309 2,914,531 Accumulated depreciation ........... (384,372) (740,956) ------------- ------------- 2,917,937 2,173,575 Construction in progress ........... 472,166 1,293,975 ------------- ------------- $ 3,390,103 $ 3,467,550 ============= =============
Depreciation expense was $713.4 million ($305.8 million from January 1, 2001 through May 31, 2001 and $407.6 million from June 1, 2001 through December 31, 2001), $390.0 million and $133.9 million in 2001, 2000 and 1999, respectively. 5. INTANGIBLE ASSETS Our intangible assets were adjusted to fair value at May 31, 2001 (see Note 2). The accumulated amortization at December 31, 2001, includes amortization expense for the seven month period subsequent to the T-Mobile merger. Goodwill
(dollars in thousands) AS OF DECEMBER 31, USEFUL ------------------------------- LIFE 2001 2000 ------------ ------------- ------------- Goodwill .................... 20 years $ 16,754,319 $ 9,424,180 Accumulated amortization .... (488,529) (348,575) ------------- ------------- $ 16,265,790 $ 9,075,605 ============= =============
Goodwill amortization expense was $684.8 million ($196.3 million from January 1, 2001 through May 31, 2001 and $488.5 million from June 1, 2001 through December 31, 2001), $339.7 million and $0 in 2001, 2000 and 1999, respectively. F-16 Licensing costs and other intangible assets
(dollars in thousands) AS OF DECEMBER 31, USEFUL ------------------------------- LIVES 2001 2000 ------------ ------------- ------------- Licensing costs .............. 20 years $ 19,240,039 $ 3,714,051 Lease rights ................. 10 years -- 57,066 Subscriber list .............. 7 years 579,630 -- Tradename .................... 1-4 years 300,000 -- Other intangible assets ...... 3 - 40 years -- 175,123 ------------- ------------- 20,119,669 3,946,240 Accumulated amortization ..... (632,400) (118,923) ------------- ------------- $ 19,487,269 $ 3,827,317 ============= =============
Effective June 1, 2001, we changed our amortization period for licenses from 40 years to 20 years. Amortization expense for licensing costs and other intangible assets was $693.1 million ($57.3 million from January 1, 2001 through May 31, 2001 and $635.8 million from June 1, 2001 through December 31, 2001), $81.1 million and $6.9 million in 2001, 2000 and 1999, respectively. 6. INVESTMENTS IN AND ADVANCES TO AFFILIATES We have entered into joint venture agreements and made other equity investments in operating companies primarily to obtain coverage for our customers in geographic areas where we could not otherwise obtain licenses, to share the cost of building and operating wireless networks and to promote the continued growth and expansion of GSM networks in North America. Since these entities are often in the early stages of building and operating wireless networks, they are generally expected to incur significant operating losses for an extended period of time and have significant capital requirements for the purchase of licenses and the build-out of the networks. The entities are typically funded initially with investments by the partners, but in some cases, also may incur substantial third party debt to acquire licenses and build networks. In circumstances where we do not control the ventures or other entities, we generally use the equity method of accounting to reflect our interests in the results of operations of the entity. Where control exists through voting rights or other means, we consolidate the results of operations into our own. Our investments in and advances to unconsolidated affiliates were adjusted to fair value at May 31, 2001 (see Note 2).
(dollars in thousands) AS OF DECEMBER 31, -------------------------------- 2001 2000 -------------- -------------- GSM Facility ........................... $ 475,405 $ -- CIVS IV ................................ 350,394 212,209 CIVS V ................................. -- 74,915 Microcell .............................. 92,144 209,758 Other .................................. 77,033 1,987 -------------- -------------- $ 994,976 $ 498,869 ============== ==============
F-17 Cingular Joint Venture (GSM Facility) On November 1, 2001, pursuant to formation and contribution agreements, we entered into a joint venture with Cingular to share certain GSM network infrastructures and the costs of expanding and operating them. Under the terms of the agreement, VoiceStream contributed its network assets in the New York BTA and Cingular contributed its network assets in the Los Angeles and San Francisco MTAs that cover most of California and parts of Nevada. VoiceStream and Cingular did not contribute licenses to the joint venture. Both VoiceStream and Cingular will independently market services under their respective brand names and bill and support their own customers in each of the markets. Network assets necessary for each party to perform proprietary customer-related functions were not contributed to the joint venture. The joint venture may be terminated under certain circumstances including mutual agreement of the parties. In the event the joint venture is terminated, under certain circumstances, the parties may have the right to exchange certain licenses with the other member. We account for the joint venture using the equity method. The joint venture will operate and expand the network infrastructure in the two markets. Network operating costs incurred by the joint venture will be recovered from the partners based on their proportionate interest in each network. The joint venture will generate losses generally equal to the depreciation charges on network assets. Network capital costs will be shared by the partners based on usage and will be funded through future capital contributions. Designated Entities The FCC, which regulates the sale and use of the radio wave spectrum by which PCS service is provided in the United States, has granted a narrow category of entities ("Designated Entities") the exclusive right to bid for and own "closed" C and F Block licenses for the initial five-year period following the award of the licenses. VoiceStream does not qualify as a Designated Entity, and so in order to continue expanding service to VoiceStream customers, we currently hold non-controlling ownership interests in two companies that qualify as Designated Entities, CIVS IV and CIVS V. These two companies are controlled by CIRI (hereafter referred to as the "CIRI Designated Entities"). Through wholesale reseller and other contractual arrangements, VoiceStream customers can obtain service in territories covered by the C and F Block licenses that are owned and operated by the CIRI Designated Entities. CIVS IV CIVS IV, a Delaware limited liability company, was formed in October 2000 for the purpose of acquiring and operating licenses subject to the FCC's Designated Entity rules. CIVS IV is controlled by Cook Inlet Mobile Corporation ("Cook Inlet Mobile"), a subsidiary of CIRI. We have 83.65% economic interest in CIVS IV and record 83.65% of CIVS IV's losses as equity in earnings (loss) of unconsolidated affiliates, however we use the equity method to account for our investment as we have a non-controlling voting interest in the entity. In connection with the formation of CIVS IV, we granted Cook Inlet Mobile exchange rights entitling Cook Inlet Mobile to certain rights, but no obligation, to exchange its ownership interest in CIVS IV for VoiceStream common shares. As a result of the T-Mobile merger, Cook Inlet Mobile may elect to exchange its ownership interest for a combination of cash and Deutsche Telekom shares. Cook Inlet Mobile's exchange rights are conditioned by the FCC's Designated Entity rules and our legal ability to hold C and F block licenses at the time of the exchange under such rules. The grant of the exchange rights resulted in an additional investment in CIVS IV, which is amortized over the life of the exchange right. The related exchange right liability is recorded in accrued liabilities and is adjusted to fair value through other income/expense at each balance sheet date. The exchange right liability related to CIVS IV was $9.1 million at December 31, 2001. Cook Inlet Mobile has recently elected to exchange its interest in CIVS IV with VoiceStream for cash and Deutsche Telekom common stock. The exchange is currently pending approval by the FCC. F-18 CIVS V CIVS V, a Delaware limited liability company, was formed in October 2000 for the purpose of acquiring and operating licenses subject to the FCC's Designated Entity rules. CIVS V is controlled by Cook Inlet Wireless, Inc. ("Cook Wireless"), a subsidiary of CIRI. We used the equity method to account for our investment in CIVS V through 2000, and began consolidating CIVS V on January 1, 2001 based on the terms of the exchange rights agreement discussed below, however, we do not have a controlling voting interest in the entity. At December 31, 2001, CIVS V had assets totaling $103.9 million primarily made up of FCC deposits which relate to the as yet ungranted Nextwave licenses from Auction 35 for which CIVS V was the high bidder. See Note 3 for discussion of these licenses. On February 12, 2001, we granted Cook Wireless exchange rights entitling Cook Wireless to certain rights, but no obligation, to exchange its ownership interest in CIVS V for VoiceStream common shares, or cash, at VoiceStream's option. As a result of the T-Mobile merger, the value of the consideration Cook Wireless will be entitled to receive if it exercises its exchange rights will be the greater of the sum of the amount Cook Wireless contributes to CIVS V, plus interest at the rate specified in the agreement or the value of (a) the merger consideration Cook Wireless would have received if it had exercised the exchange rights at the time of the T-Mobile merger, plus (b) the value of dividends and distributions paid or payable to holders of such consideration from the date of the T-Mobile merger to the date of the closing of the exchange rights plus (c) interest on the cash portion of such consideration at the rate specified in the agreement. The consideration may be paid in cash or Deutsche Telekom shares at Deutsche Telekom's option. These exchange rights are conditioned on the FCC's Designated Entity rules and our legal ability to hold C and F block licenses at the time of the exchange under such rules. The grant of the exchange rights resulted in an additional investment in CIVS V, which is eliminated upon consolidation. The related exchange right liability is recorded in accrued liabilities and is adjusted to fair value through other income/expense at each balance sheet date. The exchange right liability related to CIVS V was $15.2 million at December 31, 2001. Microcell Investment On February 28, 2000, we invested $274.6 million in Class A shares of Microcell Telecommunications Inc. ("Microcell"), a Canadian GSM service provider. The per share transaction price was equal to the closing market price of Microcell's publicly traded Class B Non-Voting shares on the Nasdaq National Market System on January 6, 2000. We invested an additional $9.7 million in Class B shares of Microcell in January 2001, and $32.5 million in the fourth quarter of 2001. The Class A shares constitute approximately 15% of the issued and outstanding equity securities of Microcell. Class A shares are non-voting but are convertible at any time into common shares, which are voting (subject to Canadian foreign ownership restrictions). If fully converted, these common shares would represent a 22.6% voting interest in Microcell. Additionally, VoiceStream is entitled to designate two members of Microcell's Board of Directors. The investment is being accounted for using the equity method. Other Other investments in and advances to unconsolidated affiliates include a receivable from Powertel, Inc. ("Powertel"), a wholly-owned subsidiary of T-Mobile (see Note 14). F-19 7. ACCRUED LIABILITIES
(dollars in thousands) AS OF DECEMBER 31, ------------------------------ 2001 2000 ------------- ------------- Accrued payroll and benefits ......................... $ 207,070 $ 182,827 Accrued interest payable ............................. 79,204 51,154 Accrued property taxes and other taxes ............... 116,922 84,144 Outstanding checks in excess of cash balance ......... 135,685 -- Other ................................................ 108,709 86,496 ------------- ------------- $ 647,590 $ 404,621 ============= =============
8. LONG-TERM DEBT AND NOTES PAYABLE TO AFFILIATES The carrying value of our long-term debt was adjusted to fair value at May 31, 2001 (see Note 2). The adjustment resulted in a premium of $415.4 million. The premium is being amortized to interest expense over the remaining terms of the related debt instruments.
(dollars in thousands) AS OF DECEMBER 31, ------------------------------ 2001 2000 ------------- ------------- Credit facilities: Term loans .................................... $ -- $ 2,425,000 Vendor facility ............................... -- 750,000 Revolvers ..................................... -- 150,000 Senior Notes: 10 3/8% Senior Notes, due in 2009 ............. 1,123,137 1,727,904 11 7/8% Senior Discount Notes, due in 2009 .... 468,000 720,000 11 5/8% Senior Notes, due in 2006 ............. -- 4,582 11 1/2% Senior Notes, due in 2009 ............. 144,900 205,000 FCC license obligations ............................ -- 32,113 ------------- ------------- 1,736,037 6,014,599 Unamortized premium (discount), net ................ 125,481 (262,600) Current portion of long-term debt .................. -- (32,113) ------------- ------------- $ 1,861,518 $ 5,719,886 ============= ============= Long-term notes payable to affiliates .............. $ 4,110,393 $ -- ============= =============
During 2001, we repaid all outstanding borrowings under our credit facilities and cancelled the related lending agreements. We also repaid $4.6 million of 11 5/8% Senior Notes due in 2006, $604.8 million of 10 3/8% Senior Notes due in 2009, $252.0 million of 11 7/8% Senior Notes due in 2009 and $60.1 million of 11 1/2% Senior Notes due in 2009. These repayments were funded by an equity infusion of $876.0 million from Deutsche Telekom. The notes relating to these borrowings, which are due in 2010, bear interest at the six-month LIBOR rate plus 0.95%. Our 10 3/8% Senior Notes accrue interest at the rate of 10 3/8% per annum payable semiannually and mature on November 15, 2009. Our 11 7/8% Senior Discount Notes accrue interest at a rate of 11 7/8% per annum and will be payable semiannually commencing on May 15, 2005 and mature on November 15, 2009. Our 11 1/2% Senior Notes accrue interest at 11 1/2% payable semiannually and mature on September 15, 2009. The Senior Note indentures contain affirmative and negative covenants, including financial covenants, and provide for various events of default. As of December 31, 2001, we were in compliance with these covenants. Maturities At December 31, 2001, there were no principal maturities of long-term debt due prior to 2006. F-20 9. COMMITMENTS AND CONTINGENCIES Commitments Future minimum payments required under operating leases and agreements that have initial or remaining non-cancelable terms in excess of one year as of December 31, 2001, are summarized below (dollars in thousands):
Years ending December 31, 2002 .................................... $ 207,329 2003 .................................... 206,198 2004 .................................... 207,631 2005 .................................... 208,176 2006 .................................... 209,970 Thereafter .................................. 174,348 ------------- $ 1,213,652 =============
Aggregate rental expense for all operating leases was $270.3 million ($105.1 million from January 1, 2001 through May 31, 2001 and $165.2 million from June 1, 2001 through December 31, 2001), $142.8 million and $32.1 million in 2001, 2000 and 1999, respectively. In order to ensure adequate supply and availability of certain infrastructure equipment and services, VoiceStream has committed to purchase PCS equipment from various suppliers. At December 31, 2001, there is approximately $113.0 million remaining under these commitments that has not been delivered. VoiceStream and its affiliates have various other purchase commitments for materials, supplies and other items incident to the ordinary course of business which are neither significant individually nor in the aggregate. Such commitments are not at prices in excess of current market value. Contingencies On May 3, 1999, Western Wireless distributed its entire 80.1% interest in VoiceStream's common shares to its stockholders. Prior to this "spin-off," Western Wireless obtained a favorable ruling from the IRS indicating that the spin-off would not result in the recognition of gain or taxable income to Western Wireless or its stockholders. However, Western Wireless could still recognize gain upon the spin-off, notwithstanding the favorable IRS ruling, if it is determined that the spin-off was part of a "prohibitive plan," that is, a plan or series of related transactions in which one or more persons acquire, directly or indirectly, 50% or more of VoiceStream's stock. Acquisitions of 50% or more of VoiceStream's stock occurring during the four year period beginning two years before the spin-off could give rise to a rebuttable presumption that the spin-off was part of a prohibited plan. Although it is not assured, VoiceStream believes that the spin-off, the subsequent Omnipoint and Aerial mergers, certain investments by Hutchison and Sonera Corporation ("Sonera") and the T-Mobile merger were not pursuant to a "prohibitive plan." F-21 VoiceStream has agreed to indemnify Western Wireless on an after-tax basis for any taxes, penalties, interest and various other expenses incurred by Western Wireless if it is required to recognize such a gain. The amount of such gain that Western Wireless would recognize would be equal to the difference between the fair market value of VoiceStream common shares at the time of the spin-off and Western Wireless' adjusted tax basis in such shares at the time. The estimated range of possible liability of VoiceStream, not including interest and penalties, if any, is from zero to $400 million. 10. VOTING PREFERRED STOCK On September 6, 2000, VoiceStream issued and sold to Deutsche Telekom 3,906,250 shares of its Voting Preferred Stock, par value $0.001 per share, for an aggregate purchase price of $5 billion. Each share has a liquidation preference of $1,280 per share. Following the T-Mobile merger, the conversion feature was eliminated and VoiceStream has the option of redeeming these shares beginning December 31, 2020. The shares are redeemable at the option of the holder beginning December 31, 2030. 11. INCOME TAXES Significant components of deferred income tax assets and liabilities, net of tax, are as follows (dollars in thousands):
AS OF DECEMBER 31, ------------------------------- 2001 2000 ------------- ------------- Deferred tax liabilities: Intangible assets .................................... $ (6,987,665) $ (705,809) Bond premium ......................................... (21,904) -- Other ................................................ (18,904) -- ------------- ------------- Total deferred tax liabilities ......................... $ (7,028,473) $ (705,809) ============= ============= Deferred tax assets: Property and equipment ............................... $ 103,770 $ 1,904 Start-up expenditures capitalized for tax purposes ... 20,081 20,081 Allowance for doubtful accounts ...................... 45,791 39,170 NOL carryforwards .................................... 3,293,545 2,202,264 Other ................................................ -- 15,145 ------------- ------------- Total deferred tax assets .............................. 3,463,187 2,278,564 ------------- ------------- Valuation reserve .................................... -- (1,572,755) ------------- ------------- Net deferred tax assets (liabilities) .................. $ (3,565,286) $ -- ============= =============
We have approximately $8.0 billion in net operating loss ("NOL") carryforwards at December 31, 2001. The NOL carryforwards will expire between 2008 and 2021. The valuation allowance decreased $1.6 billion in 2001, bringing it to zero, and increased $1.1 billion and $216.9 million in 2000 and 1999, respectively. Our ability to utilize the NOLs in any given year may be limited by certain events, including a significant change in ownership interest. The extent of such limitations, if any, has not yet been determined. Prior to the T-Mobile merger on May 31, 2001, we believed that available objective evidence, including recurring operating losses resulting primarily from the development of our PCS business, created sufficient uncertainty regarding the realization of the net deferred tax assets. Accordingly, a valuation allowance was provided for our net deferred tax assets prior to May 31, 2001. As a result of the T-Mobile merger, certain assets and liabilities were adjusted to fair market value. As the tax bases of these assets and liabilities were not affected by the T-Mobile merger, this resulted in our recording deferred tax assets and liabilities to reflect these differences in basis in accordance with SFAS No. 109. Deferred tax liabilities are greater than the deferred tax assets at December 31, 2001. We do not believe that a valuation allowance is warranted at December 31, 2001 as the deferred tax liabilities are anticipated to offset the deferred tax assets. F-22 The reconciliation between our effective tax rate and the United States federal income tax rate is as follows:
JUNE 1, 2001 | JANUARY 1, 2001 THROUGH | THROUGH DECEMBER 31, 2001 | MAY 31, 2001 ----------------- | --------------- | Federal income tax rate ...................... 35.00% | 35.00% State taxes, net of federal benefit .......... 3.51% | 3.67% Goodwill ..................................... (9.28%) | (4.91%) Preferred stock .............................. -- | (0.14%) Valuation allowance .......................... -- | (29.98%) Other ........................................ (0.50%) | (0.03%) --------------- | --------------- Effective tax rate before merger costs ....... 28.73% | 3.61% Merger charges ............................... (0.03%) | (3.61%) --------------- | --------------- Effective tax rate ........................... 28.70% | -- =============== | ===============
For the years ended December 31, 2000 and 1999, the difference between the statutory tax rate of approximately 40% (35% federal and 5% state, net of federal benefits) and the tax benefit of zero recorded is due to our full valuation allowance against net deferred tax assets. 12. STOCK-BASED COMPENSATION PLANS Stock-based compensation plans At December 31, 2001, 22,091,400 shares were subject to options outstanding under the Management Incentive Stock Option Plan (the "Option Plan"), dated 1999, and amended as a result of the T-Mobile merger on May 31, 2001. The Option Plan provides for the issuance of up to 8 million additional shares of Deutsche Telekom common stock as either Non-qualified Stock Options or as Incentive Stock Options plus that number of ordinary shares or American Depository Receipts ("ADRs"), as applicable, deliverable upon the exercise of the VoiceStream rollover options, as defined in the Agreement and Plan of Merger between Deutsche Telekom and VoiceStream. The vesting period and option term is determined by the option administrator. Options typically vest over a four year period and have a term of up to 10 years. On May 31, 2001, as a result of the T-Mobile merger, each VoiceStream stock option was converted into an option to acquire, from a trust established for the benefit of holders of VoiceStream stock options, 3.7647 Deutsche Telekom ADRs for each VoiceStream common share subject to that VoiceStream option. The exercise price per Deutsche Telekom ADR for each of these options will be the exercise price per VoiceStream common share applicable to that option before the completion of the merger, divided by 3.7647. We recorded deferred compensation of $44.6 million related to unvested options due to the T-Mobile purchase price allocations, of which $8.7 million was amortized as compensation expense from June 1, 2001 through December 31, 2001. On May 3, 1999, as a result of the Western Wireless spin-off, all unvested outstanding options held by VoiceStream employees were converted from Western Wireless options to VoiceStream options. Additionally, all VoiceStream employees with vested, outstanding options were issued an additional option in VoiceStream for each vested, outstanding option they held as well as maintaining the existing option in Western Wireless. The number of options and related strike price varied to maintain the original economic value to the employee. In accordance with EITF 90-9, we recorded deferred compensation of $69.0 million, of which $2.5 million, $15.6 million and $50.4 million was recognized as deferred compensation expense from January 1, 2001 through May 31, 2001 and for the years ended December 31, 2000 and 1999, respectively. The remaining balance of deferred compensation of $0.5 million was eliminated in the T-Mobile purchase accounting. F-23 Under VoiceStream's 1999 Restricted Stock Plan ("Restricted Stock Plan"), 292,119 shares had been awarded to key executives through December 31, 2000. The Board of Directors determined not to issue any additional awards under the Restricted Stock Plan after December 31, 2000. The restricted stock awards vested upon meeting specific performance goals. The compensation associated with the restricted grants (i.e. the difference between the market price of VoiceStream's common stock on the date of grant and as subsequently adjusted for fair market value adjustments and the exercise price) was amortized over the vesting periods. In 2000 and 1999, respectively, we recorded deferred compensation of $34.2 million and $17.0 million pursuant to fair market value adjustments for the underlying shares in the Restricted Stock Plan. We recognized deferred compensation expense of $35.4 million and $10.3 million related to this plan in 2000 and 1999, respectively. The remaining balance of deferred compensation of $5.5 million was eliminated in the T-Mobile purchase accounting. VoiceStream accounts for its stock compensation plans following the guidelines of APB Opinion No. 25 and related interpretations. Had compensation cost been determined based upon the fair value at the grant dates for awards under these plans consistent with the method defined in SFAS No. 123, VoiceStream's net loss would have increased to the pro forma amounts indicated below (dollars in thousands):
JUNE 1, 2001 | JANUARY 1, THROUGH | 2001 THROUGH FOR THE YEARS ENDED DECEMBER 31, DECEMBER 31, | MAY 31, ------------------------------- 2001 | 2001 2000 1999 ------------- | ------------- ------------- ------------- | Net loss: | As reported ...... $ (1,460,201) | $ (1,153,501) $ (2,094,389) $ (454,739) Pro forma ........ $ (1,469,613) | $ (1,162,996) $ (2,168,578) $ (497,159)
For the purpose of this pro forma calculation, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- 2001 2000 1999 -------------- -------------- -------------- Weighted average risk free interest rate........... 5.50% to 5.98% 5.56% to 6.48% 5.61% to 6.41% Expected dividend yield.......... 3.25% 0% 0% Expected volatility.............. 47% 87% 75% Expected lives................... 7.5 years 7.1 years 7.5 years
The Black-Scholes option-pricing model requires the input of highly subjective assumptions and does not necessarily provide a reliable measure of fair value. Options granted, exercised and canceled are summarized as follows (in thousands, except per share data):
JUNE 1, 2001 | JANUARY 1, 2001 FOR THE YEARS ENDED DECEMBER 31, THROUGH | THROUGH ----------------------------------------------- DECEMBER 31, 2001 | MAY 31, 2001 2000 1999 ---------------------- | ---------------------- ---------------------- ---------------------- WEIGHTED | WEIGHTED WEIGHTED WEIGHTED AVERAGE | AVERAGE AVERAGE AVERAGE PRICE | PRICE PRICE PRICE SHARES PER SHARE | SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE --------- --------- | --------- --------- --------- --------- --------- --------- | Outstanding, beginning | of period .................. 6,444 $ 58.27 | 7,663 $ 34.02 4,135 $ 8.52 -- $ -- Adjustment for .075% | stock dividend ............. -- -- | 65 -- -- -- -- -- Conversion of historical | VoiceStream options ........ (6,444) (58.27) | -- -- -- -- -- -- Adjustment for Deutsche | Telekom merger ............. 24,278 15.36 | -- -- -- -- -- -- Options granted .............. -- -- | 1,914 83.89 1,399 112.75 4,899 8.00 Options assumed .............. -- -- | -- -- 6,289 19.32 -- -- Options exercised ............ (1,639) 3.21 | (3,069) 14.03 (3,910) 15.39 (764) 5.19 Options cancelled ............ (549) 17.47 | (129) 53.53 (250) 29.16 -- -- --------- | --------- --------- --------- Outstanding, end of period ... 22,090 16.21 | 6,444 58.27 7,663 34.02 4,135 8.52 ========= | ========= ========= ========= Exercisable, end of period ... 6,299 9.88 | 1,888 32.01 3,758 13.57 2,232 6.06
F-24 The weighted average fair value of stock options granted per share was $35.57, $92.10 and $25.97 in 2001, 2000 and 1999, respectively. The following table summarizes information about stock options outstanding and exercisable at December 31, 2001 (in thousands, except per share data):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------- --------------------------- WEIGHTED WEIGHTED AVERAGE AVERAGE WEIGHTED REMAINING LIFE EXERCISE AVERAGE RANGE OF EXERCISE PRICES NUMBER (YEARS) PRICE NUMBER EXERCISE PRICE ------------------------------- ----------- -------------- ---------- ----------- -------------- $ 0.00 - $ 7.60 7,515 6.0 $ 2.66 $ 3,828 $ 2.44 7.61 - 15.20 2,875 6.3 8.47 953 8.60 15.21 - 22.80 85 7.7 17.58 38 17.59 22.81 - 30.39 10,056 8.5 26.26 1,100 29.34 30.40 - 37.99 1,553 8.3 30.98 380 30.98 ------------- ------------ ----------- -------------- --------- ----------- -------------- $ 0.00 - $ 37.99 22,084 7.4 $ 16.21 $ 6,299 $ 9.88 =========== ===========
13. SELECTED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) Selected quarterly consolidated financial information for the years ended December 31, 2001 and 2000 is as follows (dollars in thousands):
TOTAL OPERATING QUARTERS ENDED REVENUES LOSS NET LOSS - ------------------------- ------------ ------------ ------------ March 31, 2000* ......... $ 258,444 $ (119,116) $ (203,330) June 30, 2000* .......... $ 456,256 $ (264,149) $ (414,224) September 30, 2000* ..... $ 566,615 $ (507,438) $ (657,325) December 31, 2000* ...... $ 653,758 $ (562,794) $ (806,975) March 31, 2001 .......... $ 732,054 $ (480,493) $ (651,212) June 30, 2001 ........... $ 817,238 $ (575,075) $ (721,572) September 30, 2001 ...... $ 870,775 $ (825,149) $ (633,393) December 31, 2001 ....... $ 959,234 $ (719,869) $ (607,525)
- ---------- * Certain reclassifications have been made to the quarterly revenue amounts to conform to the annual presentation. 14. RELATED PARTY TRANSACTIONS: VoiceStream is party to technical service agreements and reciprocal wholesale agreements with the CIRI Designated Entities which entitle each party to utilize airtime on the other's spectrum, and/or utilize wireless system infrastructure, in certain agreed upon markets. The agreements are structured such that each party performs as a reseller for the other and related fees are charged and paid between the parties. Through 2001, we earned revenues of $34.6 million ($3.6 million from January 1, 2001 through May 31, 2001 and $31.0 million from June 1, 2001 through December 31, 2001) and incurred expenses of $39.8 million ($3.8 million from January 1, 2001 through May 31, 2001 and $36.0 million from June 1, 2001 through December 31, 2001) related to these agreements, as compared to revenues of $113.8 million and expenses of $138.1 million for the year ended December 31, 2000. F-25 After our spin-off from Western Wireless, the NOL carryforwards resulting from VoiceStream's cumulative tax losses were transferred from Western Wireless to VoiceStream. Pursuant to a tax sharing agreement entered into at the time of the Hutchison investment, we paid Western Wireless $20.0 million for the estimated tax benefit of NOLs generated while we were a subsidiary of Western Wireless. This was accounted for as a capital adjustment to Western Wireless in 1999. In 2001, as a result of Western Wireless retaining a portion of the NOLs generated by VoiceStream before the spin-off pursuant to the Tax Sharing agreement between the companies, Western Wireless paid VoiceStream approximately $24.5 million, which was recorded as a capital adjustment. Following the T-Mobile merger, Powertel's employees became employees of VoiceStream and we charge Powertel for the compensation and benefit costs of our employees working exclusively on Powertel business. Certain centralized costs are incurred by VoiceStream and are allocated to Powertel, a subsidiary of T-Mobile. Such allocations include the costs of accounting and other administrative functions. These costs are allocated to the respective operational units in a manner that reflects the relative time and associated costs devoted to each of the operational units. Powertel was allocated costs of $19.1 million for the period from June 1, 2001 through December 31, 2001. At December 31, 2001, we have an intercompany receivable due from Powertel of $71.2 million as a result of the allocations as discussed above and transfers of certain fixed assets, inventory and other balance sheet items. This receivable is included on the balance sheet in investments and advances from unconsolidated affiliates. 15. SUBSEQUENT EVENTS Subsequent to December 31, 2001, we repaid $134.5 million of our 10 3/8% Senior Notes due on 2009, $10.0 million of our 11 5/8% Senior Notes due 2006, and $15.0 million of our 11 1/2% Senior Notes due 2009. These repayments were funded by borrowings from Deutsche Telekom of $159.5 million. Subsequent to December 31, 2001, CIRI has submitted their put exercise notice to VoiceStream for the conversion of their ownership interest in CIVS IV. The exchange is pending approval by the FCC and is expected to close by the end of the second quarter, 2002. F-26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. March 4, 2002 VOICESTREAM WIRELESS CORPORATION By /s/ JOHN W. STANTON ---------------------------------------- John W. Stanton Chairman of the Board, Director and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE ---------- ----- ---- By: /s/ JOHN W. STANTON Chairman of the Board, Director and March 4, 2002 --------------------------------------- Chief Executive Officer John W. Stanton (Principal Executive Officer) By: /s/ ROBERT R. STAPLETON President and Director March 4, 2002 --------------------------------------- Robert R. Stapleton By: /s/ BRIAN W. KIRKPATRICK Executive Vice President, March 4, 2002 --------------------------------------- Chief Financial Officer Brian W. Kirkpatrick (Principal Financial Officer) By: /s/ DONALD GUTHRIE Vice Chairman and Director March 4, 2002 --------------------------------------- Donald Guthrie By: /s/ ALLYN P. HEBNER Vice President and Controller March 4, 2002 --------------------------------------- (Principal Accounting Officer) Allyn P. Hebner By: /s/ DR. KARL-GERHARD EICK Director March 4, 2002 --------------------------------------- Dr. Karl-Gerhard Eick By: /s/ JEFFREY A. HEDBERG Director March 4, 2002 --------------------------------------- Jeffrey A. Hedberg By: /s/ MAX HIRSCHBERGER Director March 4, 2002 --------------------------------------- Max Hirschberger By: /s/ KAI-UWE RICKE Director March 4, 2002 --------------------------------------- Kai-Uwe Ricke
F-27 REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULE To VoiceStream Wireless Corporation: We have audited in accordance with generally accepted auditing standards in the United States, the financial statements of VoiceStream Wireless Corporation and subsidiaries as of December 31, 2000 and for each of the two years in the period ended December 31, 2000 included in this Form 10-K, and have issued our report thereon dated February 7, 2001. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The accompanying schedule is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole for the periods discussed above. /s/ ARTHUR ANDERSEN LLP Seattle, Washington, February 7, 2001 SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS
(dollars in thousands) BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF OF PERIOD EXPENSES(1) DEDUCTIONS(2) OTHER(3) PERIOD ------------ ------------ ------------ ------------ ------------ Year ended December 31, 1999 .... $ 5,715 $ 37,000 $ (25,233) $-- $ 17,482 ============ ============ ============ ============ ============ Year ended December 31, 2000 .... $ 17,482 $ 162,800 $ (113,618) $ 33,936 $ 100,600 ============ ============ ============ ============ ============ Year ended December 31, 2001 .... $ 100,600 $ 252,793 $ (241,498) $ 7,899 $ 119,794 ============ ============ ============ ============ ============
- ---------- (1) For the year ended December 31, 2001, amounts charged to costs and expenses were $91.5 million from January 1, 2001 through May 31, 2001 and $161.3 million from June 1, 2001 through December 31, 2001. (2) Write-offs, net of bad debt recovery. (3) Recorded in purchase accounting adjustments. F-28 EX-4.2 3 v79584ex4-2.txt EXHIBIT 4.2 EXHIBIT 4.2 VOICESTREAM WIRELESS CORPORATION VOICESTREAM WIRELESS HOLDINGS CORPORATION To HARRIS TRUST COMPANY OF CALIFORNIA, AS TRUSTEE Indenture Dated as of November 9, 1999 Up to $2,200,000,000 10-3/8% Senior Notes Due 2009 INDENTURE, dated as of November 9, 1999, between (i) VoiceStream Wireless Corporation, a corporation duly organized and existing under the laws of the State of Washington ("VoiceStream") and VoiceStream Wireless Holding Corporation, a corporation duly incorporated and existing under the laws of the State of Delaware ("VoiceStream Holdings")(unless otherwise provided by Section 803, VoiceStream and VoiceStream Holdings shall hereinafter be referred to as the "Issuers"), each having its principal office at 3650 131st Avenue SE, Bellevue, Washington 98006, and (ii) Harris Trust Company of California, a trust company duly organized and existing under the laws of the State of California, as Trustee (the "Trustee"). RECITALS OF THE ISSUER The Issuers have duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of up to $2,200,000,000 aggregate principal amount of their 10-3/8% Senior Notes Due 2009 (the "Securities") of substantially the tenor and amount hereinafter set forth. All things necessary to make the Securities, when executed by the Issuers and authenticated and delivered hereunder and duly issued by the Issuers, the valid obligations of the Issuers, and to make this Indenture a valid agreement of the Issuers, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:ARTICLE ONE ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: - the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; - all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; - all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles (whether or not such is indicated herein), and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; - unless otherwise specifically set forth herein, all calculations or determinations of a Person shall be performed or made on a consolidated basis in accordance with generally accepted accounting principles but shall not include the accounts of Unrestricted Subsidiaries, except to the extent of dividends and distributions actually paid to the Issuers or one of their Wholly Owned Restricted Subsidiaries; and - the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Acquired Indebtedness" means, with respect to any specified Person: - Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person; and - Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Adjusted Treasury Rate" will be determined on the third business day preceding any applicable redemption date and is the sum of: - the arithmetic mean of the yields under the heading "Week Ending" published in the Statistical Release most recently published prior to the date of determination under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the redemption date, of the principal being redeemed; and - 0.50%; provided, however, that if no maturity set forth under such heading exactly corresponds to the maturity of such principal, yields for the two published maturities most closely corresponding to the maturity of such principal will be calculated as provided immediately above, and the Adjusted Treasury Rate will be interpolated or extrapolated 2 from such yields on a straight-line basis, rounding in each of the relevant periods to the nearest month. "Administrative Agent" means the Person or Persons designated as such under the Credit Facility or, if the Omnipoint Reorganization is completed, the Anticipated New Credit Facility. "Aerial" means Aerial Communications, Inc., a Delaware corporation. "Aerial Reorganization" means the reorganization and related transactions contemplated by the Agreement and Plan of Reorganization, dated as of September 17, 1999, among VoiceStream, VoiceStream Holdings, VoiceStream Subsidiary II Corporation, Aerial and Telephone and Data Systems, Inc. "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" means any member of, or participant in, the Depositary. "Anticipated New Credit Facility" means the new credit facility to be entered into upon and assuming completion of the Omnipoint Reorganization by a wholly-owned subsidiary of VoiceStream Holdings, together with a subsidiary of Omnipoint, which the Issuers are currently negotiating with a consortium of lenders, but for which the Issuers have not received commitments. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, Euroclear and Cedel, in each case to the extent applicable to such transaction and as in effect from time to time. "Asset Disposition" by any Person means any transfer, conveyance, sale, lease or other disposition by such Person or any of its Restricted Subsidiaries (including a consolidation or merger or other sale of any such Restricted Subsidiaries with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Subsidiary of such Person to such Person or a Wholly Owned Restricted Subsidiary of such Person or by such Person to a Wholly Owned Restricted Subsidiary of such Person) of (i) shares of Capital Stock (other than directors' qualifying shares) or other ownership interests of a Subsidiary of such Person, (ii) substantially all of the assets of such Person or any of its Subsidiaries representing a division or line of business or (iii) other assets or rights of such Person or any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Dispositions: 3 - any single transaction or series of related transactions that (a) involves assets having a Fair Market Value of less than $15 million; or (b) results in net proceeds to either Issuer or any of its respective Restricted Subsidiaries of less than $15 million; - a Restricted Payment that is permitted under Section 1010; - sales or other dispositions of inventory in the ordinary course of business and of receivables; - substantially simultaneous exchanges by either Issuer or any of its Restricted Subsidiaries of Telecommunications Assets for other Telecommunications Assets, provided that the Telecommunications Assets received by such Issuer or such Restricted Subsidiary have at least substantially equal or greater value to such Issuer or such Restricted Subsidiary (as determined by the Board of Directors whose good faith determination shall be conclusive and evidenced by a Board Resolution); - any sale or other disposition of any or all the Capital Stock of an Unrestricted Subsidiary; or - any sale or other disposition of Temporary Cash Investments. Additionally, the contribution of Telecommunications Assets to an Unrestricted Subsidiary whereby an Issuer or a Restricted Subsidiary of an Issuer receives Capital Stock of an Unrestricted Subsidiary shall be deemed a Restricted Payment only and shall not be deemed an Asset Disposition. "Attributable Value" means, as to any particular lease under which any Person is at the time liable other than a Capital Lease Obligation, and at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such Person under such lease during the initial term thereof as determined in accordance with generally accepted account principles, discounted from the last date of such initial term to the date of determination at a rate per annum equal to the discount rate which would be applicable to a Capital Lease Obligation with like term in accordance with generally accepted accounting principles. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of insurance, taxes, assessments, utility, operating and labor costs and similar charges. In the case of any lease which is terminable by the lessee upon the payment of penalty, such net amount shall also include the lesser of the amount of such penalty (in which case no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the rent which would otherwise be required to be paid if such lease is not so terminated. "Attributable Value" means, as to a Capital Lease Obligation, the principal amount thereof. 4 "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness and the amount of such principal payment, by (ii) the sum of all such principal payments. "Board of Directors" means, with respect to an Issuer, either the board of directors of such Issuer or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of VoiceStream, VoiceStream Holdings or one of their subsidiaries, as the case may be, to have been duly adopted by the Board of Directors, to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City, the State of Washington, the State of Illinois or the State of California are authorized or obligated by law or executive order to close. "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles (a "Capital Lease"). The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. "Capital Stock" means: - in the case of a corporation, corporate stock; - in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; - in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and - any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 5 "Cedel" means Cedel Bank, S.A. (or any successor securities clearing agency). "Change of Control" means - directly or indirectly a sale, transfer or other conveyance of all or substantially all the assets of VoiceStream or VoiceStream Holdings, as the case may be, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among such Issuer or such Issuers' Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons that, as of the date of this Indenture, are not Initial Investors or Affiliates of the Initial Investors, own more than 50% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction; - the adoption of a plan relating to the liquidation or dissolution of VoiceStream or VoiceStream Holdings, as the case may be; - any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than the Initial Investors (or any Person or group of Persons that, as of the date of this Indenture, are Affiliates of the Initial Investors), is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Power of VoiceStream or VoiceStream Holdings, as the case may be; or - during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the applicable Issuer was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be, then in office. "Change of Control Payment Date" has the meaning specified in Section 1016. "Change of Control Triggering Event" has the meaning specified in Section 1016. 6 "Closing Date" means November 9, 1999. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Consolidated Income Tax Expense" of any Person means for any period the provision for income taxes of such Person and its Consolidated Restricted Subsidiaries for such period. "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Consolidated Restricted Subsidiaries at such date. "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Rate Agreements but without deduction of interest income) of such Person and its Consolidated Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of), (i) the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles; (ii) the amortization of Indebtedness discounts; (iii) any payments or fees with respect to letters of credit, bankers acceptances or similar facilities; (iv) fees with respect to Interest Rate Agreements; (v) the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and (vi) Preferred Stock dividends declared and payable in cash. "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication) (i) the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the date of this Indenture in a pooling-of-interests transaction for any period prior to the date of such transaction, (ii) the net income (or loss) of any Person that is not a Consolidated Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period, (iii) gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business and (iv) all extraordinary gains and extraordinary losses. 7 "Consolidated Restricted Subsidiary" of any Person means all other Persons that would be accounted for as consolidated Persons in such Person's financial statements in accordance with generally accepted accounting principles other than Unrestricted Subsidiaries. "Corporate Trust Office" means the principal office of the Trustee in Los Angeles, California at which at any particular time its corporate trust business shall be administered or its operations center in Chicago, Illinois, or such other location designated by the Trustee in a report pursuant to Section 703(a). "corporation" means a corporation, association, company, joint-stock company, partnership or business trust. "Credit Facility" means the Loan Agreement, dated as of June 26, 1998, among VoiceStream PCS Holding L.L.C. (as successor in interest to Western PCS Holding Corporation), Toronto-Dominion Bank (Texas), Inc., as Administrative Agent, and the other financial institutions named therein, as it may be amended, supplemented, restated or otherwise modified from time to time. "Cumulative EBITDA" means EBITDA of the Issuers and their respective Consolidated Restricted Subsidiaries for the period beginning on January 1, 2001, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment. "Cumulative Interest Expense" means the total amount of Consolidated Interest Expense of the Issuers and their respective Consolidated Restricted Subsidiaries for the period beginning on January 1, 2001, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment. "Currency Protection Agreements" means any currency swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge against a risk in the fluctuation of the exchange rate of a currency in which a payment to be made or received by either Issuer or any of its Restricted Subsidiaries is denominated, arising at any time between either Issuer or any of its Restricted Subsidiaries, on the one hand, and any Person (other than an Affiliate of either Issuer or any of its Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time. "Defaulted Interest" has the meaning specified in Section 308. "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the Securities until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean such successor Depositary. The Depositary initially is DTC. "Disqualified Stock" of any person means any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible of or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily 8 redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of such Person, any Restricted Subsidiary of such Person or the holder thereof, in whole or in part, on or prior to the final Stated Maturity of the Securities; provided, however, that any Preferred Stock which would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require either Issuer to repurchase or redeem such Preferred Stock upon the occurrence of a Change of Control occurring prior to the final Stated Maturity of the Securities shall not constitute Disqualified Stock if the change of control provisions applicable to such Preferred Stock specifically provide that such Issuer will not repurchase or redeem any such stock pursuant to such provisions prior to the Issuers' repurchase of such Securities as are required to be repurchased pursuant to Section 1016. "DTC" means The Depository Trust Company, a New York corporation. "EBITDA" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expense included in the income statement of such Person and its Consolidated Restricted Subsidiaries for such period, plus (iv) all other non-cash charges and expenses that were deducted in determining Consolidated Net Income for such period, minus (v) all non-cash revenues and gains to the extent included in Consolidated Net Income for such period. "Eligible Institution" means a commercial banking institution that has combined capital and surplus of not less than $500 million or its equivalent in foreign currency, whose debt is rated "A-3" or higher, "A-" or higher or "A-" or higher according to Moody's Investors Service, Inc., Standard & Poor's Ratings Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act) respectively, at the time as of which any investment or rollover therein is made. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means the Euroclear Clearance System (or any successor securities clearing agency). "Event of Default" has the meaning specified in Section 501. "Exchange Act" refers to the Securities Exchange Act of 1934 as it may be amended and any successor act thereto. "Exchange Offer" means an offer made pursuant to an effective registration statement under the Securities Act by the Issuers to exchange securities substantially identical to Outstanding Securities (except for the differences provided for herein) for Outstanding Securities. 9 "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement, dated as of November 4, 1999, among the Issuers and the Initial Purchasers, as such agreement may be amended from time to time. "Exchange Registration Statement" means a registration statement of the Issuers under the Securities Act registering Exchange Securities for distribution pursuant to the Exchange Offer. "Exchange Securities" means the Securities issued pursuant to the Exchange Offer or sold pursuant to the Resale Registration Statement and their Successor Securities. "Expiration Date" has the meaning specified in the definition of Offer to Purchase. "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined (i) if such Person or assets has a Fair Market Value of less than $5 million, by any officer of VoiceStream or VoiceStream Holdings, as the case may be, and evidenced by an Officers' Certificate, dated within 30 days of the relevant transaction, or (ii) if such Person or assets has a Fair Market Value of $5 million or more, by a majority of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be, and evidenced by a Board Resolution, dated within 30 days of the relevant transaction "Global Security" means a Security that evidences all or part of the Securities of any series and bears the applicable legend set forth in Section 202. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted average life to maturity of not more than one year from the date of Investment therein. "Gradation" means a gradation within a Rating Category or a change to another Rating Category, which shall include: - "+" and "-" in the case of S&P's current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one gradation); - 1, 2 and 3 in the case of Moody's current Rating Categories (e.g., a decline from Ba1 to Ba2 would constitute a decrease of one gradation); or - the equivalent in respect of successor Rating Categories of S&P or Moody's or Rating Categories used by Rating Agencies other that S&P or Moody's. 10 "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. "Holder" means a Person in whose name a Security is registered in the Security Register. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (viii) every obligation of the type referred to in Clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise. The amount of any Indebtedness outstanding as of any date shall be: 11 - the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest; and - the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indebtedness to EBITDA Ratio" of any Person means at any date the ratio of Consolidated Indebtedness outstanding on such date to the product calculated by multiplying the aggregate EBITDA for the first full fiscal quarter immediately preceding such date by four; provided, however, that, in the event such Person or any of its Restricted Subsidiaries has acquired a Person during or after such period in a pooling-of-interests transaction, such computation shall be made on a pro forma basis as if the transaction had taken place on the first day of such period. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Investors" means Hutchison Whampoa Limited and its Affiliates, John W. Stanton and Theresa E. Gillespie and their Affiliates and Providence Media Partners, L.P. and its Affiliates. "Initial Purchasers" means Goldman, Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Smith Barney Inc., Banc of America Securities LLC, TD Securities (USA) Inc., Barclays Capital Inc. and SG Cowen Securities Corporation. "Initial Regulation S Securities" means the Securities sold by the Initial Purchasers in the initial offering contemplated by the Purchase Agreement in reliance on Regulation S. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Agreements" means any interest rate swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between either Issuer or any Restricted Subsidiary, on the one hand, and any Person (other than an Affiliate of either Issuer or any Restricted Subsidiary), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time. "Investment" by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person, including any payment on a guarantee of any obligation of such other Person, but shall not include trade 12 accounts receivable in the ordinary course of business on credit terms made generally available to the customers of such Person. "Investment Grade" means a rating of at least BBB-, in the case of S&P, or Baa3, in the case of Moody's. "Issuance Date" means the date of issuance of the Securities by the Issuers. "Issuers" has the meaning specified in the preamble. "Issuer Request" or "Issuer Order" means a written request or order signed in the name of VoiceStream or VoiceStream Holdings, as the case may be, by its Chairman or Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Maturity" means, when used with respect to any Security, the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors Service, Inc. shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if Moody's Investors Service, Inc. ceases rating debt securities having a maturity at original issuance of at least one year and its rating business with respect thereto shall not have been transferred to any successor Person, then "Moody's" shall mean any other national recognized rating agency (other than S&P) that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by VoiceStream or VoiceStream Holdings, as the case may be, by a written notice given to the trustee. "Net Available Proceeds" from any Asset Disposition means the aggregate amount of cash (including any other consideration that is converted into cash) received by an Issuer or any of its Restricted Subsidiaries in respect of such an Asset Disposition, less the sum of (i) all fees, commissions and other expenses Incurred in connection with such Asset Disposition, including the amount of income taxes required to be paid by such Issuer or any of its Restricted Subsidiaries in connection therewith and (ii) the aggregate amount of cash so received which is used to retire any existing Indebtedness of such 13 Issuer or any of its Restricted Subsidiaries which is required to be repaid in connection therewith. "Net Cash Proceeds" from the sale of Equity Interests means the aggregate amount of cash (including any other consideration that is converted into cash) received by an Issuer or any of its Restricted Subsidiaries in respect of such sale of Equity Interests, less the sum of: - all fees, commissions and other expenses incurred in connection with such sale of Equity Interests, including the amount of income taxes required to be paid by such Issuer or any of its Restricted Subsidiaries in connection therewith; and - the aggregate amount of cash so received which is used to retire any existing Indebtedness of such Issuer or any of its Restricted Subsidiaries which is required to be repaid in connection therewith. "Non-Recourse Debt" means Indebtedness: - as to which neither of the Issuers nor any of their respective Restricted Subsidiaries; (a)provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness); (b)is directly or indirectly liable (as a guarantor or otherwise); or (c)constitutes the lender; - no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary of such Issuer) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of either Issuer or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and - as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of either Issuer or any of its Restricted Subsidiaries. "Offer" has the meaning specified in the definition of Offer to Purchase. "Offer to Purchase" means a written offer (the "Offer") sent by the Issuers by first class mail, postage prepaid, to each Holder at his address appearing in the Security Register on the date of the Offer offering to purchase up to the principal amount of Securities specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Indenture). Unless otherwise required by applicable law, the 14 Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of Securities within five Business Days after the Expiration Date. The Issuers shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Issuers' obligation to make an Offer to Purchase, and the Offer shall be mailed by the Issuers or, at the Issuers' request, by the Trustee in the name and at the expense of the Issuers. The Offer shall contain information concerning the business of the Issuers and their respective Subsidiaries which the Issuers in good faith believe will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to Section 704 (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in the Issuers' business subsequent to the date of the latest of such financial statements referred to in Clause (i) (including a description of the events requiring the Issuers to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Issuers to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein. The Offer shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Offer to Purchase. The Offer shall also state: - the Section of this Indenture pursuant to which the Offer to Purchase is being made; - the Expiration Date and the Purchase Date; - the aggregate principal amount of the Outstanding Securities offered to be purchased by the Issuers pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such has been determined pursuant to the Section hereof requiring the Offer to Purchase) (the "Purchase Amount"); - the purchase price to be paid by the Issuers for each $1,000 aggregate principal amount of Securities accepted for payment (as specified pursuant to this Indenture) (the "Purchase Price"); - that the Holder may tender all or any portion of the Securities registered in the name of such Holder and that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount; - the place or places where Securities are to be surrendered for tender pursuant to the Offer to Purchase; 15 - that on the Purchase Date the Purchase Price will become due and payable upon each Security accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date; - that each Holder electing to tender a Security pursuant to the Offer to Purchase will be required to surrender such Security at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Security being, if the Issuers or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing); - that Holders will be entitled to withdraw all or any portion of Securities tendered if the Issuers (or its Paying Agent) receives, not later than the close of business on the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder tendered, the certificate number of the Security the Holder tendered and a statement that such Holder is withdrawing all or a portion of his tender; - that (a) if Securities in an aggregate principal amount less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Issuers shall purchase all such Securities and (b) if Securities in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Issuers shall purchase Securities having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Securities in denominations of $1,000 or integral multiples thereof shall be purchased); and - that in case of any Holder whose Security is purchased only in part, the Issuers shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Security so tendered. Any Offer to Purchase shall be governed by and effected in accordance with the Offer for such Offer to Purchase. "Officers' Certificate" means a certificate signed by two officers at least one of whom shall be the principal executive officer, principal accounting officer or principal financial officer of VoiceStream or VoiceStream Holdings, as the case may be, and delivered to the Trustee."Omnipoint" means Omnipoint Corporation, a Delaware corporation. 16 "Omnipoint Reorganization" means the reorganization and related transactions contemplated by that Agreement and Plan of Reorganization, dated as of June 23, 1999, among VoiceStream, VoiceStream Holdings and Omnipoint. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for an Issuer, and who shall be reasonably acceptable to the Trustee and delivered to the Trustee. "Original Securities" means all Securities other than Exchange Securities. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: - Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; - Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Issuers) in trust or set aside and segregated in trust by the Issuers (if the Issuers shall act as their own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and - Securities which have been paid pursuant to Section 307 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Issuers; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Issuers or any other obligor upon the Securities or any Affiliate of the Issuers or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee has actual knowledge to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not an Issuer or any other obligor upon the Securities or any Affiliate of the Issuers or of such other obligor. 17 "pari passu," when used with respect to the ranking of any Indebtedness of any Person in relation to other Indebtedness of such Person, means that each such Indebtedness (a) either (i) is not subordinated in right of payment to any other Indebtedness of such Person or (ii) is subordinate in right of payment to the same Indebtedness of such Person as is the other and is so subordinate to the same extent and (b) is not subordinate in right of payment to the other or to any Indebtedness of such Person as to which the other is not so subordinate. "Paying Agent" means any Person authorized by the Issuers to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Issuers. "Permitted Investments" include: - Investments in either Issuer or any Restricted Subsidiary of either Issuer; - Investments in a Person such that the Person will become a Restricted Subsidiary after giving effect to the Investment or purchases of additional Equity Interests of a Restricted Subsidiary or of a Person who becomes a Restricted Subsidiary as a result of any such purchase; - a Temporary Cash Investment; - stock, obligations or other consideration received in satisfaction of judgments; - an Investment in any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted under Section 1014; - Investments (including acquisitions of other Telecommunications Businesses) not to exceed two times the Net Cash Proceeds from the sale of Equity Interests; - Investments (including acquisitions of other Telecommunications Businesses) made with Capital Stock; - Restricted Equity Investments; - Strategic Investments; - customary loans or advances made in the ordinary course of business to officers, directors or employees of an Issuer or any of its Restricted Subsidiaries for travel, entertainment and moving and other relocation expenses; and - any other Investments not to exceed $100 million in the aggregate. 18 "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock," as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Public Equity Offering" means an underwritten primary public offering of Common Stock pursuant to an effective registration statement under the Securities Act. "Purchase Agreement" means the Purchase Agreement, dated as of November 4, 1999, among the Issuers and the Initial Purchasers, as such agreement may be amended from time to time. "Purchase Amount" has the meaning specified in the definition of Offer to Purchase. "Purchase Date" has the meaning specified in the definition of Offer to Purchase. "Purchase Price" has the meaning specified in the definition of Offer to Purchase. "Rating Agency" means (1) S&P and Moody's or (2) any other rating agencies contemplated by the definitions of "S&P" and "Moody's". "Rating Category" means: - with respect to S&P, any of the following categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); - with respect to Moody's, any of the following categories (any of which may include a "1", "2" or "3"); Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and - the equivalent of any such categories of S&P or Moody's used by another Rating Agency, if applicable. "Ratings Decline" has the meaning specified in Section 1016. 19 "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to the final Stated Maturity of the Securities. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Securities" means the Exchange Securities and all other Securities sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act, together with their respective Successor Securities. "Registration Default" has the meaning specified in the form of the Securities set forth in Section 202. "Regular Record Date" for the interest payable on any Interest Payment Date means the May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act (or any successor provision), as it may be amended from time to time. "Regulation S Certificate" means a certificate substantially in the form set forth in Annex A. "Regulation S Global Security" has the meaning specified in Section 201. "Regulation S Legend" means a legend substantially in the form of the legend required in the form of Security set forth in Section 202 to be placed upon a Regulation S Global Security. "Regulation S Securities" means all Securities required pursuant to Section 306(c) to bear a Regulation S Legend. Such term includes the Regulation S Global Security. "Related Person" of any Person means any other Person owning (a) 5% or more of the outstanding Common Stock of such Person or (b) 5% or more of the Voting Power of such Person. "Reorganizations" means the Omnipoint Reorganization and the Aerial Reorganization. "Resale Registration Statement" means a shelf registration statement under the Securities Act filed by the Issuers, if required by, and meeting the requirements of, the Exchange and Registration Rights Agreement, registering Original Securities for resale. 20 "Responsible Officer," when used with respect to the Trustee, means the chairman or vice-chairman of the executive committee of the board of directors, the president, any vice-president, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Entity" means, as applied to any Person, any corporation or other entity: - engaged in the acquisition, ownership, operation and management of assets in the Telecommunications Business; - over which such Person is responsible (either directly or through a services agreement) for day-to-day operations or otherwise has a technical services or comparable agreement that provides such Person with such rights, duties and obligations as are substantially similar to those rights, duties and obligations of VoiceStream (as assignee of Western Wireless Corporation) under that certain Technical Services Agreement dated July 30, 1996, as amended, with respect to Cook Inlet Western Wireless PV/SS PCS, L.P.; - of which more than 40% of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary voting power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such voting power by reason of the happening of any contingency, in the case a corporation, or more than 40% of the outstanding ownership interests, in the case of an entity other than a corporation, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and by one or more Subsidiaries of such Person; and - that is formed or the ownership in which is acquired pursuant to an arms' length negotiation between such Person and the Restricted Entity or the other investors in such Restricted Entity that satisfies the requirements of Section 1013. "Restricted Equity Investments" means: - any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of Capital Stock or other ownership interests in a Restricted Entity or (b) any option, warrant or other right to acquire shares of Capital Stock or ownership interests of a Restricted Entity; or 21 - any loan, advance, lease, capital contribution to, or Investment in, or payment of a Guarantee of any obligation of a Restricted Entity. "Restricted Global Security" has the meaning specified in Section 201. "Restricted Payment" has the meaning specified in Section 1010. "Restricted Period" means the period of 41 consecutive days beginning on and including the later of (i) the day on which Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the day on which the closing of the offering of Securities pursuant to the Purchase Agreement occurs. "Restricted Securities" means all Securities required pursuant to Section 306(c) to bear a Restricted Securities Legend. Such term includes the Restricted Global Security. "Restricted Securities Certificate" means a certificate substantially in the form set forth in Annex B. "Restricted Securities Legend" means a legend substantially in the form of the legend required in the form of Security set forth in Section 202 to be placed upon a Restricted Security. "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time. "Rule 144A Securities" means the Securities purchased by the Initial Purchasers from the Issuers pursuant to the Purchase Agreement, other than the Initial Regulation S Securities. "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty. "Securities" means securities designated in the first paragraph of the recitals and includes the Exchange Securities. "Securities Act" refers to the Securities Act of 1933 as it may be amended and any successor act thereto. 22 "Securities Act Legend" means a Restricted Securities Legend or a Regulation S Legend. "Security Registrar" and "Security Register" have the respective meanings specified in Section 306. "Special Interest" has the meaning specified in the form of the Securities set forth in Section 202. "S&P" means Standard & Poor's Rating Services or, if Standard & Poor's Rating Services shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if Standard & Poor's Rating Services ceases rating debt securities having a maturity at original issuance of at least one year and its rating business with respect thereto shall not have been transferred to any successor Person, then "S&P" shall mean any other national recognized rating agency (other than Moody's) that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by VoiceStream or VoiceStream Holdings, as the case may be, by a written notice given to the Trustee. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the date on which the principal of such Security or such installment of interest is due and payable. "Statistical Release" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under this Indenture, then such other reasonably comparable index which shall be designated by VoiceStream or VoiceStream Holdings, as the case may be. "Step-Down Date" has the meaning specified in the form of the Securities set forth in Section 202. "Step-Up" has the meaning specified in the form of the Securities set forth in Section 202. "Strategic Equity Infusion" means an equity investment in VoiceStream or VoiceStream Holdings, as the case may be, made by a Strategic Investor in an aggregate amount of not less than $250 million. "Strategic Investment" means an Investment in one or more Persons engaged in a Telecommunications Business, provided that the aggregate amount of all such Investments does not exceed (1) $100 million or (2), provided that after giving effect to such Strategic Investment the Issuers would comply with the first paragraph of Section 1008, $175 million. 23 "Strategic Investor" means a corporation, partnership or other entity engaged in one or more Telecommunications Businesses that has, or 80% or more of the voting stock of which is owned by a Person that has, an equity market capitalization, at the time of its initial Investment in the applicable Issuer, in excess of $1 billion. "Subsidiary" of any Person means (i) any corporation of which more than fifty percent (50%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, or (ii) any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. "Successor Security" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Telecommunications Asset" means any asset of a Telecommunications Business, including, without limitation, Equity Interests or joint venture, partnership or membership interests of an entity engaged in the Telecommunications Business. "Telecommunications Business" means the business of: - transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities; - creating, developing, acquiring, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or - evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (1) or (2) above (in the case of this clause (3), however, in a manner consistent with VoiceStream's and, assuming completion of either of the Reorganizations, Omnipoint's or Aerial's, as applicable, manner of business on the date of this Indenture), and shall, in any event, include all businesses in which VoiceStream and, assuming completion of either of the Reorganizations, Omnipoint or Aerial, as applicable, or any of their Subsidiaries is engaged on the date of this Indenture or has entered into agreements to engage in or 24 to acquire a company to engage in or contemplate engaging in, as expressly set forth in VoiceStream's Form 10/A filed with the Commission on April 13, 1999 or its Form 10-Q for the quarter ended June 30, 1999 or its current reports on Form 8-K filed prior to October 15, 1999 (or not required to be disclosed therein pursuant to the rules and regulations of the Commission) and, assuming completion of the Reorganizations, each of Omnipoint's and Aerial's Form 10-K for the fiscal year ended December 31, 1998 and Forms 10-Q and 8-K filed during calendar year 1999 prior to the date of the offering circular associated with the Securities (or not required to be disclosed therein pursuant to the rules and regulations of the Commission); provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be. "Telecommunications Indebtedness" means Indebtedness (including Acquired Indebtedness) of an Issuer or any of its Restricted Subsidiaries that is incurred for the (1) development, construction, acquisition, operations or improvement by such Issuer or any of its Restricted Subsidiaries of Telecommunications Assets (including any Indebtedness assumed in connection with an acquisition of Telecommunications Assets) or (2) acquisition of Equity Interests of a Person engaged in a Telecommunications Business; provided that with respect to clause (1) the net proceeds of such Telecommunications Indebtedness do not exceed 100% of the cost of construction, development, acquisition, operations or improvement of the applicable Telecommunications Assets. "Temporary Cash Investment" means: - Government Securities; - any time deposit account, money market deposit and certificate of deposit maturing not more than 270 days after the date of acquisition issued by, or time deposit of, an Eligible Institution; - commercial paper maturing not more than 270 days after the date of acquisition issued by a corporation (other than an Affiliate of either Issuer) with a rating, at the time as of which any investment therein is made, of "P-1" or higher according to Moody's Investors Service, Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or higher according to Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)); - any banker's acceptances or money market deposit accounts issued or offered by an Eligible Institution; - repurchase obligations with a term of not more than 7 days for Government Securities entered into with an Eligible Institution; and 25 - any fund investing exclusively in investments of the types described in clauses (1) through (5) above. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "U.S. Government Obligations" has the meaning specified in Section 1204. "Unrestricted Securities Certificate" means a certificate substantially in the form set forth in Annex C. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Common Stock or Preferred Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, the Fair Market Value of the Subsidiary at the time of such designation would be permitted as an investment under Section 1011. The Board of Directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided that immediately after giving effect to such designation (x) such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the first paragraph of Section 1008 and (y) no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing. Any such designation by the Board of Directors shall be evidenced by a Board Resolution submitted to the Trustee. "Vice President," when used with respect to VoiceStream or VoiceStream Holdings, as the case may be, or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "VoiceStream" has the meaning set forth in the preamble. "VoiceStream Holdings" has the meaning set forth in the preamble. "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily has voting power for the election of directors of such Person. 26 "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.2. Compliance Certificates and Opinions. Upon any application or request by an Issuer to the Trustee to take any action under any provision of this Indenture, such Issuer shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of such Issuer, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as in its reasonable judgment is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of an Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, 27 unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of such Issuer stating that the information with respect to such factual matters is in the possession of the Issuers, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.4. Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent(s) duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, by such Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and such Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee reasonably deems sufficient. (c) An Issuer may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by such Issuer prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders 28 on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or an Issuer in reliance thereon, whether or not notation of such action is made upon such Security. Section 1.5. Notices, Etc., to Trustee and Issuer. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by an Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Trust Officer, or (2) an Issuer by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to such Issuer, Attention: Chief Executive Officer, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by such Issuer with a copy to its General Counsel. Section 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 29 In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.7. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of this Indenture shall be deemed to apply. Section 1.8. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.9. Successors and Assigns. All covenants and agreements in this Indenture by an Issuer shall bind its successors and assigns, whether so expressed or not. Section 1.10. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of law. Section 1.13. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Purchase Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next 30 succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or Purchase Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Purchase Date or Stated Maturity, as the case may be. ARTICLE TWO ARTICLE 2 SECURITY FORMS Section 2.1. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Upon their original issuance, Rule 144A Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Securities, together with their Successor Securities which are Global Securities other than the Regulation S Global Security, are collectively herein called the "Restricted Global Security". Upon their original issuance, Initial Regulation S Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct), provided that upon such deposit all such Securities shall be credited to or through accounts maintained at DTC by or on behalf of Euroclear or Cedel. Such Global Securities, together with their Successor Securities which are Global Securities other than the Restricted Global Security, are collectively herein called the "Regulation S Global Security". Section 2.2. Form of Face of Security. [If the Security is a Restricted Security, then insert -- THIS SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE 31 TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.] [If the Security is a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.] [If the Security is a Global Security, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] [If the Security is a Global Security and The Depository Trust Company is to be the Depositary therefor, then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 32 10-3/8% SENIOR NOTES DUE 2009 No. __________$________ [If Restricted Global Security - CUSIP Number ___________] [If Regulation S Global Security - CUSIP Number ___________] [If Non-Global Security - CUSIP Number ___________] [If Registered Security - CUSIP Number ___________] VoiceStream Wireless Corporation, a corporation duly organized and existing under the laws of Washington and VoiceStream Wireless Holding Corporation, a corporation organized and existing under the laws of Delaware (herein collectively referred to as the "Issuers," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _____________, or registered assigns, the principal sum of ________ Dollars [if the Security is a Global Security, then insert -- , or such other principal amount (which, when taken together with the principal amounts of all other Outstanding Securities, shall not exceed $2,200,000,000 in the aggregate at any time) as may be set forth in the records of the Trustee hereinafter referred to in accordance with the Indenture,] on November 15, 2009, and to pay interest thereon from the Issuance Date of this Security or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on May 15 and November 15 in each year, commencing May 15, 2000, or in the case of Securities issued after the Closing Date, on the first such date following the Issuance Date, at the rate of 10-3/8% per annum, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of 12-3/8% per annum on any overdue principal and premium, if any, and on any overdue installment of interest until paid [if the Security is an Original Security, then insert -- , provided that if (i) the Issuers have not filed an Exchange Registration Statement under the Securities Act registering a security substantially identical to this Security for distribution pursuant to an Exchange Offer or, if applicable, a Resale Registration Statement registering this Security for resale, in either case by March 23, 2000, (ii) either the Exchange Registration Statement or, if applicable, the Resale Registration Statement has not become or been declared effective within 75 days after the filing of such Statement, (iii) the expiration of the Exchange Offer has not occurred within 45 days after the date on which the Exchange Registration Statement has become or been declared effective initially or (iv) either the Exchange Registration Statement or, if applicable, the Resale Registration Statement is filed and declared effective but shall thereafter cease to be effective (except as specifically permitted pursuant to the agreement referred to below) without being succeeded immediately by an additional registration statement filed and declared effective, in each case (i) through (iv) upon the terms and conditions set forth in the Exchange and Registration Rights Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"; provided that no more than one Registration Default shall be deemed to be in effect at any one time), then interest will accrue (in addition to the stated interest on this 33 Security) (the "Step-Up") at a rate of (i) 0.25% per annum for the first 90-day period, (ii) 0.50% per annum for the second 90-day period, (iii) 0.75% per annum for the third 90-day period and (iv) 1.00% per annum thereafter on the principal amount of the Securities for the period from the occurrence of the Registration Default until such time (the "Step-Down Date") as no Registration Default is in effect (after which the interest rate will be restored to its initial rate). The Issuers shall provide the Trustee with written notice of the date of any Registration Default and the Step-Down Date. Interest accruing as a result of the Step-Up is referred to herein as "Special Interest."] The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date [if the Security is an Original Security, then insert - --, provided that any accrued and unpaid interest (including Special Interest) on this Security upon the issuance of an Exchange Security in exchange for this Security shall cease to be payable to the Holder hereof and shall be payable on the next Interest Payment Date for such Exchange Security to the Holder thereof on the related Regular Record Date]. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. If either Reorganization is completed, immediately upon completion of such Reorganization, without any further act by any Person VoiceStream shall cease to be an Issuer of the Securities and any or all of its obligations under the Indenture as an Issuer shall effectively terminate, and VoiceStream Holdings shall remain as the sole Issuer of the Securities. If both Reorganizations are terminated, immediately upon the termination of the last of the Reorganizations to be terminated, without any further act by any Person, VoiceStream Holdings shall cease to be an Issuer of the Securities and any or all of its obligations under the Indenture as an Issuer shall effectively terminate, and VoiceStream shall remain as the sole Issuer of the Securities. Upon either of VoiceStream or VoiceStream Holdings being the sole Issuer, the term "Issuers" hereunder shall be deemed to be changed to "Issuer." Payment of the principal of (and premium, if any) and interest on this Security will be made at the Corporate Trust Office or at the office or agency of the Issuers maintained for that purpose in the Borough of Manhattan, New York City, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Issuers payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. 34 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, each of the Issuers have caused this instrument to be duly executed. Dated: VoiceStream Wireless Corporation By -------------------------- Title: Attest: ------------------------------ Title: VoiceStream Wireless Holding Corporation By -------------------------- Title: Attest: ------------------------------ Title: Section 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Issuers designated as their 10-3/8% Senior Notes Due 2009 (herein called the "Securities"), limited in aggregate principal amount to $2,200,000,000, issued and to be issued from time to time under an Indenture, dated as of November 9, 1999 (herein called the "Indenture"), between the Issuers and Harris Trust Company of California, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Issuers, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. 35 Until November 15, 2002, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount at maturity of the Securities originally issued at a redemption price of 110.375% of principal amount of the Securities to be redeemed on the redemption date with the net cash proceeds of one or more Public Equity Offerings and/or Strategic Equity Infusions; provided that: (1) at least 65% of the aggregate principal amount of Securities originally issued remains outstanding immediately after the occurrence of such redemption (excluding Securities held by the Issuers or any of their respective Subsidiaries); and (2) the redemption occurs within 60 days of the date of the Public Equity Offering or Strategic Equity Infusion. Except pursuant to the preceding paragraph and the provisions of Section 1016 of the Indenture, the Securities will not be redeemable at the Issuers' option prior to November 15, 2004. On or after November 15, 2004, the Issuers may redeem all or a part of the Securities upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued interest, if any, on the Securities redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on November 15 of the years indicated below:
Year Percentage 2004 105.188% 2005 103.458% 2006 101.729% 2007 and thereafter 100.0%
Notice of any optional redemption of any Securities (or portion thereof) will be given to the Holders at their addresses appearing in the Security Register not less than 30 nor more than 60 days prior to the date fixed for redemption. The Securities do not have the benefit of any sinking fund obligations. In the event of redemption or purchase pursuant to an Offer to Purchase of this Security in part only, a new Security or Securities for the unredeemed or unpurchased portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 36 If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that, subject to certain conditions, if (i) certain Net Available Proceeds are available to the Issuers as a result of Asset Dispositions or (ii) a Change of Control Triggering Event occurs, the Issuers shall be required to make an Offer to Purchase for Securities. The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth therein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuers and the rights of the Holders of the Securities under the Indenture at any time by the Issuers and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Issuers with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuers, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the Corporate Trust Office or at the office or agency of the Issuers in the Borough of Manhattan, New York City, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like 37 aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuers, the Trustee nor any such agent shall be affected by notice to the contrary. Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months; provided, however, that any Special Interest on Original Securities shall be computed on the basis of a 365- or 366- day year, as the case may be, and the number of days actually elapsed. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased in its entirety by the Issuers pursuant to Section 1014 or 1016 of the Indenture, check the box: [ ] If you want to elect to have only a part of this Security purchased by the Issuers pursuant to Section 1014 or 1016 of the Indenture, state the amount: $ Dated: Your Signature:____________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee:___________________________________ (Signature must be guaranteed by an eligible guarantor institution which is a member of or participation the Securities Transfer Agent Medallion Program)(STAMP) Section 2.4. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. 38 Harris Trust Company of California, as Trustee By _______________________________, Authorized Officer ARTICLE THREE ARTICLE 3 THE SECURITIES Section 3.1. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered from time to time under this Indenture is limited to $2,200,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 307, 906 or 1108 or in connection with an Offer to Purchase pursuant to Section 1014 or 1016. The Securities shall be known and designated as the "10-3/8% Senior Notes Due 2009" of the Issuers. Their Stated Maturity shall be November 15, 2009 and they shall bear interest at the rate of 10-3/8% per annum, from the Issuance Date of the Securities or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable semi-annually on May 15 and November 15, commencing on May 15, 2000, or in the case of Securities issued after the Closing Date, on the first such date following the Issuance Date, to the Holders of record on the immediately preceding May 1 and November 1, until the principal thereof is paid or made available for payment; provided, however, with respect to Original Securities, that if a Registration Default occurs (provided that no more than one Registration Default shall be deemed to be in effect at any one time), then a Step-Up will occur for the period from the occurrence of the Registration Default until the Step-Down Date (after which the interest rate will be restored to its initial rate). The Issuers shall provide the Trustee with written notice of the date of any Registration Default and the Step-Down Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Accrued Special Interest, if any, shall be paid in cash in arrears semi-annually on May 15 and November 15 in each year and the amount of accrued Special Interest shall be determined on the basis of the number of days actually elapsed and computed as provided in Section 311. The principal of (and premium, if any) and interest on the Securities shall be payable at the Corporate Trust Office or at the office or agency of the Issuers in the City and State of New York maintained for such purpose; provided, however, that at the option of the Issuers payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. 39 The Securities shall be subject to repurchase by the Issuers pursuant to an Offer to Purchase as provided in Sections 1014 and 1016. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be subject to defeasance at the option of the Issuers as provided in Article Twelve. Section 3.2. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiples thereof. Section 3.3. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of each of VoiceStream or VoiceStream Holdings by its Chairman or Vice Chairman of the Board, its President or one of its Vice Presidents, attested by its Secretary, one of its Assistant Secretaries or its Chief Financial Officer. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of an Issuer shall bind such Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Issuers may deliver Securities executed by the Issuers to the Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Securities; and the Trustee in accordance with such an Issuer Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. At any time and from time to time after the execution and delivery of this Indenture and after the effectiveness of a registration statement under the Securities Act with respect thereto, the Issuers may deliver Exchange Securities executed by the Issuers to the Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Exchange Securities and a like principal amount of Original Securities for cancellation in accordance with Section 310 of this Indenture, and the Trustee in accordance with the Issuer Order shall authenticate and deliver such Securities. Prior to authenticating such Exchange Securities, and accepting any additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, if requested, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating in substance (a) that all conditions hereunder precedent to the authentication and delivery of such Exchange Securities have been complied with and that such Exchange Securities, when such Securities have been duly authenticated and delivered by the Trustee (and subject to any other conditions specified in such Opinion of Counsel), have been duly 40 issued and delivered and will constitute valid and legally binding obligations of the Issuers, as applicable, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (b) that the issuance of the Exchange Securities in exchange for Original Securities has been effected in compliance with the Securities Act. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 3.4. Temporary Securities. Pending the preparation of definitive Securities, the Issuers may execute, and upon Issuer Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Issuers will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Issuers designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Issuers shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.5. Global Securities. (a) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Issuers for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other 41 than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary (A) has notified the Issuers that it is unwilling or unable to continue as Depositary for such Global Security or (B) has ceased to be a clearing agency registered as such under the Exchange Act, (ii) there shall have occurred and be continuing an Event of Default or any event which after notice or lapse of time or both would be an Event of Default with respect to such Global Security, (iii) the Issuers execute and deliver to the Trustee an Issuer Order stating that they elect to cause the issuance of the Securities in certificated form and that all Global Securities shall be exchanged in whole for Securities that are not Global Securities (in which case such exchange shall be effected by the Trustee) or (iv) pursuant to the following sentence. All or any portion of a Global Security may be exchanged for a Security that has a like aggregate principal amount and is not a Global Security, upon 20 days' prior request made by the Depositary or its authorized representative to the Trustee. (c) If any Global Security is to be exchanged for other Securities or canceled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation as provided in this Article Three. If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article Three or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 305(b) and as otherwise provided in this Article Three, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Issuers shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article Three if such order, direction or request is given or made in accordance with the Applicable Procedures. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article Three, Section 906, 1014 or 1016 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. 42 (e) The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. Section 3.6. Registration, Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends. (a) Registration, Registration of Transfer and Exchange Generally. The Issuers shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Issuers shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers and exchanges of Securities as herein provided. Such Security Register shall distinguish between Original Securities and Exchange Securities. Upon surrender for registration of transfer of any Security at an office or agency of the Issuers designated pursuant to Section 1002 for such purpose, the Issuers shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. At the option of the Holder, Securities may be exchanged for new Securities of any authorized denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Issuers shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuers, evidencing the same debt, and (except for the differences between Original Securities and Exchange Securities provided for herein) entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuers or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. 43 No service charge shall be made for any registration of transfer or exchange of Securities, but the Issuers may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 305, 306, 906, 1014 or 1016 not involving any transfer. The Issuers shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (b) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 306(b) shall be made only in accordance with this Section 306(b). (i) Restricted Global Security to Regulation S Global Security. If the owner of a beneficial interest in the Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Regulation S Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Restricted Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) a Regulation S Certificate, in the form of Annex A hereto, duly executed by the owner of such beneficial interest in the Restricted Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall reduce the principal amount of the Restricted Global Security and increase the principal amount of the Regulation S Global Security by such specified principal amount as provided in Section 305(c). (ii) Regulation S Global Security to Restricted Global Security. If the owner of a beneficial interest in the Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Restricted Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Regulation S Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) if such transfer is 44 to occur during the Restricted Period, a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by the owner of such beneficial interest in the Regulation S Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar, shall reduce the principal amount of the Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount as provided in Section 305(c). (iii) Restricted Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(iii) and Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) such Security as provided in Section 306(a) and instructions satisfactory to the Trustee directing that a beneficial interest in the Restricted Global Security or Regulation S Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) a Restricted Securities Certificate, if the specified account is to be credited with a beneficial interest in the Restricted Global Security, or a Regulation S Certificate, if the specified account is to be credited with a beneficial interest in the Regulation S Global Security, in either case satisfactory to the Trustee and duly executed by such Holder or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 306(a) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal amount as provided in Section 305(c). (iv) Regulation S Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Regulation S Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, such transfer may be effected only in accordance with this Clause (b)(iv) and Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) such Security as provided in Section 306(a) and instructions satisfactory to the Trustee directing that a beneficial interest in the Restricted Global Security or Regulation S Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) if the transfer is to occur during the Restricted Period and the specified account is to be credited with a beneficial interest in the Restricted Global Security, a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by such Holder or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall cancel such Security (and issue a new 45 Security in respect of any untransferred portion thereof) as provided in Section 306(a) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal amount as provided in Section 305(c). (v) Non-Global Security to Non-Global Security. A Security that is not a Global Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 3.06(a), provided that, if the Security to be transferred in whole or in part is a Restricted Security, or is a Regulation S Security and the transfer is to occur during the Restricted Period, then the Trustee shall have received (A) a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Restricted Security, or (B) a Regulation S Certificate, satisfactory to the Trustee and duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Regulation S Security (subject in each case to Section 306(c)). (vi) Exchanges between Global Security and Non-Global Security. A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security as provided in Section 305, provided that, if such interest is a beneficial interest in the Restricted Global Security, or if such interest is a beneficial interest in the Regulation S Global Security and such exchange is to occur during the Restricted Period, then such interest shall be exchanged for a Restricted Security (subject in each case to Section 306(c)). A Security that is not a Global Security may be exchanged for a beneficial interest in a Global Security only if (A) such exchange occurs in connection with a transfer effected in accordance with Clause (b)(iii) or (iv) above or (B) such Security is a Regulation S Security and such exchange occurs after the Restricted Period. (vii) Regulation S Global Security to be Held Through Euroclear or Cedel during Restricted Period. The Issuers shall use their best efforts to cause the Depositary to ensure that, until the expiration of the Restricted Period, beneficial interests in the Regulation S Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account; provided that this Clause (b)(vii) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) or (vi) above. (c) Securities Act Legends. Rule 144A Securities and their Successor Securities shall bear a Restricted Securities Legend, and Initial Regulation S Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following: 46 (i) subject to the following Clauses of this Section 306(c), a Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Securities Act Legend borne by such Global Security while represented thereby; (ii) subject to the following Clauses of this Section 306(c), a new Security which is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Securities Act Legend borne by such other Security, provided that, if such new Security is required pursuant to Section 306(b)(v) or (vi) to be issued in the form of a Restricted Security, it shall bear a Restricted Securities Legend and, if such new Security is so required to be issued in the form of a Regulation S Security, it shall bear a Regulation S Legend; (iii) Registered Securities shall not bear a Securities Act Legend; (iv) after November 9, 2001, a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if the Trustee has received an Unrestricted Securities Certificate, in the form of Annex C hereto, duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall authenticate and deliver such a new Security in exchange for or in lieu of such other Security as provided in this Article Three; (v) a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if, in the Issuers' judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Issuers, shall authenticate and deliver such a new Security as provided in this Article Three; and (vi) notwithstanding the foregoing provisions of this Section 306(c), a Successor Security of a Security that does not bear a particular form of Securities Act Legend shall not bear such form of legend unless the Issuers has reasonable cause to believe that such Successor Security is a "restricted security" within the meaning of Rule 144, in which case the Trustee, at the direction of the Issuers, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article Three. Section 3.7. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Issuers shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. 47 If there shall be delivered to the Issuers and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Issuers or the Trustee that such Security has been acquired by a bona fide purchaser, the Issuers shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Issuers in their discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Issuers may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Issuers, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.8. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Issuers, at its election in each case, as provided in Clause (1) or (2) below: (1) The Issuers may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuers shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the 48 date of the proposed payment, and at the same time the Issuers shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuers of such Special Record Date and, in the name and at the expense of the Issuers, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Issuers may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuers to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.9. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 308) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Issuers, the Trustee nor any agent of the Issuers or the Trustee shall be affected by notice to the contrary. 49 None of the Issuers, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Section 3.10. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any Offer to Purchase pursuant to Section 1014 or 1016 shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Issuers may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Issuers may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by an Issuer Order. Section 3.11. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months; provided, however, that any Special Interest on Original Securities shall be computed on the basis of a 365- or 366- day year, as the case may be, and the number of days actually elapsed. ARTICLE 4 SATISFACTION AND DISCHARGE Section 4.1. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 307 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation 50 (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers, and the Issuers, in the case of (i), (ii) or (iii) above, have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Issuers have paid or caused to be paid all other sums payable hereunder by the Issuers; and (3) the Issuers have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture pursuant to this Article Four, the obligations of the Issuers to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. 51 ARTICLE 5 Remedies Section 5.1. Events of Default. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (2) default in the payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; or (3) default in the performance, or breach, of the provisions under Sections 801 and 802 of this Indenture; or (4) default in the performance, or breach, of any covenant or agreement of the Issuers in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 30 days after there has been given, by registered or certified mail, to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (5) a default or defaults under any bond(s), debenture(s), note(s) or other evidence(s) of Indebtedness by either Issuer or any of their respective Restricted Subsidiaries or under any mortgage(s), indenture(s) or instrument(s) under which there may be issued or by which there may be secured or evidenced any Indebtedness of such type by the Issuers or any of their respective Restricted Subsidiaries with a principal amount then outstanding, individually or in the aggregate, in excess of $25 million, whether such Indebtedness now exists or shall hereafter be created, which default or defaults shall constitute a failure to pay any portion of the principal of such Indebtedness at final maturity after the expiration of any applicable grace period with respect thereto or shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable; or 52 (6) a final judgment or final judgments for the payment of money are entered against either Issuer or any of their respective Restricted Subsidiaries in an aggregate amount in excess of $25 million by a court or courts of competent jurisdiction, which judgments remain undischarged or unbonded for a period (during which execution shall not be effectively stayed) of 60 days after the right to appeal all such judgments has expired; or (7) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of either Issuer or any of their respective Restricted Subsidiaries in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging either Issuer or any of their Restricted Subsidiaries a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Issuer or any such Restricted Subsidiary under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Issuer or any such Restricted Subsidiary or of any substantial part of the property of such Issuer or any such Restricted Subsidiary, or ordering the winding up or liquidation of the affairs of such Issuer or any such Restricted Subsidiary, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (8) the commencement by either Issuer or any of their respective Restricted Subsidiaries of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by either Issuer or any of their respective Restricted Subsidiaries to the entry of a decree or order for relief in respect of such Issuer or any such respective Restricted Subsidiaries in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against such Issuer or any such Restricted Subsidiary, or the filing by either Issuer or any of their respective Restricted Subsidiaries of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by either Issuer or any of their respective Restricted Subsidiaries to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Issuer or any such Restricted Subsidiary or of any substantial part of the property of 53 such Issuer or any such Restricted Subsidiary, or the making by either Issuer or any of their respective Restricted Subsidiaries of an assignment for the benefit of creditors, or the admission by either Issuer or any of their respective Restricted Subsidiaries in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by either Issuer or any of their respective Restricted Subsidiaries in furtherance of any such action. Section 5.2. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(7) or (8)) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the principal of all the Securities to be due and payable immediately, by a notice in writing to the Issuers (and to the Trustee if given by Holders), and upon any such declaration such principal and any accrued interest shall become immediately due and payable. If an Event of Default specified in Section 501(7) or (8) occurs, the principal of and any accrued interest on the Securities then Outstanding shall ipso facto become immediately due and payable without any declaration or other Act on the part of the Trustee or any Holder. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Issuers and the Trustee, may rescind and annul such declaration and its consequences if (1) the Issuers have paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration (including any Securities required to have been purchased on the Purchase Date pursuant to an Offer to Purchase made by the Issuers) and, to the extent that payment of such interest is lawful, interest thereon at the rate provided by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate provided by the Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and 54 (2) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Issuers covenant that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof or, with respect to any Security required to have been purchased pursuant to an Offer to Purchase made by the Issuers, at the Purchase Date thereof, the Issuers will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate provided by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Issuers fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Issuers or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Issuers or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 55 Section 5.4. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to either Issuer (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditors' committee. Section 5.5. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.6. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any 56 kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. Section 5.7. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 308) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date or, in the case of an Offer to Purchase made by the Issuers and required to be accepted as to such Security, on the Purchase Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. 57 Section 5.9. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Issuers, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 307, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the 58 Trustee in good faith shall determine that the action or proceedings so directed might involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interest of holders of the Securities not joining in the giving of said direction, it being understood that the Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such holders. Section 5.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any default hereunder and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security (including any Security which is required to have been purchased pursuant to an Offer to Purchase which has been made by the Issuers), or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Issuers. Section 5.15. Waiver of Stay or Extension Laws. The Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law and covenant that they will not hinder, delay or 59 impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 THE TRUSTEE Section 6.1. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 6.2. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.3. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, Officers' Certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuers mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) before the Trustee acts or refrains from acting, the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be 60 full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document unless requested to do so by the Holders of not less than a majority in principal amount of the Securities then outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuers, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder; (i) the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Issuers, except as otherwise provided herein, but the Trustee may require of the Issuers full information and advice as to the performance of the covenants, conditions and agreements contained herein and shall be entitled in connection herewith to examine the books, records and premises of the Issuers; and (j) except for (i) a default under Sections 501(1) or (2) hereof, or (ii) any other event of which the Trustee has "actual knowledge" and which event, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Indenture, the Trustee shall not be deemed to have notice of any default or Event of Default unless specifically notified in writing of such event by the Issuers or the Holders of not less than 25% in aggregate principal amount of the Securities then outstanding; as used herein, the term "actual knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. Section 6.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuers, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the 61 validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Issuers of Securities or the proceeds thereof. Section 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Issuers, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Issuers with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 6.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuers. Section 6.7. Compensation and Reimbursement. The Issuers agree (1) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture, including costs of collection (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Issuers under this Section shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Issuers, the Trustee shall have a claim prior to the Securities upon all property and funds 62 held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) and interest on particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Article Five hereof, the expenses (including reasonable fees and expenses of its counsel) and the compensation for the services in connection therewith are intended to constitute expense of administration under any applicable bankruptcy law. Section 6.8. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has (or in the case of a Person included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 and its Corporate Trust Office in New York City or Los Angeles. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Issuers. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Issuers. (d) If at any time: 63 (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Issuers or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Issuers or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Issuers by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuers, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Issuers and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Issuers. If no successor Trustee shall have been so appointed by the Issuers or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Issuers shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuers and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the 64 retiring Trustee; but, on request of the Issuers or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13. Preferential Collection of Claims Against the Issuers. If and when the Trustee shall be or become a creditor of the Issuers (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Issuers (or any such other obligor). Section 6.14. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption or pursuant to Section 307, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Issuers and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having (or in the 65 case of a corporation included in a bank holding company system, the related bank holding company having) a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuers. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuers. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuers and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities described in the within-mentioned Indenture. Harris Trust Company of California, As Trustee By___________________________ ,As Authenticating Agent By___________________________ Authorized Officer 66 ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS Section 7.1. Issuers to Furnish Trustee Names and Addresses of Holders. The Issuers will furnish or cause to be furnished to the Trustee (a) semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Issuers of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 7.2. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities and the corresponding rights and duties of the Trustee, shall be provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Issuers and the Trustee that neither the Issuers nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.3. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Issuers. The Issuers will notify the Trustee when the Securities are listed on any stock exchange. Section 7.4. Reports by Issuers. 67 The Issuers shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.1. Issuers May Consolidate, Etc. Only on Certain Terms. The Issuers (a) shall not consolidate with or merge into any other Person; (b) shall not permit any other Person to consolidate with or merge into either Issuer; and (c) shall not, directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of either Issuer's properties and assets as an entirety; unless, in any such transaction: (1) (a)such Issuer is the surviving entity or (b) in the case such Issuer shall consolidate with or merge into another Person or shall directly or indirectly transfer, convey, sell, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety, the Person formed by such consolidation or into which such Issuer is merged or the Person which acquires by transfer, conveyance, sale, lease or other disposition all or substantially all of the properties and assets of such Issuer as an entirety (for purposes of this Article Eight, a "Successor Company") shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume by an indenture supplemental hereto executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of such Issuer to be performed or observed; (2) immediately after giving effect to such transaction and treating any Indebtedness Incurred by the Issuers or any of their respective Restricted Subsidiaries as a result of such transaction as having been Incurred by the Issuers or such Restricted Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; 68 (3) immediately after giving effect to such transaction, and treating any Indebtedness Incurred by the Issuers or any of their respective Restricted Subsidiaries as a result of such transaction as having been Incurred at the time of such transaction, the Issuers or the Successor Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph under Section 1008 or (b) after giving effect to such transaction the Indebtedness to EBITDA Ratio is not higher than the Indebtedness to EBITDA Ratio prior to giving effect to such transaction; and (4) such Issuer has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, and, with respect to such Officer's Certificate, setting forth the manner of determination of the ability to Incur Indebtedness in accordance with Clause (3) of Section 801 or of the comparison of the Indebtedness to EBITDA Ratio prior to and immediately after giving effect to the transaction of such Issuer or, if applicable, of the Successor Company as required pursuant to the foregoing. Section 8.2. Successor Substituted. Upon any consolidation of either Issuer with, or merger of either Issuer into, any other Person or any transfer, conveyance, sale, lease or other disposition of all or substantially all of the properties and assets of such Issuer as an entirety in accordance with Section 801, the Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer under this Indenture with the same effect as if such successor Person had been named as such Issuer herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. Section 8.3. Effect of the Reorganizations. (a) VoiceStream and VoiceStream Holdings are the initial issuers of the Securities. If either Reorganization is completed, immediately upon such Reorganization without any further act by any Person, VoiceStream shall cease to be an Issuer of the Securities and any or all of its obligations under this Indenture as an Issuer shall effectively terminate, and VoiceStream Holdings shall remain as the sole Issuer of the Securities. If both Reorganizations are terminated, immediately upon the termination of the last of the Reorganizations to be terminated, without any further act by any Person, VoiceStream Holdings shall cease to be an Issuer of the Securities and any or all of its obligations under this Indenture as an Issuer shall effectively terminate, and VoiceStream 69 shall remain as the sole Issuer of the Securities. Upon either of VoiceStream or VoiceStream Holdings being the sole Issuer, the term "Issuers" hereunder shall be deemed to read "Issuer." (b) Notwithstanding anything contained in this Indenture to the contrary, the Reorganizations and the transactions contemplated thereby shall be deemed not to violate the provisions of this Indenture. The Issuers shall not be required to take any actions they would otherwise be obligated to take under this Indenture as a result of the Reorganizations and the transactions contemplated thereby, nor will the provisions of this Indenture with respect to Change of Control Triggering Event contained in Section 1016 or Asset Dispositions contained in Section 1014 be applicable. ARTICLE 9 SUPPLEMENTAL INDENTURES Section 9.1. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Issuers, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to either Issuer and the assumption by any such successor of the covenants of such Issuer herein and in the Securities; or (b) to add to the covenants of the Issuers for the benefit of the Holders, or to surrender any right or power herein conferred upon the Issuers; or (c) to secure the Securities pursuant to the requirements of Section 1012 or otherwise; or (d) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act; or (e) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this Clause (5) shall not adversely affect the interests of the Holders in any material respect. Section 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Issuers and the Trustee, the Issuers, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any 70 provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any instalment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable thereon, or change the place of payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date or, in the case of an Offer to Purchase which has been made, on or after the applicable Purchase Date), or (2) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify any of the provisions of this Section, Section 513 or Section 1018, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, or (4) following the mailing of an Offer with respect to an Offer to Purchase pursuant to Sections 1014 or 1016, modify the provisions of this Indenture with respect to such Offer to Purchase in a manner adverse to such Holder. Notice shall be given to all Holders and the Trustee at least 10 Business Days prior to the adoption of any proposed amendment pursuant to this Section 902. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 9.3. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by, and that all conditions 71 precedent have been met under, this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.5. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuers shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Issuers, to any such supplemental indenture may be prepared and executed by the Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 9.7. Notice of Supplemental Indenture. Promptly after the execution by the Issuers and the Trustee of any supplemental indenture pursuant to Section 902, the Issuers shall transmit to the Holders a notice setting forth the substance of such supplemental indenture. ARTICLE 10 COVENANTS Section 10.1. Payment of Principal, Premium and Interest. The Issuers will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 10.2. Maintenance of Office or Agency. The Issuers will maintain in the Borough of Manhattan, New York City, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuers in respect of the Securities and this Indenture may be served. The Issuers will give prompt written notice to the Trustee of the location, and 72 any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuers hereby appoint the Trustee as their agent to receive all such presentations, surrenders, notices and demands. The Issuers may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan, New York City) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuers will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.3. Money for Security Payments to be Held in Trust. If the Issuers shall at any time act as their own Paying Agent, they will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of their action or failure so to act. Whenever the Issuers shall have one or more Paying Agents, they will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Issuers will promptly notify the Trustee of their action or failure so to act. The Issuers will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Issuers (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. 73 The Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Issuers or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Issuers or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Issuers on Issuer Request, or (if then held by the Issuers) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York City, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuers. Section 10.4. Existence. Subject to Article Eight, the Issuers will do or cause to be done all things necessary to preserve and keep in full force and effect their existence, rights (charter and statutory) and franchises; provided, however, that the Issuers shall not be required to preserve any such right or franchise if the Board of Directors in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 10.5. Maintenance of Properties. The Issuers will cause all properties used or useful in the conduct of its business or the business of any Restricted Subsidiary of the Issuers to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Issuers may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Issuers from discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Board of Directors in good faith, desirable in the conduct of their business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders. 74 Section 10.6. Payment of Taxes and Other Claims. The Issuers will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Issuers or any of their Restricted Subsidiaries or upon the income, profits or property of the Issuers or any of their Restricted Subsidiaries, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Issuers or any of their Restricted Subsidiaries; provided, however, that the Issuers shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 10.7. Maintenance of Insurance. The Issuers shall, and shall cause any of their Restricted Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by the Issuers to be responsible to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties in accordance with good business practice. Section 10.8. Limitation on Consolidated Indebtedness. The Issuers shall not, and shall not permit any of their Restricted Subsidiaries to, Incur any Indebtedness unless the Issuers' Indebtedness to EBITDA Ratio at the end of the fiscal quarter immediately preceding the Incurrence of such Indebtedness, after giving pro forma effect to the Incurrence of such Indebtedness and any other Indebtedness Incurred since such date and the receipt and application of the proceeds thereof, would be less than 8.0 to 1 for the period ending December 31, 2005 and 7 to 1 thereafter. Notwithstanding the foregoing paragraph, the Issuers and/or any Restricted Subsidiary of the Issuers, as the case may be, may Incur the following Indebtedness: (i) Indebtedness of an Issuer or any of its Restricted Subsidiaries, as the case may be, that is outstanding or committed at the time of the issuance of the Securities; (ii) Indebtedness of an Issuer or any of its Restricted Subsidiaries, as the case may be, that is outstanding or committed at the date hereof under the Credit Facility of up to $1.2 billion or, if the Omnipoint Reorganization is completed, under the Anticipated New Credit Facility of up to $3.0 billion (including any letters of credit issued thereunder) and any renewal, extension, refinancing or refunding thereof in an amount which, together with any amount remaining outstanding or committed (x) under the Credit Facility, does not exceed $1.2 billion and (y) under the Anticipated New Credit Facility, does not exceed $3.0 billion, at any time outstanding; provided that this Clause (ii) shall not prohibit an Issuer or any of its Restricted Subsidiaries from Incurring additional Indebtedness under the Credit Facility or the Anticipated New Credit Facility otherwise permitted pursuant to this Section 1008; 75 (iii) Telecommunications Indebtedness; (iv) Acquired Indebtedness of an Issuer or any of its Restricted Subsidiaries in connection with the acquisition of assets or a new Subsidiary and the incurrence by either Issuer's Restricted Subsidiaries of Indebtedness as a result of the designation of an Unrestricted Subsidiary as a Restricted Subsidiary; provided that, in the case of any such incurrence of Acquired Indebtedness, such Acquired Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the applicable Issuer or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, the acquisition by the applicable Issuer or one of its Restricted Subsidiaries; and provided further that, in the case of any incurrence pursuant to this clause (iv), as a result of such acquisition by an Issuer or one of its Restricted Subsidiaries, the Issuers and their respective Restricted Subsidiaries would be permitted to incur an additional $1.00 of Indebtedness pursuant to the first paragraph of this Section 1008, as applicable; (v) Indebtedness of an Issuer or any of its Restricted Subsidiaries represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of such Issuer or such Restricted Subsidiary, in an aggregate principal amount, including all Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (v), not to exceed $25 million at any one time outstanding; (vi) Indebtedness owed by an Issuer to any Restricted Subsidiary of such Issuer (provided that such Indebtedness is at all times held by a Person which is a Restricted Subsidiary of the Issuer) or Indebtedness owed by a Restricted Subsidiary of such Issuer to such Issuer or a Restricted Subsidiary of such Issuer (provided that such Indebtedness is at all times held by such Issuer or a Person which is a Restricted Subsidiary of such Issuer); provided, however, that for purposes of this Section 1008, upon either (x) the transfer or other disposition by such Restricted Subsidiary or such Issuer of any Indebtedness so permitted to a Person other than such Issuer or another Restricted Subsidiary of such Issuer or (y) the issuance (other than directors' qualifying shares), sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of such Restricted Subsidiary to a Person other than the Issuer or another such Restricted Subsidiary, the provisions of this Clause (vi) shall no longer be applicable to such Indebtedness and such Indebtedness shall be deemed to have been Incurred at the time of such transfer or other disposition; (vii) Indebtedness of an Issuer or any of its Restricted Subsidiaries to renew, extend, refinance or refund any Indebtedness of such Issuer or any of its Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to Clause (ii) or (vi) above; provided, however, that such Indebtedness does not 76 exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus financing fees and other expenses (including make-whole or other repurchase payments or premiums) associated therewith; and provided further, that (A) such renewing, extending, refinancing or refunding Indebtedness has a final maturity date the same as or later than the final maturity date of the Indebtedness being renewed, extended, refinanced or refunded; (B) in the case of any refinancing or refunding of Indebtedness pari passu to the Securities, the refinancing or refunding Indebtedness is made pari passu or subordinated to the Securities and, in the case of any refinancing or refunding of Indebtedness subordinated to the Securities, the refinancing or refunding Indebtedness is made subordinate to the Securities to substantially the same extent as the Indebtedness refinanced or refunded; and (C) such renewing, extending, refinancing or refunding Indebtedness has an Average Life equal to or longer than the life of the Indebtedness being renewed, extended, refinanced or refunded; (viii)any Guarantee by any Restricted Subsidiary of any Indebtedness incurred under the Credit Facility or the Anticipated New Credit Facility, as applicable, in compliance with this Section 1008; (ix) Indebtedness of an Issuer of any of its Restricted Subsidiaries under (or constituting reimbursement obligations with respect to) letters of credit, performance or surety bonds or similar instruments issued in the ordinary course of a Telecommunications Business, including letters of credit in respect of workers' compensation claims or self-insurance, provided, however, that upon the drawing of any such letter of credit or other instrument, such obligations are reimbursed within 90 days following such drawing; (x) Indebtedness arising from agreements providing for indemnification, purchase price adjustments or similar obligations, or from guarantees of letters of credit, surety bonds or performance bonds securing any obligation of an Issuer or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary of an Issuer (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary of such Issuer for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by such Issuer or any Restricted Subsidiary in connection with such disposition; (xi) Indebtedness Incurred by an Issuer or any of its Restricted Subsidiary under Interest Rate Agreements or Currency Protection Agreements to hedge permitted Indebtedness; (xii) Indebtedness of Omnipoint, Aerial or any of their respective Subsidiaries that is outstanding or committed at the time of the issuance of the Securities; 77 (xiii) Indebtedness evidenced by the Securities or otherwise arising under this Indenture; (xiv) Indebtedness due and owing to governmental entities in connection with telecommunication license fees or Indebtedness incurred to finance the payment of deposits with and licensing fees to the FCC in connection with FCC license auctions; and (xv) Indebtedness of an Issuer or any of its Restricted Subsidiaries not otherwise permitted to be Incurred pursuant to Clauses (i) through (xiv) above, which, together with any other outstanding Indebtedness Incurred pursuant to this Clause (xv), has an aggregate principal amount not in excess of $50 million at any time outstanding or committed. Notwithstanding the foregoing, the maximum amount of Indebtedness that either Issuer or any of its Restricted Subsidiaries may incur shall not be deemed to be exceeded due solely to the result of fluctuations in the exchange rates of currencies. For purposes of determining any particular amount of Indebtedness under the foregoing clauses, (1) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (2) any Liens granted pursuant to the equal and ratable provisions of Section 1012 shall not be treated as Indebtedness. For purposes of determining compliance with the Indebtedness incurrence restriction, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, VoiceStream or VoiceStream Holdings, as the case may be, in its respective sole discretion shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. Section 10.9. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of such Restricted Subsidiary or any other Restricted Subsidiary to any Person other than the Issuers or a Restricted Subsidiary; and will not permit any Restricted Subsidiary to issue shares of its Capital Stock or securities convertible into, or warrants, rights or options, to subscribe for or purchase shares of, its Capital Stock to any Person other than the Issuers or a Restricted Subsidiary, unless, in each such case: (1) immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 1010; or (2) if such sale or disposition is effected in accordance with the provisions under Section 1014; 78 The foregoing shall not prohibit the issuance of Capital Stock of a Restricted Subsidiary of either Issuer pursuant to an employee stock option plan approved by the Boards of Directors of the Restricted Subsidiary and such Issuer. Section 10.10. Limitation on Restricted Payments. Each of the Issuers (i) shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, declare or pay any dividend, or make any distribution, of any kind or character (whether in cash, property or securities) in respect of any class of its or such Restricted Subsidiary's Capital Stock or to the holders of any class of its or such Restricted Subsidiary's Capital Stock (other than (a) any dividends or distributions payable solely in shares of its or such Restricted Subsidiary's Capital Stock or in options, warrants or other rights to acquire its or such Restricted Subsidiary's Capital Stock, (b) any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to such Issuer or another Restricted Subsidiary or (c) any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to any other shareholder of such Restricted Subsidiary, so long as such Issuer or its Restricted Subsidiaries receive their pro rata share of such dividends or distributions), (ii) shall not, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to purchase, redeem or otherwise acquire or retire for value (a) any Capital Stock of such Issuer or any Related Person (other than a Restricted Subsidiary) of such Issuer or (b) any options, warrants or rights to purchase or acquire shares of Capital Stock of such Issuer or any Related Person (other than a Restricted Subsidiary) of such Issuer, in each case other than pursuant to the cashless exercise of options, (iii) shall not make, or permit any of its Restricted Subsidiaries to make, any Investment other than a Permitted Investment and (iv) shall not, and shall not permit any Restricted Subsidiary of such Issuer to, redeem, defease (including, but not limited to, legal or covenant defeasance), repurchase, retire or otherwise acquire or retire for value prior to any scheduled maturity, repayment or sinking fund payment, Indebtedness of such Issuer or such Restricted Subsidiary (other than the Securities) which is subordinate in right of payment to the Securities (the transactions described in Clauses (i) through (iv) being referred to herein as "Restricted Payments"), if at the time thereof and giving effect thereto: (1) an Event of Default, or an event that with the lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and is continuing; (2) such Issuer would not be permitted to Incur an additional $1.00 of Indebtedness pursuant to the first paragraph of Section 1008; and (3) the aggregate of all Restricted Payments made on or after the date of this Indenture exceeds the sum of: (B) Cumulative EBITDA less 1.6 times Cumulative Interest Expense; 79 (C) 100% of the aggregate Net Cash Proceeds received by the Issuers since the date of this Indenture from the issue or sale of Equity Interests of VoiceStream and VoiceStream Holdings or of debt securities of VoiceStream and VoiceStream Holdings that have been converted into such Capital Stock (other than to a Restricted Subsidiary); (D) an amount equal to the net reduction in Investments made by an Issuer or a Restricted Subsidiary subsequent to the date of this Indenture in any Person resulting from: (E) payments of interest on debt, repayment of loans or advances, or other transfers or distributions of property, in each case to an Issuer or any Restricted Subsidiary from any Person; (F) to the extent that any Investment is sold for cash or otherwise liquidated or repaid for cash, the after-tax cash return of capital with respect to such Investment (less the cost of disposition, if any); and (G) the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, in which case such aggregate amount of the net reduction in Investments will not exceed the amount of such Investments previously made by the Issuers and their respective Restricted Subsidiaries in such Person or Unrestricted Subsidiary, as the case may be, which were treated as Restricted Payments; and (H) $50 million. So long as no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing (other than in the case of clause (2) below), the preceding provisions will not prohibit: (1) the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision; (2) the redemption, repurchase or other acquisition or retirement for value of any Indebtedness of an Issuer subordinated to the Securities in exchange for or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, or from the incurrence of Indebtedness pursuant to a refinancing permitted under clause (vii) of Section 1008; (3) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, in exchange for or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of Equity Interests (other than Disqualified 80 Stock) of VoiceStream or VoiceStream Holdings, as the case may be; (4) the repurchase, redemption or other acquisition of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, held by present or former employees, officers or directors of either Issuer or any of their respective Subsidiaries; provided that the aggregate price paid for all such repurchased, redeemed or otherwise acquired Equity Interests shall not exceed $2.0 million in any fiscal year; (5) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, to the extent necessary in the good faith judgment of the Board of Directors evidenced by a Board Resolution delivered to the trustee to prevent the loss or secure the renewal or reinstatement of any material license or franchise held by VoiceStream or VoiceStream Holdings, as the case may be, or any Restricted Subsidiary from any government agency; (6) the repurchase of Indebtedness subordinated to the Securities at a purchase price not greater than 101% of the principal amount thereof (plus accrued and unpaid interest) pursuant to a mandatory offer to repurchase made after a Change of Control Triggering Event, provided that the Issuers first make an Offer to Purchase the Securities (and repurchase all tendered Securities) pursuant to the provisions of Section 1016; (7) Permitted Investments; and (8) payments or distributions to dissenting stockholders pursuant to applicable law in connection with a consolidation, merger or transfer of assets that complies with the provisions of Section 801. Section 10.11. Limitations Concerning Distributions and Transfers By Restricted Subsidiaries. The Issuers shall not, and shall not permit any of their Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary (i) to pay, directly or indirectly, dividends or make any other distributions in respect of its Capital Stock or any other ownership interest or participation in, or measured by, its profits, to the Issuers or any of their respective Restricted Subsidiaries or pay any Indebtedness or other obligation owed to either Issuer or any Restricted Subsidiary; (ii) to make loans or advances to either Issuer or any of its Restricted Subsidiaries; or (iii) to transfer any of its property or assets 81 to either Issuer or any of its Restricted Subsidiaries, except, in any such case, any restriction or prohibition: (a) pursuant to any agreement in effect on the date of this Indenture, or (b) pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary was acquired by the applicable Issuer other than in anticipation of becoming a Restricted Subsidiary, or (c) pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in Clauses (a), (b) or (d); provided, however, that the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, or (d) pursuant to an agreement entered into after the date of this Indenture relating to any Indebtedness the Incurrence of which is permitted under this Indenture, provided, however, that the provisions contained in such agreement relating to such encumbrance or restriction are, taken as a whole, no more restrictive in any material respect than those contained in this Indenture or are no more restrictive in any material respect than those contained in the Credit Facility, or (e) pursuant to an agreement by which an Issuer or any of its Restricted Subsidiaries obtains financing, provided that (A) such restriction is not materially more restrictive than customary provisions in comparable financing agreements and (B) management of such Issuer determines that at the time such agreement is entered into such restriction will not materially impair the Issuers' ability to make payments on the Securities, such determination to be confirmed by an Officers' Certificate delivered to the Trustee, or (f) pursuant to applicable law, or (g) pursuant to customary provisions restricting subletting or assignment of property subject to any lease governing any leasehold interest of any Restricted Subsidiary of either Issuer, or (h) pursuant to purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (iii) of this Section 1011, or (i) pursuant to restrictions of the type referred to in clause (iii) of this Section 1011 contained in security agreements securing Indebtedness of either Issuer or a Restricted Subsidiary of either Issuer to the extent that such Liens were otherwise incurred in accordance with the provisions under Section 1012 and restrict the transfer of the collateral subject to such agreements without restricting the transfer of other property, or 82 (j) pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, a Restricted Subsidiary of an Issuer. Nothing contained in the foregoing clauses shall prevent either Issuer or any of its Restricted Subsidiaries from (i) creating, incurring, assuming or suffering to exist any Liens otherwise permitted under this Indenture or (ii) restricting the sale or other disposition of property or assets of either Issuer or any of its Restricted Subsidiaries that secure Indebtedness of such Issuer or any of its Restricted Subsidiaries. Section 10.12. Limitation on Liens. (a) The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that is pari passu or subordinated to the Securities without making, or causing such Restricted Subsidiary to make, effective provision for securing the Securities (i) equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured or (ii) in the event such Indebtedness is Indebtedness of an Issuer which is subordinate in right of payment to the Securities, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured. The foregoing restrictions will not apply to: (i) Liens in respect of Indebtedness existing at the date of this Indenture or that is outstanding or permitted under the Credit Facility or, assuming the Omnipoint Reorganization is completed, under the Anticipated New Credit Facility; (ii) Liens in favor of an Issuer or Liens in favor of a Wholly Owned Restricted Subsidiary of an Issuer on the assets or Capital Stock of another Wholly Owned Restricted Subsidiary of an Issuer; (iii) Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that (a) the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost, (b) such Lien does not extend to or cover any other property other than such item of property and any improvements on such item and (c) the Incurrence of such Indebtedness is otherwise permitted by Section 1008; (iv) Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition); (v) Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in 83 part, Indebtedness secured by any Lien referred to in the foregoing Clauses (i), (iii) and (iv) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under Clause (ii) or (vii) of Section 1008; (vi) Liens securing any Indebtedness of any of the Restricted Subsidiaries of an Issuer that was permitted by the provisions of this Indenture to be Incurred; (vii) Liens on any Capital Stock of any Unrestricted Subsidiary of an Issuer securing Indebtedness of such Subsidiary that is Non-Recourse Indebtedness; (viii)Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature Incurred in the ordinary course of business (other than obligations for the payment of money); (ix) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; provided that any reserve or other appropriate provision as shall be required in conformity with generally accepted accounting principles shall have been made therefor; (x) Carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations that are not yet due, are bonded or are being contested in good faith by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Issuer or such Restricted Subsidiary, as the case may be, in conformity with generally accepted accounting principles; and (xi) Liens securing Interest Rate Agreements entered into in the ordinary course of business on any property also securing the permitted Indebtedness to which such Interest Rate Agreements relate. Section 10.13. Limitation on Transactions with Affiliates and Related Persons. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, directly or indirectly, enter into any transaction (including, without limitation, any purchase, sale, lease or exchange of property or rendering of any service) involving aggregate consideration in excess of $5 million, with or to any Affiliate or Related Person (other than a Restricted Subsidiary)(each of the foregoing, an "Affiliate Transaction"), unless management of the applicable Issuer shall determine (evidenced by an Officers' Certificate), that: (1) such transaction is in the best interests of the Issuers or such Restricted Subsidiary; and 84 (2) such transaction is on terms no less favorable to the Issuers or such Restricted Subsidiary than those that could be obtained in a comparable arm's length transaction with a third party at the time. In the event that any transaction contemplated by the preceding paragraph involves aggregate consideration in excess of $10 million, a determination by a majority of the disinterested members of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be (which determination shall be evidenced by a Board Resolution) will be required with respect to clause (1) and (2) above. Notwithstanding the foregoing, the following items will not be deemed to be Affiliate Transactions: (1) transactions between or among an Issuer and/or its Restricted Subsidiaries (other than a Restricted Subsidiary in which an Affiliate or Related Person of the applicable Issuer, other than a Wholly Owned Restricted Subsidiary, owns any Capital Stock or any option, warrant or other right to purchase Capital Stock); (2) customary payment of compensation to employees, officers or consultants in the ordinary course of business and payment of reasonable directors fees and customary indemnification and insurance arrangements in favor of directors, regardless of affiliation with the Issuers; (3) Restricted Payments that are permitted by the provisions of Section 1010; (4) payments and other transactions required under or contemplated by any agreement in effect on the date of this Indenture and disclosed in VoiceStream's Form 10/A filed with the SEC on April 13, 1999, its Form 10-Q for the quarter ended June 30, 1999, its current reports on Form 8-K filed prior to October 15, 1999 (or not required to be disclosed therein pursuant to the rules and regulations of the Commission) and, assuming completion of the Reorganizations, each of Omnipoint's and Aerial's Form 10-K for the fiscal year ended December 31, 1998 and Forms 10-Q and 8-K filed during calendar year 1999 prior to the date of the offering circular associated with the Securities (or not required to be disclosed therein pursuant to the rules and regulations of the Commission), or any agreement in effect at the time that an entity becomes a Restricted Subsidiary or is merged into either Issuer (and was not entered into in anticipation of such acquisition), or any amendment thereto or replacement of such agreement so long 85 as any such amendment or replacement is not disadvantageous to the Holders in any material respect; and (5) loans or advances to officers or employees of either Issuer or any Restricted Subsidiary to pay business related travel expenses or reasonable relocation costs of such officers or employees in connection with their employment by such Issuer or any of its Restricted Subsidiaries. Section 10.14. Limitation on Certain Asset Dispositions. (a) The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, consummate an Asset Disposition unless: (1) an Issuer (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Disposition at least equal to the Fair Market Value of the assets issued or sold or otherwise disposed of; and (2) at least 75% of the consideration received in such Asset Disposition by such Issuer or such Restricted Subsidiary is in the form of cash or readily marketable cash equivalents, the assumption of Indebtedness of an Issuer or any Restricted Subsidiary or assets of a Telecommunications Business. Within the applicable time period specified below, the Issuers or the Restricted Subsidiary may apply Net Available Proceeds from an Asset Disposition to (i) invest in assets of a Telecommunications Business or a Person engaged in a Telecommunications Business; or (ii) permanently repay any Indebtedness of the Issuers or any Indebtedness of a Restricted Subsidiary. Any Net Available Proceeds from Asset Dispositions that are not applied or invested in accordance with the preceding paragraph within 365 days from the date of such Asset Disposition, or within 18 months of such Asset Disposition if the applicable Issuer or a Restricted Subsidiary has entered into a binding agreement to invest in such assets or Person, will be deemed to constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $10 million (taking into account income earned on such Excess Proceeds), the Issuers will be required to make an Offer to Purchase to all Holders of Securities and all holders of other senior indebtedness of the Issuers containing provisions similar to those set forth in this Indenture, on a pro rata basis according to principal amount, to purchase the maximum principal amount (or Accreted Value, as applicable) of Securities and such other senior indebtedness of the Issuers that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase will be payable in cash and will be 100% of the principal amount of the Securities plus any accrued but unpaid Special Interest to but excluding the date of purchase. In the case of any other senior indebtedness, the offer price will be 100% of the principal amount (or accreted value, as applicable) of the indebtedness plus accrued and unpaid interest 86 thereon, if any, to the date of purchase. If the aggregate principal amount of the Securities or other senior indebtedness surrendered for purchase exceeds the amount of Excess Proceeds, then the Securities and the other senior indebtedness of the Issuers will be purchased pro rata according to the outstanding principal amount of such Securities and other senior indebtedness with such adjustments as may be deemed appropriate by the Issuers so that only Securities in denominations of $1,000 or integral multiples thereof shall be purchased. To the extent that any portion of the amount of Net Available Proceeds remains after compliance with the preceding sentence and provided that all Holders of Securities and other senior indebtedness have been given the opportunity to tender their Securities or other senior indebtedness for purchase pursuant to the Offer to Purchase, the Issuers or the Restricted Subsidiary may use the remaining amount at their own discretion. (b) Not later than the date of the Offer with respect to an Offer to Purchase pursuant to this Section 1014, the Issuers shall deliver to the Trustee an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of the Net Available Proceeds from the Asset Disposition pursuant to which such Offer is being made, including, if amounts are invested in Telecommunications Assets or a Person in the Telecommunications Business, the actual assets or Person acquired and (iii) the compliance of such allocation with the provisions of Clause (a). The Issuers and the Trustee shall perform their respective obligations specified in the Offer to Purchase. On or prior to the Purchase Date, the Issuers shall (i) accept for payment (on a pro rata basis, if necessary) Securities or portions thereof tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or, if the Issuers are acting as their own Paying Agent, segregate and hold in trust as provided in Section 1003) money sufficient to pay the purchase price of all Securities or portions thereof so accepted and (iii) deliver or cause to be delivered to the Trustee all Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof accepted for payment by the Issuers. The Paying Agent (or the Issuers, if so acting) shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Security not accepted for payment shall be promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers shall publicly announce the results of the Offer on or as soon as practicable after the Purchase Date. (c) Notwithstanding the foregoing, this Section 1014 shall not apply to any Asset Disposition which constitutes a transfer, conveyance, sale, lease or other disposition of all or substantially all of the Issuers' properties or assets within the meaning of Section 801 hereof. Section 10.15. Limitation on Sale and Leaseback Transactions. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to any 87 property of an Issuer or any of its Restricted Subsidiaries (other than a Sale and Leaseback Transaction between an Issuer or a Restricted Subsidiary or any of them). The preceding paragraph shall not prohibit the Issuers or any of their respective Restricted Subsidiaries from entering into a Sale and Leaseback Transaction if: (1) the Issuers and their respective Restricted Subsidiaries would be entitled to create or incur a Lien to secure Indebtedness pursuant to the provisions of Section 1012 equal in amount to the Attributable Value of the Sale and Leaseback Transaction without equally and ratably securing the Securities; and (2) the Sale and Leaseback Transaction is treated as an Asset Disposition and the provisions of Section 1014 are satisfied with respect to such Sale and Leaseback Transaction. Section 10.16. Change of Control Triggering Event. (a) If a Change of Control Triggering Event occurs, the Issuers shall have the right to repurchase in whole the Securities at a redemption price equal to the greater of: (1) 101% of the aggregate principal amount of the Securities, plus accrued and unpaid interest and Special Interest on the Securities, if any (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date); and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including the portion of any such payments of interest accrued as of the Redemption Date) discounted to the Redemption Date on a semiannual basis at the Adjusted Treasury Rate, plus accrued and unpaid interest and Special Interest on the Securities, if any. A "Change of Control Triggering Event" will be deemed to have occurred if a Change of Control and a Rating Decline occur. A "Rating Decline" will be deemed to have occurred if at any time within the earlier of (1) 90 days after the date of public notice of a Change of Control, or of the intention of an Issuer or of any Person to effect a Change of Control and (2) the occurrence of the Change of Control (which period shall in either event be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by a Rating Agency), the rating of the Securities is decreased by either Rating Agency by one or more Gradations and the rating by both Rating Agencies on the Securities following such downgrade is below Investment Grade. Within 30 days following any Change of Control Triggering Event, the Issuers shall mail a notice to each Holder and each holder of senior Indebtedness of the Issuers 88 containing similar provisions to those set forth in this Indenture describing the transaction or transactions that constitute the Change of Control Triggering Event and indicating the Issuers' intention to repurchase the Securities and such other senior Indebtedness (in which case the provisions of Clause (b) of this Section 1016 shall not be applicable) on the Change of Control Payment Date specified in the notice. The Change of Control Payment Date shall be no earlier than 30 days and not later than 60 days from the date the notice is mailed, pursuant to the procedures required by this Indenture and described in such notice. (b) If a Change of Control Triggering Event occurs, each Holder of Securities shall have the right to require the Issuers to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of such Holder's Securities pursuant to an Offer to Purchase. The offer price in any Offer to Purchase shall be payable in cash and shall be 101% of the aggregate principal amount of the Securities, plus accrued and unpaid interest and Special Interest on the Securities, if any (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date), to the date of purchase. Within 30 days following any Change of Control Triggering Event, the Issuers shall mail a notice to each Holder and each holder of senior Indebtedness of the Issuers containing provisions similar to those set forth in this Indenture describing the transaction or transactions that constitute the Change of Control Triggering Event and offering to repurchase Securities and such other senior Indebtedness on the Change of Control Payment Date specified in the notice. The Change of Control Payment Date shall be no earlier than 30 days and not later than 60 days from the date the notice is mailed, pursuant to the procedures required by this Indenture and described in such notice. On the Change of Control Payment Date, the Issuers shall, to the extent lawful: (1) accept for payment all Securities or portions of Securities properly tendered pursuant to the Offer to Purchase; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Securities or portions of Securities properly tendered; and (3) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities or portions of the Securities being purchased by the Issuers. The Paying Agent shall promptly mail to each Holder of Securities properly tendered the Change of Control Payment for such Securities, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that the new Security shall be in a principal amount of $1,000 or an integral multiple of $1,000. 89 (c) The provisions of this Section 1016 described above are applicable whether or not any other provisions of this Indenture are applicable. The Issuers shall comply with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations to the extent those laws and regulations are applicable to any Offer to Purchase. Section 10.17. Statement by Officers as to Default; Compliance Certificates. (a) Each Issuer shall deliver to the Trustee, within 90 days after the end of each fiscal year, and within 60 days after the end of each fiscal quarter (other than the fourth fiscal quarter), of such Issuer ending after the date hereof an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof such Issuer is in default in the performance and observance of any of the terms, provisions and conditions of Section 801 or Sections 1004 to 1016, inclusive, and if such Issuer shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) Each Issuer shall deliver to the Trustee, as soon as possible and in any event within 10 days after such Issuer becomes aware or should reasonably become aware of the occurrence of an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default, the period of existence thereof and the action which such Issuer proposes to take with respect thereto. (c) Each Issuer shall deliver to the Trustee within 90 days after the end of each fiscal year a written statement by such Issuer's independent public accountants stating (A) that their audit examination has included a review of the terms of this Indenture and the Securities as they relate to accounting matters, and (B) whether, in connection with their audit examination, any event which, with notice or the lapse of time or both, would constitute an Event of Default has come to their attention and, if such a default has come to their attention, specifying the nature and period of the existence thereof. Section 10.18. Waiver of Certain Covenants. The Issuers may omit in any particular instance to comply with any covenant or condition set forth in Section 801 and Sections 1004 to 1016, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Issuers and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect; provided, however, with respect to an Offer to Purchase as to which an Offer has been mailed, no such waiver may be made or shall be effective against any Holder tendering Securities pursuant to such Offer, and the Issuers may not omit to comply with the terms of such Offer as to such Holder. 90 Section 10.19. Provision of Financial Information. Whether or not required by the Commission, so long as any Securities are outstanding, VoiceStream or VoiceStream Holdings, as the case may be, shall file with the Commission the annual reports, quarterly reports and other documents which VoiceStream or VoiceStream Holdings, as the case may be, would have been required to file with the Commission pursuant to such Section 13(a) or 15(d)or any successor provision thereto if VoiceStream or VoiceStream Holdings, as the case may be, were so required, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which VoiceStream or VoiceStream Holdings, as the case may be, would have been required so to file such documents if VoiceStream or VoiceStream Holdings, as the case may be, were so required. In addition, whether or not required by the Commission, so long as any Securities are outstanding, VoiceStream or VoiceStream Holdings, as the case may be, shall furnish to the Holders of Securities and the Trustee within 15 days of each Required Filing Date copies of the annual reports, quarterly reports and other documents which VoiceStream or VoiceStream Holdings, as the case may be, files with the Commission pursuant to such Section 13(a) or 15(d) or any successor provision thereto or would have been required to file with the Commission pursuant to such Section 13(a) or 15(d) or any successor provisions thereto if VoiceStream or VoiceStream Holdings, as the case may be, were required to be subject to such Sections. If filing such documents by VoiceStream or VoiceStream Holdings, as the case may be, with the Commission is not permitted under the Securities Exchange Act of 1934, the VoiceStream or VoiceStream Holdings, as the case may be, shall promptly upon written request supply copies of such documents to any prospective Holder. ARTICLE 11 REDEMPTION OF SECURITIES Section 11.1. Right of Redemption. The Issuers will not have the right to redeem any Securities prior to November 15, 2004 (other than out of the Net Cash Proceeds of a Public Equity Offering or Strategic Equity Infusion, as described below, or upon a Change of Control Triggering Event). The Securities will be redeemable at the option of the Issuers, in whole or in part, at any time on or after November 15, 2004, at the Redemption prices specified in the form of Security hereinbefore set forth together with any applicable accrued interest, if any, thereon to the Redemption Date. At any time on or prior to November 15, 2002, the Issuers may redeem, on one or more occasions, up to an aggregate of 35% of the aggregate principal amount at Maturity of the Securities originally outstanding at a redemption price equal to 110.375% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption, with cash from the Net Cash Proceeds to the Issuers of one or more Public Equity Offerings or Strategic Equity Infusions; provided, that at least 65% of the aggregate principal amount of the Securities originally outstanding remain outstanding immediately after the occurrence of each such redemption; provided, further, that such notice of redemption shall be sent within 30 days 91 after the date of closing of any such Public Equity Offering or Strategic Equity Infusion, and such redemption shall occur within 60 days after the date such notice is sent. Section 11.2. Applicability of Article. Redemption of Securities at the election of the Issuers, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 11.3. Election to Redeem; Notice to Trustee. The election of the Issuers to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Issuers of less than all the Securities, the Issuers shall, at least 60 days prior to the Redemption Date fixed by the Issuers (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 11.4. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by prorating, as nearly as may be practicable, the principal amount of Securities to be redeemed. In any proration pursuant to this Section, the Trustee shall make such adjustments, reallocations and eliminations as it shall deem proper (and in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed) to the end that the principal amount of Securities so prorated shall be $1,000 or a multiple thereof, by increasing or decreasing or eliminating the amount which would be allocable to any Holder on the basis of exact proportion by an amount not exceeding $1,000. The Trustee shall promptly notify the Issuers and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 11.5. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: 92 (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Issuers shall be given by the Issuers or, at the Issuers' request, by the Trustee in the name and at the expense of the Issuers. Section 11.6. Deposit of Redemption Price. Prior to any Redemption Date, the Issuers shall deposit with the Trustee or with a Paying Agent (or, if the Issuers are acting as their own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. Section 11.7. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuers shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Issuers at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 308. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate provided by the Security. Section 11.8. Securities Redeemed in Part. 93 Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Issuers designated for that purpose pursuant to Section 1002 (with, if the Issuers or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuers and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Issuers shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE 12 DEFEASANCE AND COVENANT DEFEASANCE Section 12.1. Issuers' Option to Effect Defeasance or Covenant Defeasance. The Issuers may at their option by Board Resolution, at any time, elect to have either Section 1202 or Section 1203 applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article Twelve. Section 12.2. Defeasance and Discharge. Upon the Issuers' exercise of the option provided in Section 1201 applicable to this Section, the Issuers shall be deemed to have been discharged from their obligations with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Issuers shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Issuers, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Issuers' obligations with respect to such Securities under Sections 304, 305, 306, 307, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Twelve. Subject to compliance with this Article Twelve, the Issuers may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203. Section 12.3. Covenant Defeasance. Upon the Issuers' exercise of the option provided in Section 1201 applicable to this Section, (i) the Issuers shall be released from its obligations under Sections 1005 through 1016, inclusive, and Clauses (3) and (4) of Section 801 and (ii) the occurrence of an event specified in Sections 501(3) (with respect to Clauses (2), (3) or (4) of Section 801), 501(4) (with respect to any of Sections 1005 through 1016, inclusive), 501(5) and 501(6) shall not be deemed to be an Event of Default on and after the date the conditions 94 set forth below are satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that the Issuers may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, Clause or Article, whether directly or indirectly by reason of any reference elsewhere herein to any such Section, Clause or Article or by reason of any reference in any such Section, Clause or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. Section 12.4. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1202 or Section 1203 to the then Outstanding Securities: (1) The Issuers shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article Twelve applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms, without the need for reinvestment, will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any), and each installment of interest on the Securities on the Stated Maturity of such principal or instalment of interest in accordance with the terms of this Indenture and of such Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that 95 (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (2) In the case of an election under Section 1202, the Issuers shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (3) In the case of an election under Section 1203, the Issuers shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred. (4) The Issuers shall have delivered to the Trustee an Officer's Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (5) Such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to any securities of the Issuers. (6) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as subsections 501(7) and (8) are concerned, at any time during the period ending on the 121st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). 96 (7) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Issuers are a party or by which it is bound. (8) The Issuers shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 1202 or the covenant defeasance under Section 1203 (as the case may be) have been complied with. (9) Such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder. Section 12.5. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee--collectively, for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in respect of the Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Issuers shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon Issuers' Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 12.6. Reinstatement. 97 If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 1202 or 1203 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Twelve until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1202 or 1203; provided, however, that if the Issuers make any payment of principal of (and premium, if any) or interest on any Security following the reinstatement of their obligations, the Issuers shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or the Paying Agent.____________________ This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument 98 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. VOICESTREAM WIRELESS CORPORATION By______________________________ Name: Donald Guthrie Title: Vice Chairman Attest: ______________________________ Name: Alan R. Bender VOICESTREAM WIRELESS HOLDING CORPORATION By______________________________ Name: Donald Guthrie Title: Vice Chairman Attest: ______________________________ Name: Alan R. Bender Harris Trust Company of California, as Trustee By______________________________ Authorized Officer TABLE OF CONTENTS
Page ---- ARTICLE 1 - Definitions and Other Provisions of General Application..................................... 1 Section 1.1. Definitions.................................................................. 1 Section 1.2. Compliance Certificates and Opinions......................................... 27 Section 1.3. Form of Documents Delivered to Trustee....................................... 27 Section 1.4. Acts of Holders; Record Date................................................. 28 Section 1.5. Notices, Etc., to Trustee and Issuer......................................... 29 Section 1.6. Notice to Holders; Waiver.................................................... 29 Section 1.7. Conflict with Trust Indenture Act............................................ 30 Section 1.8. Effect of Headings and Table of Contents..................................... 30 Section 1.9. Successors and Assigns....................................................... 30 Section 1.10. Separability Clause.......................................................... 30 Section 1.11. Benefits of Indenture........................................................ 30 Section 1.12. Governing Law................................................................ 30 Section 1.13. Legal Holidays............................................................... 30 ARTICLE 2 - Security Forms.............................................................................. 31 Section 2.1. Forms Generally.............................................................. 31 Section 2.2. Form of Face of Security..................................................... 31 Section 2.3. Form of Reverse of Security.................................................. 35 Section 2.4. Form of Trustee's Certificate of Authentication.............................. 38 ARTICLE 3 - The Securities.............................................................................. 39 Section 3.1. Title and Terms.............................................................. 39 Section 3.2. Denominations................................................................ 40 Section 3.3. Execution, Authentication, Delivery and Dating............................... 40 Section 3.4. Temporary Securities......................................................... 41 Section 3.5. Global Securities............................................................ 41 Section 3.6. Registration, Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends...................... 43 Section 3.7. Mutilated, Destroyed, Lost and Stolen Securities............................. 47 Section 3.8. Payment of Interest; Interest Rights Preserved............................... 48 Section 3.9. Persons Deemed Owners........................................................ 49 Section 3.10. Cancellation................................................................. 50 Section 3.11. Computation of Interest...................................................... 50 ARTICLE 4 - Satisfaction and Discharge.................................................................. 50 Section 4.1. Satisfaction and Discharge of Indenture...................................... 50 Section 4.2. Application of Trust Money................................................... 51 ARTICLE 5 - Remedies.................................................................................... 52 Section 5.1. Events of Default............................................................ 52 Section 5.2. Acceleration of Maturity; Rescission and Annulment........................... 54
Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee................................................................... 55 Section 5.4. Trustee May File Proofs of Claim............................................. 56 Section 5.5. Trustee May Enforce Claims Without Possession of Securities.................. 56 Section 5.6. Application of Money Collected............................................... 56 Section 5.7. Limitation on Suits.......................................................... 57 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest......................................................... 57 Section 5.9. Restoration of Rights and Remedies........................................... 58 Section 5.10. Rights and Remedies Cumulative............................................... 58 Section 5.11. Delay or Omission Not Waiver................................................. 58 Section 5.12. Control by Holders........................................................... 58 Section 5.13. Waiver of Past Defaults...................................................... 59 Section 5.14. Undertaking for Costs........................................................ 59 Section 5.15. Waiver of Stay or Extension Laws............................................. 59 ARTICLE 6 - The Trustee................................................................................. 60 Section 6.1. Certain Duties and Responsibilities.......................................... 60 Section 6.2. Notice of Defaults........................................................... 60 Section 6.3. Certain Rights of Trustee.................................................... 60 Section 6.4. Not Responsible for Recitals or Issuance of Securities....................... 61 Section 6.5. May Hold Securities.......................................................... 62 Section 6.6. Money Held in Trust.......................................................... 62 Section 6.7. Compensation and Reimbursement............................................... 62 Section 6.8. Disqualification; Conflicting Interests...................................... 63 Section 6.9. Corporate Trustee Required; Eligibility...................................... 63 Section 6.10. Resignation and Removal; Appointment of Successor............................ 63 Section 6.11. Acceptance of Appointment by Successor....................................... 64 Section 6.12. Merger, Conversion, Consolidation or Succession to Business.................. 65 Section 6.13. Preferential Collection of Claims Against the Issuers........................ 65 Section 6.14. Appointment of Authenticating Agent.......................................... 65 ARTICLE 7 - Holders' Lists and Reports by Trustee and Issuers........................................... 67 Section 7.1. Issuers to Furnish Trustee Names and Addresses of Holders.................... 67 Section 7.2. Preservation of Information; Communications to Holders....................... 67 Section 7.3. Reports by Trustee........................................................... 67 Section 7.4. Reports by Issuers........................................................... 67 ARTICLE 8 - Consolidation, Merger, Conveyance, Transfer or Lease........................................ 68 Section 8.1. Issuers May Consolidate, Etc. Only on Certain Terms.......................... 68 Section 8.2. Successor Substituted........................................................ 69 Section 8.3. Effect of the Reorganizations................................................ 69 ARTICLE 9 - Supplemental Indentures..................................................................... 70 Section 9.1. Supplemental Indentures Without Consent of Holders........................... 70 Section 9.2. Supplemental Indentures with Consent of Holders.............................. 70 Section 9.3. Execution of Supplemental Indentures......................................... 71
ii Section 9.4. Effect of Supplemental Indentures............................................ 72 Section 9.5. Conformity with Trust Indenture Act.......................................... 72 Section 9.6. Reference in Securities to Supplemental Indentures........................... 72 Section 9.7. Notice of Supplemental Indenture............................................. 72 ARTICLE 10 - Covenants.................................................................................. 72 Section 10.1. Payment of Principal, Premium and Interest................................... 72 Section 10.2. Maintenance of Office or Agency.............................................. 72 Section 10.3. Money for Security Payments to be Held in Trust.............................. 73 Section 10.4. Existence.................................................................... 74 Section 10.5. Maintenance of Properties.................................................... 74 Section 10.6. Payment of Taxes and Other Claims............................................ 75 Section 10.7. Maintenance of Insurance..................................................... 75 Section 10.8. Limitation on Consolidated Indebtedness...................................... 75 Section 10.9. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries................................................... 78 Section 10.10. Limitation on Restricted Payments............................................ 79 Section 10.11. Limitations Concerning Distributions and Transfers By Restricted Subsidiaries......................................... 81 Section 10.12. Limitation on Liens.......................................................... 83 Section 10.13. Limitation on Transactions with Affiliates and Related Persons............... 84 Section 10.14. Limitation on Certain Asset Dispositions..................................... 86 Section 10.15. Limitation on Sale and Leaseback Transactions................................ 87 Section 10.16. Change of Control Triggering Event........................................... 88 Section 10.17. Statement by Officers as to Default; Compliance Certificates................. 90 Section 10.18. Waiver of Certain Covenants.................................................. 90 Section 10.19. Provision of Financial Information........................................... 91 ARTICLE 11 - Redemption of Securities................................................................... 91 Section 11.1. Right of Redemption.......................................................... 91 Section 11.2. Applicability of Article..................................................... 92 Section 11.3. Election to Redeem; Notice to Trustee........................................ 92 Section 11.4. Selection by Trustee of Securities to Be Redeemed............................ 92 Section 11.5. Notice of Redemption......................................................... 92 Section 11.6. Deposit of Redemption Price.................................................. 93 Section 11.7. Securities Payable on Redemption Date........................................ 93 Section 11.8. Securities Redeemed in Part.................................................. 93 ARTICLE 12 - Defeasance and Covenant Defeasance......................................................... 94 Section 12.1. Issuers' Option to Effect Defeasance or Covenant Defeasance.................. 94 Section 12.2. Defeasance and Discharge..................................................... 94 Section 12.3. Covenant Defeasance.......................................................... 94 Section 12.4. Conditions to Defeasance or Covenant Defeasance.............................. 95 Section 12.5. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.......................... 97 Section 12.6. Reinstatement................................................................ 97
iii EX-4.3 4 v79584ex4-3.txt EXHIBIT 4.3 EXHIBIT 4.3 ================================================================================ VOICESTREAM WIRELESS CORPORATION VOICESTREAM WIRELESS HOLDINGS CORPORATION TO HARRIS TRUST COMPANY OF CALIFORNIA, AS TRUSTEE Indenture Dated as of November 9, 1999 Up to $1,470,000,000 11 7/8% Senior Discount Notes Due 2009 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE 1 - Definitions and Other Provisions of General Application.................. 1 Section 1.1. Definitions.................................................... 1 Section 1.2. Compliance Certificates and Opinions...........................27 Section 1.3. Form of Documents Delivered to Trustee.........................27 Section 1.4. Acts of Holders; Record Date...................................28 Section 1.5. Notices, Etc., to Trustee and Issuer...........................29 Section 1.6. Notice to Holders; Waiver......................................29 Section 1.7. Conflict with Trust Indenture Act..............................30 Section 1.8. Effect of Headings and Table of Contents.......................30 Section 1.9. Successors and Assigns.........................................30 Section 1.10. Separability Clause............................................30 Section 1.11. Benefits of Indenture..........................................30 Section 1.12. Governing Law..................................................30 Section 1.13. Legal Holidays.................................................30 ARTICLE 2 - Security Forms...........................................................31 Section 2.1. Forms Generally................................................31 Section 2.2. Form of Face of Security.......................................31 Section 2.3. Form of Reverse of Security....................................36 Section 2.4. Form of Trustee's Certificate of Authentication................39 ARTICLE 3 - The Securities...........................................................39 Section 3.1. Title and Terms................................................39 Section 3.2. Denominations..................................................40 Section 3.3. Execution, Authentication, Delivery and Dating.................40 Section 3.4. Temporary Securities...........................................41 Section 3.5. Global Securities..............................................42 Section 3.6. Registration, Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends.........................................43 Section 3.7. Mutilated, Destroyed, Lost and Stolen Securities...............48 Section 3.8. Payment of Interest; Interest Rights Preserved.................49 Section 3.9. Persons Deemed Owners..........................................50 Section 3.10. Cancellation...................................................50 Section 3.11. Computation of Interest........................................50 ARTICLE 4 - Satisfaction and Discharge...............................................50 Section 4.1. Satisfaction and Discharge of Indenture........................50 Section 4.2. Application of Trust Money.....................................52
i ARTICLE - 5 Remedies.................................................................52 Section 5.1. Events of Default..............................................52 Section 5.2. Acceleration of Maturity; Rescission and Annulment.............54 Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee.....................................................55 Section 5.4. Trustee May File Proofs of Claim...............................55 Section 5.5. Trustee May Enforce Claims Without Possession of Securities....56 Section 5.6. Application of Money Collected.................................56 Section 5.7. Limitation on Suits............................................56 Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest ..........................................57 Section 5.9. Restoration of Rights and Remedies.............................57 Section 5.10. Rights and Remedies Cumulative.................................57 Section 5.11. Delay or Omission Not Waiver...................................58 Section 5.12. Control by Holders.............................................58 Section 5.13. Waiver of Past Defaults........................................58 Section 5.14. Undertaking for Costs..........................................59 Section 5.15. Waiver of Stay or Extension Laws...............................59 ARTICLE 6 - The Trustee..............................................................59 Section 6.1. Certain Duties and Responsibilities............................59 Section 6.2. Notice of Defaults.............................................60 Section 6.3. Certain Rights of Trustee......................................60 Section 6.4. Not Responsible for Recitals or Issuance of Securities.........61 Section 6.5. May Hold Securities............................................61 Section 6.6. Money Held in Trust............................................61 Section 6.7. Compensation and Reimbursement.................................62 Section 6.8. Disqualification; Conflicting Interests........................62 Section 6.9. Corporate Trustee Required; Eligibility........................62 Section 6.10. Resignation and Removal; Appointment of Successor..............63 Section 6.11. Acceptance of Appointment by Successor.........................64 Section 6.12. Merger, Conversion, Consolidation or Succession to Business....64 Section 6.13. Preferential Collection of Claims Against the Issuers..........64 Section 6.14. Appointment of Authenticating Agent............................65 ARTICLE 7 - Holders' Lists and Reports by Trustee and Issuers........................66 Section 7.1. Issuers to Furnish Trustee Names and Addresses of Holders......66 Section 7.2. Preservation of Information; Communications to Holders.........66 Section 7.3. Reports by Trustee.............................................67 Section 7.4. Reports by Issuers.............................................67 ARTICLE 8 - Consolidation, Merger, Conveyance, Transfer or Lease.....................67 Section 8.1. Issuers May Consolidate, Etc. Only on Certain Terms............67
ii Section 8.2. Successor Substituted..........................................68 Section 8.3. Effect of the Reorganizations..................................69 ARTICLE 9 - Supplemental Indentures..................................................69 Section 9.1. Supplemental Indentures Without Consent of Holders.............69 Section 9.2. Supplemental Indentures with Consent of Holders................70 Section 9.3. Execution of Supplemental Indentures...........................71 Section 9.4. Effect of Supplemental Indentures..............................71 Section 9.5. Conformity with Trust Indenture Act............................71 Section 9.6. Reference in Securities to Supplemental Indentures.............71 Section 9.7. Notice of Supplemental Indenture...............................71 ARTICLE 10 - Covenants...............................................................71 Section 10.1. Payment of Principal, Premium and Interest.....................71 Section 10.2. Maintenance of Office or Agency................................72 Section 10.3. Money for Security Payments to be Held in Trust................72 Section 10.4. Existence......................................................73 Section 10.5. Maintenance of Properties......................................73 Section 10.6. Payment of Taxes and Other Claims..............................74 Section 10.7. Maintenance of Insurance.......................................74 Section 10.8. Limitation on Consolidated Indebtedness........................74 Section 10.9. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries.......................................77 Section 10.10.Limitation on Restricted Payments..............................78 Section 10.11.Limitations Concerning Distributions and Transfers By Restricted Subsidiaries.....................................80 Section 10.12.Limitation on Liens............................................82 Section 10.13.Limitation on Transactions with Affiliates and Related Persons .......................................................83 Section 10.14.Limitation on Certain Asset Dispositions.......................84 Section 10.15.Limitation on Sale and Leaseback Transactions..................86 Section 10.16.Change of Control Triggering Event.............................86 Section 10.17.Statement by Officers as to Default; Compliance Certificates...88 Section 10.18.Waiver of Certain Covenants....................................89 Section 10.19.Provision of Financial Information.............................89 ARTICLE 11 - Redemption of Securities................................................90 Section 11.1. Right of Redemption............................................90 Section 11.2. Applicability of Article.......................................90 Section 11.3. Election to Redeem; Notice to Trustee..........................90 Section 11.4. Selection by Trustee of Securities to Be Redeemed..............90 Section 11.5. Notice of Redemption...........................................91 Section 11.6. Deposit of Redemption Price....................................91 Section 11.7. Securities Payable on Redemption Date..........................92 Section 11.8. Securities Redeemed in Part....................................92
iii ARTICLE 12 - Defeasance and Covenant Defeasance......................................92 Section 12.1. Issuers' Option to Effect Defeasance or Covenant Defeasance....92 Section 12.2. Defeasance and Discharge.......................................92 Section 12.3. Covenant Defeasance............................................93 Section 12.4. Conditions to Defeasance or Covenant Defeasance................93 Section 12.5. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions.......................95 Section 12.6. Reinstatement..................................................96 ANNEXES Annex A Form of Regulation S Certificate.....................................A-1 Annex B Form of Restricted Securities Certificate............................B-1 Annex C Form of Unrestricted Securities Certificate..........................C-1
iv INDENTURE, dated as of November 9, 1999, between (i) VoiceStream Wireless Corporation, a corporation duly organized and existing under the laws of the State of Washington ("VoiceStream") and VoiceStream Wireless Holding Corporation, a corporation duly incorporated and existing under the laws of the State of Delaware ("VoiceStream Holdings")(unless otherwise provided by Section 803, VoiceStream and VoiceStream Holdings shall hereinafter be referred to as the "Issuers"), each having its principal office at 3650 131st Avenue SE, Bellevue, Washington 98006, and (ii) Harris Trust Company of California, a trust company duly organized and existing under the laws of the State of California, as Trustee (the "Trustee"). RECITALS OF THE ISSUER The Issuers have duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of up to $1,470,000,000 of their 11 7/8% Senior Discount Notes Due 2009 (the "Securities") of substantially the tenor and amount hereinafter set forth. All things necessary to make the Securities, when executed by the Issuers and authenticated and delivered hereunder and duly issued by the Issuers, the valid obligations of the Issuers, and to make this Indenture a valid agreement of the Issuers, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: - the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; - all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; - all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles (whether or not such is indicated herein), and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; - unless otherwise specifically set forth herein, all calculations or determinations of a Person shall be performed or made on a consolidated basis in accordance with generally accepted accounting principles but shall not include the accounts of Unrestricted Subsidiaries, except to the extent of dividends and distributions actually paid to the Issuers or one of their Wholly Owned Restricted Subsidiaries; and - the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Accreted Value" means, as of any date prior to November 15, 2004, an amount per $1,000 principal amount at maturity of Securities that is equal to the sum of (1) the initial offering price ($560.61 per $1,000 principal amount at maturity of Securities) of such Securities; and (2) the portion of the excess of the principal amount of such Securities over such initial offering price which shall have been amortized through such date, such amount to be so amortized on a daily basis and compounded semi-annually on each May 15 and November 15 at the rate of 11 7/8% per annum from the date of original issue of the Securities through the date of determination computed on the basis of a 360-day year of twelve 30-day months, and as of any date on or after November 15, 2004 the principal amount of each Security. "Acquired Indebtedness" means, with respect to any specified Person: - Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person; and - Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Act," when used with respect to any Holder, has the meaning specified in Section 104. "Adjusted Treasury Rate" will be determined on the third business day preceding any applicable redemption date and is the sum of: - the arithmetic mean of the yields under the heading "Week Ending" published in the Statistical Release most recently published prior to the 2 date of determination under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the remaining life to maturity, as of the redemption date, of the principal being redeemed; and - 0.50%; provided, however, that if no maturity set forth under such heading exactly corresponds to the maturity of such principal, yields for the two published maturities most closely corresponding to the maturity of such principal will be calculated as provided immediately above, and the Adjusted Treasury Rate will be interpolated or extrapolated from such yields on a straight-line basis, rounding in each of the relevant periods to the nearest month. "Administrative Agent" means the Person or Persons designated as such under the Credit Facility or, if the Omnipoint Reorganization is completed, the Anticipated New Credit Facility. "Aerial" means Aerial Communications, Inc., a Delaware corporation. "Aerial Reorganization" means the reorganization and related transactions contemplated by the Agreement and Plan of Reorganization, dated as of September 17, 1999, among VoiceStream, VoiceStream Holdings, VoiceStream Subsidiary II Corporation, Aerial and Telephone and Data Systems, Inc. "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent Member" means any member of, or participant in, the Depositary. "Anticipated New Credit Facility" means the new credit facility to be entered into upon and assuming completion of the Omnipoint Reorganization by a wholly-owned subsidiary of VoiceStream Holdings, together with a subsidiary of Omnipoint, which the Issuers are currently negotiating with a consortium of lenders, but for which the Issuers have not received commitments. "Applicable Procedures" means, with respect to any transfer or transaction involving a Global Security or beneficial interest therein, the rules and procedures of the Depositary for such Security, Euroclear and Cedel, in each case to the extent applicable to such transaction and as in effect from time to time. "Asset Disposition" by any Person means any transfer, conveyance, sale, lease or other disposition by such Person or any of its Restricted Subsidiaries (including a consolidation or merger or other sale of any such Restricted Subsidiaries with, into or to 3 another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Subsidiary of such Person to such Person or a Wholly Owned Restricted Subsidiary of such Person or by such Person to a Wholly Owned Restricted Subsidiary of such Person) of (i) shares of Capital Stock (other than directors' qualifying shares) or other ownership interests of a Subsidiary of such Person, (ii) substantially all of the assets of such Person or any of its Subsidiaries representing a division or line of business or (iii) other assets or rights of such Person or any of its Subsidiaries. Notwithstanding the preceding, the following items shall not be deemed to be Asset Dispositions: - any single transaction or series of related transactions that (a) involves assets having a Fair Market Value of less than $15 million; or (b) results in net proceeds to either Issuer or any of its respective Restricted Subsidiaries of less than $15 million; - a Restricted Payment that is permitted under Section 1010; - sales or other dispositions of inventory in the ordinary course of business and of receivables; - substantially simultaneous exchanges by either Issuer or any of its Restricted Subsidiaries of Telecommunications Assets for other Telecommunications Assets, provided that the Telecommunications Assets received by such Issuer or such Restricted Subsidiary have at least substantially equal or greater value to such Issuer or such Restricted Subsidiary (as determined by the Board of Directors whose good faith determination shall be conclusive and evidenced by a Board Resolution); - any sale or other disposition of any or all the Capital Stock of an Unrestricted Subsidiary; or - any sale or other disposition of Temporary Cash Investments. Additionally, the contribution of Telecommunications Assets to an Unrestricted Subsidiary whereby an Issuer or a Restricted Subsidiary of an Issuer receives Capital Stock of an Unrestricted Subsidiary shall be deemed a Restricted Payment only and shall not be deemed an Asset Disposition. "Attributable Value" means, as to any particular lease under which any Person is at the time liable other than a Capital Lease Obligation, and at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such Person under such lease during the initial term thereof as determined in accordance with generally accepted account principles, discounted from the last date of such initial term to the date of determination at a rate per annum equal to the discount rate which would be applicable to a Capital Lease Obligation with like term in accordance with 4 generally accepted accounting principles. The net amount of rent required to be paid under any such lease for any such period shall be the aggregate amount of rent payable by the lessee with respect to such period after excluding amounts required to be paid on account of insurance, taxes, assessments, utility, operating and labor costs and similar charges. In the case of any lease which is terminable by the lessee upon the payment of penalty, such net amount shall also include the lesser of the amount of such penalty (in which case no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated) or the rent which would otherwise be required to be paid if such lease is not so terminated. "Attributable Value" means, as to a Capital Lease Obligation, the principal amount thereof. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Average Life" means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness and the amount of such principal payment, by (ii) the sum of all such principal payments. "Board of Directors" means, with respect to an Issuer, either the board of directors of such Issuer or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of VoiceStream, VoiceStream Holdings or one of their subsidiaries, as the case may be, to have been duly adopted by the Board of Directors, to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City, the State of Washington, the State of Illinois or the State of California are authorized or obligated by law or executive order to close. "Capital Lease Obligation" of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet of such Person in accordance with generally accepted accounting principles (a "Capital Lease"). The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. The principal amount of such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with generally accepted accounting principles. "Capital Stock" means: - in the case of a corporation, corporate stock; 5 - in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; - in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and - any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cedel" means Cedel Bank, S.A. (or any successor securities clearing agency). "Change of Control" means - directly or indirectly a sale, transfer or other conveyance of all or substantially all the assets of VoiceStream or VoiceStream Holdings, as the case may be, on a consolidated basis, to any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among such Issuer or such Issuers' Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons that, as of the date of this Indenture, are not Initial Investors or Affiliates of the Initial Investors, own more than 50% of the total Voting Power entitled to vote in the election of directors, managers or trustees of the transferee entity immediately after such transaction; - the adoption of a plan relating to the liquidation or dissolution of VoiceStream or VoiceStream Holdings, as the case may be; - any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than the Initial Investors (or any Person or group of Persons that, as of the date of this Indenture, are Affiliates of the Initial Investors), is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total Voting Power of VoiceStream or VoiceStream Holdings, as the case may be; or - during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be (together with 6 any new directors whose election by such Board or whose nomination for election by the stockholders of the applicable Issuer was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be, then in office. "Change of Control Payment Date" has the meaning specified in Section 1016. "Change of Control Triggering Event" has the meaning specified in Section 1016. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Consolidated Income Tax Expense" of any Person means for any period the provision for income taxes of such Person and its Consolidated Restricted Subsidiaries for such period. "Consolidated Indebtedness" of any Person means at any date the Indebtedness of such Person and its Consolidated Restricted Subsidiaries at such date. "Consolidated Interest Expense" of any Person means for any period the interest expense included in an income statement (taking into account the effect of any Interest Rate Agreements but without deduction of interest income) of such Person and its Consolidated Restricted Subsidiaries for such period, including without limitation or duplication (or, to the extent not so included, with the addition of), (i) the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with generally accepted accounting principles; (ii) the amortization of Indebtedness discounts; (iii) any payments or fees with respect to letters of credit, bankers acceptances or similar facilities; (iv) fees with respect to Interest Rate Agreements; (v) the portion of any rental obligations in respect of any Sale and Leaseback Transaction allocable to interest expense (determined as if such were treated as a Capital Lease Obligation); and (vi) Preferred Stock dividends declared and payable in cash. "Consolidated Net Income" of any Person means for any period the net income (or loss) of such Person for such period determined on a consolidated basis in accordance with generally accepted accounting principles; provided that there shall be excluded therefrom (to the extent included and without duplication) (i) the net income (or loss) of any Person acquired by such Person or a Restricted Subsidiary of such Person after the 7 date of this Indenture in a pooling-of-interests transaction for any period prior to the date of such transaction, (ii) the net income (or loss) of any Person that is not a Consolidated Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person by such other Person during such period, (iii) gains or losses from sales of assets other than sales of assets acquired and held for resale in the ordinary course of business and (iv) all extraordinary gains and extraordinary losses. "Consolidated Restricted Subsidiary" of any Person means all other Persons that would be accounted for as consolidated Persons in such Person's financial statements in accordance with generally accepted accounting principles other than Unrestricted Subsidiaries. "Corporate Trust Office" means the principal office of the Trustee in Los Angeles, California at which at any particular time its corporate trust business shall be administered or its operations center in Chicago, Illinois, or such other location designated by the Trustee in a report pursuant to Section 703(a). "corporation" means a corporation, association, company, joint-stock company, partnership or business trust. "Credit Facility" means the Loan Agreement, dated as of June 26, 1998, among VoiceStream PCS Holding L.L.C. (as successor in interest to Western PCS Holding Corporation), Toronto-Dominion Bank (Texas), Inc., as Administrative Agent, and the other financial institutions named therein, as it may be amended, supplemented, restated or otherwise modified from time to time. "Cumulative EBITDA" means EBITDA of the Issuers and their respective Consolidated Restricted Subsidiaries for the period beginning on January 1, 2001, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment. "Cumulative Interest Expense" means the total amount of Consolidated Interest Expense of the Issuers and their respective Consolidated Restricted Subsidiaries for the period beginning on January 1, 2001, through and including the end of the last fiscal quarter preceding the date of any proposed Restricted Payment. "Currency Protection Agreements" means any currency swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge against a risk in the fluctuation of the exchange rate of a currency in which a payment to be made or received by either Issuer or any of its Restricted Subsidiaries is denominated, arising at any time between either Issuer or any of its Restricted Subsidiaries, on the one hand, and any Person (other than an Affiliate of either Issuer or any of its Restricted Subsidiaries), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time. "Default Amount" has the meaning specified in Section 502. 8 "Defaulted Interest" has the meaning specified in Section 308. "Depositary" means a clearing agency registered under the Exchange Act that is designated to act as Depositary for the Securities until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean such successor Depositary. The Depositary initially is DTC. "Disqualified Stock" of any person means any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible of or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of such Person, any Restricted Subsidiary of such Person or the holder thereof, in whole or in part, on or prior to the final Stated Maturity of the Securities; provided, however, that any Preferred Stock which would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require either Issuer to repurchase or redeem such Preferred Stock upon the occurrence of a Change of Control occurring prior to the final Stated Maturity of the Securities shall not constitute Disqualified Stock if the change of control provisions applicable to such Preferred Stock specifically provide that such Issuer will not repurchase or redeem any such stock pursuant to such provisions prior to the Issuers' repurchase of such Securities as are required to be repurchased pursuant to Section 1016. "DTC" means The Depository Trust Company, a New York corporation. "EBITDA" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expense included in the income statement of such Person and its Consolidated Restricted Subsidiaries for such period, plus (iv) all other non-cash charges and expenses that were deducted in determining Consolidated Net Income for such period, minus (v) all non-cash revenues and gains to the extent included in Consolidated Net Income for such period. "Eligible Institution" means a commercial banking institution that has combined capital and surplus of not less than $500 million or its equivalent in foreign currency, whose debt is rated "A-3" or higher, "A-" or higher or "A-" or higher according to Moody's Investors Service, Inc., Standard & Poor's Ratings Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act) respectively, at the time as of which any investment or rollover therein is made. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means the Euroclear Clearance System (or any successor securities clearing agency). 9 "Event of Default" has the meaning specified in Section 501. "Exchange Act" refers to the Securities Exchange Act of 1934 as it may be amended and any successor act thereto. "Exchange Offer" means an offer made pursuant to an effective registration statement under the Securities Act by the Issuers to exchange securities substantially identical to Outstanding Securities (except for the differences provided for herein) for Outstanding Securities. "Exchange and Registration Rights Agreement" means the Exchange and Registration Rights Agreement, dated as of November 4, 1999, among the Issuers and the Initial Purchasers, as such agreement may be amended from time to time. "Exchange Registration Statement" means a registration statement of the Issuers under the Securities Act registering Exchange Securities for distribution pursuant to the Exchange Offer. "Exchange Securities" means the Securities issued pursuant to the Exchange Offer or sold pursuant to the Resale Registration Statement and their Successor Securities. "Expiration Date" has the meaning specified in the definition of Offer to Purchase. "Fair Market Value" means, with respect to any assets or Person, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined (i) if such Person or assets has a Fair Market Value of less than $5 million, by any officer of VoiceStream or VoiceStream Holdings, as the case may be, and evidenced by an Officers' Certificate, dated within 30 days of the relevant transaction, or (ii) if such Person or assets has a Fair Market Value of $5 million or more, by a majority of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be, and evidenced by a Board Resolution, dated within 30 days of the relevant transaction "Global Security" means a Security that evidences all or part of the Securities of any series and bears the applicable legend set forth in Section 202. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America for the payment of which obligations or guarantee the full faith and credit of the United States is pledged and which have a remaining weighted average life to maturity of not more than one year from the date of Investment therein. "Gradation" means a gradation within a Rating Category or a change to another Rating Category, which shall include: 10 - "+" and "-" in the case of S&P's current Rating Categories (e.g., a decline from BB+ to BB would constitute a decrease of one gradation); - 1, 2 and 3 in the case of Moody's current Rating Categories (e.g., a decline from Ba1 to Ba2 would constitute a decrease of one gradation); or - the equivalent in respect of successor Rating Categories of S&P or Moody's or Rating Categories used by Rating Agencies other that S&P or Moody's. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business. "Holder" means a Person in whose name a Security is registered in the Security Register. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to generally accepted accounting principles or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in generally accepted accounting principles that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. "Indebtedness" means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations Incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (v) every Capital Lease Obligation of such Person, (vi) the 11 maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) every obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (viii) every obligation of the type referred to in Clauses (i) through (vii) of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise. The amount of any Indebtedness outstanding as of any date shall be: - the accreted value thereof, in the case of any Indebtedness that does not require current payments of interest; and - the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indebtedness to EBITDA Ratio" of any Person means at any date the ratio of Consolidated Indebtedness outstanding on such date to the product calculated by multiplying the aggregate EBITDA for the first full fiscal quarter immediately preceding such date by four; provided, however, that, in the event such Person or any of its Restricted Subsidiaries has acquired a Person during or after such period in a pooling-of-interests transaction, such computation shall be made on a pro forma basis as if the transaction had taken place on the first day of such period. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Investors" means Hutchison Whampoa Limited and its Affiliates, John W. Stanton and Theresa E. Gillespie and their Affiliates and Providence Media Partners, L.P. and its Affiliates. "Initial Purchasers" means Goldman, Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Salomon Smith Barney Inc., Banc of America Securities LLC, TD Securities (USA) Inc., Barclays Capital Inc. and SG Cowen Securities Corporation. "Initial Regulation S Securities" means the Securities sold by the Initial Purchasers in the initial offering contemplated by the Purchase Agreement in reliance on Regulation S. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Interest Rate Agreements" means any interest rate swap, cap, collar, floor, caption or swaption agreements, or any similar arrangements designed to hedge the risk of variable interest rate volatility or to reduce interest costs, arising at any time between either Issuer or any Restricted Subsidiary, on the one hand, and any Person (other than an 12 Affiliate of either Issuer or any Restricted Subsidiary), on the other hand, as such agreement or arrangement may be modified, supplemented and in effect from time to time. "Investment" by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person, including any payment on a guarantee of any obligation of such other Person, but shall not include trade accounts receivable in the ordinary course of business on credit terms made generally available to the customers of such Person. "Investment Grade" means a rating of at least BBB-, in the case of S&P, or Baa3, in the case of Moody's. "Issuers" has the meaning specified in the preamble. "Issuer Request" or "Issuer Order" means a written request or order signed in the name of VoiceStream or VoiceStream Holdings, as the case may be, by its Chairman or Vice Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Lien" means, with respect to any property or assets, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). "Maturity" means, when used with respect to any Security, the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors Service, Inc. shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if Moody's Investors Service, Inc. ceases rating debt securities having a maturity at original issuance of at least one year and its rating business with respect thereto shall not have been transferred to any successor Person, then "Moody's" shall mean any other national recognized rating agency (other than S&P) that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by VoiceStream or VoiceStream Holdings, as the case may be, by a written notice given to the trustee. 13 "Net Available Proceeds" from any Asset Disposition means the aggregate amount of cash (including any other consideration that is converted into cash) received by an Issuer or any of its Restricted Subsidiaries in respect of such an Asset Disposition, less the sum of (i) all fees, commissions and other expenses Incurred in connection with such Asset Disposition, including the amount of income taxes required to be paid by such Issuer or any of its Restricted Subsidiaries in connection therewith and (ii) the aggregate amount of cash so received which is used to retire any existing Indebtedness of such Issuer or any of its Restricted Subsidiaries which is required to be repaid in connection therewith. "Net Cash Proceeds" from the sale of Equity Interests means the aggregate amount of cash (including any other consideration that is converted into cash) received by an Issuer or any of its Restricted Subsidiaries in respect of such sale of Equity Interests, less the sum of: - all fees, commissions and other expenses incurred in connection with such sale of Equity Interests, including the amount of income taxes required to be paid by such Issuer or any of its Restricted Subsidiaries in connection therewith; and - the aggregate amount of cash so received which is used to retire any existing Indebtedness of such Issuer or any of its Restricted Subsidiaries which is required to be repaid in connection therewith. "Non-Recourse Debt" means Indebtedness: - as to which neither of the Issuers nor any of their respective Restricted Subsidiaries; - provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness); - is directly or indirectly liable (as a guarantor or otherwise); or - constitutes the lender; - no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary of such Issuer) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of either Issuer or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and - as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of either Issuer or any of its Restricted Subsidiaries. 14 "Offer" has the meaning specified in the definition of Offer to Purchase. "Offer to Purchase" means a written offer (the "Offer") sent by the Issuers by first class mail, postage prepaid, to each Holder at his address appearing in the Security Register on the date of the Offer offering to purchase up to the principal amount of Securities specified in such Offer at the purchase price specified in such Offer (as determined pursuant to this Indenture). Unless otherwise required by applicable law, the Offer shall specify an expiration date (the "Expiration Date") of the Offer to Purchase which, subject to any contrary requirements of applicable law, shall be not less than 30 days nor more than 60 days after the date of such Offer to Purchase and a settlement date (the "Purchase Date") for purchase of Securities within five Business Days after the Expiration Date. The Issuers shall notify the Trustee at least 15 Business Days (or such shorter period as is acceptable to the Trustee) prior to the mailing of the Offer of the Issuers' obligation to make an Offer to Purchase, and the Offer shall be mailed by the Issuers or, at the Issuers' request, by the Trustee in the name and at the expense of the Issuers. The Offer shall contain information concerning the business of the Issuers and their respective Subsidiaries which the Issuers in good faith believe will enable such Holders to make an informed decision with respect to the Offer to Purchase (which at a minimum will include (i) the most recent annual and quarterly financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the documents required to be filed with the Trustee pursuant to Section 704 (which requirements may be satisfied by delivery of such documents together with the Offer), (ii) a description of material developments in the Issuers' business subsequent to the date of the latest of such financial statements referred to in Clause (i) (including a description of the events requiring the Issuers to make the Offer to Purchase), (iii) if applicable, appropriate pro forma financial information concerning the Offer to Purchase and the events requiring the Issuers to make the Offer to Purchase and (iv) any other information required by applicable law to be included therein. The Offer shall contain all instructions and materials necessary to enable such Holders to tender Securities pursuant to the Offer to Purchase. The Offer shall also state: - the Section of this Indenture pursuant to which the Offer to Purchase is being made; - the Expiration Date and the Purchase Date; - the aggregate principal amount of the Outstanding Securities offered to be purchased by the Issuers pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such has been determined pursuant to the Section hereof requiring the Offer to Purchase) (the "Purchase Amount"); - the purchase price to be paid by the Issuers for each $1,000 aggregate principal amount of Securities accepted for payment (as specified pursuant to this Indenture) (the "Purchase Price"); 15 - that the Holder may tender all or any portion of the Securities registered in the name of such Holder and that any portion of a Security tendered must be tendered in an integral multiple of $1,000 principal amount; - the place or places where Securities are to be surrendered for tender pursuant to the Offer to Purchase; - that on the Purchase Date the Purchase Price will become due and payable upon each Security accepted for payment pursuant to the Offer to Purchase and that interest thereon shall cease to accrue on and after the Purchase Date; - that each Holder electing to tender a Security pursuant to the Offer to Purchase will be required to surrender such Security at the place or places specified in the Offer prior to the close of business on the Expiration Date (such Security being, if the Issuers or the Trustee so requires, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing); - that Holders will be entitled to withdraw all or any portion of Securities tendered if the Issuers (or its Paying Agent) receives, not later than the close of business on the Expiration Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder tendered, the certificate number of the Security the Holder tendered and a statement that such Holder is withdrawing all or a portion of his tender; - that (a) if Securities in an aggregate principal amount less than or equal to the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Issuers shall purchase all such Securities and (b) if Securities in an aggregate principal amount in excess of the Purchase Amount are tendered and not withdrawn pursuant to the Offer to Purchase, the Issuers shall purchase Securities having an aggregate principal amount equal to the Purchase Amount on a pro rata basis (with such adjustments as may be deemed appropriate so that only Securities in denominations of $1,000 or integral multiples thereof shall be purchased); and - that in case of any Holder whose Security is purchased only in part, the Issuers shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in an aggregate principal amount equal to and in exchange for the unpurchased portion of the Security so tendered. Any Offer to Purchase shall be governed by and effected in accordance with the Offer for such Offer to Purchase. 16 "Officers' Certificate" means a certificate signed by two officers at least one of whom shall be the principal executive officer, principal accounting officer or principal financial officer of VoiceStream or VoiceStream Holdings, as the case may be, and delivered to the Trustee."Omnipoint" means Omnipoint Corporation, a Delaware corporation. "Omnipoint Reorganization" means the reorganization and related transactions contemplated by that Agreement and Plan of Reorganization, dated as of June 23, 1999, among VoiceStream, VoiceStream Holdings and Omnipoint. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for an Issuer, and who shall be reasonably acceptable to the Trustee and delivered to the Trustee. "Original Securities" means all Securities other than Exchange Securities. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: - Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; - Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Issuers) in trust or set aside and segregated in trust by the Issuers (if the Issuers shall act as their own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and - Securities which have been paid pursuant to Section 307 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Issuers; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Issuers or any other obligor upon the Securities or any Affiliate of the Issuers or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee has actual knowledge to be so owned shall be so 17 disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not an Issuer or any other obligor upon the Securities or any Affiliate of the Issuers or of such other obligor. "pari passu," when used with respect to the ranking of any Indebtedness of any Person in relation to other Indebtedness of such Person, means that each such Indebtedness (a) either (i) is not subordinated in right of payment to any other Indebtedness of such Person or (ii) is subordinate in right of payment to the same Indebtedness of such Person as is the other and is so subordinate to the same extent and (b) is not subordinate in right of payment to the other or to any Indebtedness of such Person as to which the other is not so subordinate. "Paying Agent" means any Person authorized by the Issuers to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Issuers. "Permitted Investments" include: - Investments in either Issuer or any Restricted Subsidiary of either Issuer; - Investments in a Person such that the Person will become a Restricted Subsidiary after giving effect to the Investment or purchases of additional Equity Interests of a Restricted Subsidiary or of a Person who becomes a Restricted Subsidiary as a result of any such purchase; - a Temporary Cash Investment; - stock, obligations or other consideration received in satisfaction of judgments; - an Investment in any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted under Section 1014; - Investments (including acquisitions of other Telecommunications Businesses) not to exceed two times the Net Cash Proceeds from the sale of Equity Interests; - Investments (including acquisitions of other Telecommunications Businesses) made with Capital Stock; - Restricted Equity Investments; - Strategic Investments; - customary loans or advances made in the ordinary course of business to officers, directors or employees of an Issuer or any of its Restricted 18 Subsidiaries for travel, entertainment and moving and other relocation expenses; and - any other Investments not to exceed $100 million in the aggregate. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock," as applied to the Capital Stock of any Person, means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person. "Public Equity Offering" means an underwritten primary public offering of Common Stock pursuant to an effective registration statement under the Securities Act. "Purchase Agreement" means the Purchase Agreement, dated as of November 4, 1999, among the Issuers and the Initial Purchasers, as such agreement may be amended from time to time. "Purchase Amount" has the meaning specified in the definition of Offer to Purchase. "Purchase Date" has the meaning specified in the definition of Offer to Purchase. "Purchase Price" has the meaning specified in the definition of Offer to Purchase. "Rating Agency" means (1) S&P and Moody's or (2) any other rating agencies contemplated by the definitions of "S&P" and "Moody's". "Rating Category" means: - with respect to S&P, any of the following categories (any of which may include a "+" or "-"): AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor categories); - with respect to Moody's, any of the following categories (any of which may include a "1", "2" or "3"); Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and 19 - the equivalent of any such categories of S&P or Moody's used by another Rating Agency, if applicable. "Ratings Decline" has the meaning specified in Section 1016. "Redeemable Stock" of any Person means any equity security of such Person that by its terms or otherwise is required to be redeemed prior to the final Stated Maturity of the Securities or is redeemable at the option of the holder thereof at any time prior to the final Stated Maturity of the Securities. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registered Securities" means the Exchange Securities and all other Securities sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act, together with their respective Successor Securities. "Registration Default" has the meaning specified in the form of the Securities set forth in Section 202. "Regular Record Date" for the interest payable on any Interest Payment Date means the May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act (or any successor provision), as it may be amended from time to time. "Regulation S Certificate" means a certificate substantially in the form set forth in Annex A. "Regulation S Global Security" has the meaning specified in Section 201. "Regulation S Legend" means a legend substantially in the form of the legend required in the form of Security set forth in Section 202 to be placed upon a Regulation S Global Security. "Regulation S Securities" means all Securities required pursuant to Section 306(c) to bear a Regulation S Legend. Such term includes the Regulation S Global Security. "Related Person" of any Person means any other Person owning (a) 5% or more of the outstanding Common Stock of such Person or (b) 5% or more of the Voting Power of such Person. "Reorganizations" means the Omnipoint Reorganization and the Aerial Reorganization. 20 "Resale Registration Statement" means a shelf registration statement under the Securities Act filed by the Issuers, if required by, and meeting the requirements of, the Exchange and Registration Rights Agreement, registering Original Securities for resale. "Responsible Officer," when used with respect to the Trustee, means the chairman or vice-chairman of the executive committee of the board of directors, the president, any vice-president, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Entity" means, as applied to any Person, any corporation or other entity: - engaged in the acquisition, ownership, operation and management of assets in the Telecommunications Business; - over which such Person is responsible (either directly or through a services agreement) for day-to-day operations or otherwise has a technical services or comparable agreement that provides such Person with such rights, duties and obligations as are substantially similar to those rights, duties and obligations of VoiceStream (as assignee of Western Wireless Corporation) under that certain Technical Services Agreement dated July 30, 1996, as amended, with respect to Cook Inlet Western Wireless PV/SS PCS, L.P.; - of which more than 40% of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary voting power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such voting power by reason of the happening of any contingency, in the case a corporation, or more than 40% of the outstanding ownership interests, in the case of an entity other than a corporation, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and by one or more Subsidiaries of such Person; and - that is formed or the ownership in which is acquired pursuant to an arms' length negotiation between such Person and the Restricted Entity or the other investors in such Restricted Entity that satisfies the requirements of Section 1013. "Restricted Equity Investments" means: - any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of Capital Stock or other ownership interests 21 in a Restricted Entity or (b) any option, warrant or other right to acquire shares of Capital Stock or ownership interests of a Restricted Entity; or - any loan, advance, lease, capital contribution to, or Investment in, or payment of a Guarantee of any obligation of a Restricted Entity. "Restricted Global Security" has the meaning specified in Section 201. "Restricted Payment" has the meaning specified in Section 1010. "Restricted Period" means the period of 41 consecutive days beginning on and including the later of (i) the day on which Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the day on which the closing of the offering of Securities pursuant to the Purchase Agreement occurs. "Restricted Securities" means all Securities required pursuant to Section 306(c) to bear a Restricted Securities Legend. Such term includes the Restricted Global Security. "Restricted Securities Certificate" means a certificate substantially in the form set forth in Annex B. "Restricted Securities Legend" means a legend substantially in the form of the legend required in the form of Security set forth in Section 202 to be placed upon a Restricted Security. "Restricted Subsidiary" of any Person means any Subsidiary of such Person other than an Unrestricted Subsidiary. "Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time. "Rule 144A Securities" means the Securities purchased by the Initial Purchasers from the Issuers pursuant to the Purchase Agreement, other than the Initial Regulation S Securities. "Sale and Leaseback Transaction" of any Person means an arrangement with any lender or investor or to which such lender or investor is a party providing for the leasing by such Person of any property or asset of such Person which has been or is being sold or transferred by such Person more than 270 days after the acquisition thereof or the completion of construction or commencement of operation thereof to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. The stated maturity of such arrangement shall be the date of the last payment of rent or any other amount due under such arrangement prior to the first date on which such arrangement may be terminated by the lessee without payment of a penalty. 22 "Securities" means securities designated in the first paragraph of the recitals and includes the Exchange Securities. "Securities Act" refers to the Securities Act of 1933 as it may be amended and any successor act thereto. "Securities Act Legend" means a Restricted Securities Legend or a Regulation S Legend. "Security Registrar" and "Security Register" have the respective meanings specified in Section 306. "Special Interest" has the meaning specified in the form of the Securities set forth in Section 202. "S&P" means Standard & Poor's Rating Services or, if Standard & Poor's Rating Services shall cease rating debt securities having a maturity at original issuance of at least one year and such ratings business shall have been transferred to a successor Person, such successor Person; provided, however, that if Standard & Poor's Rating Services ceases rating debt securities having a maturity at original issuance of at least one year and its rating business with respect thereto shall not have been transferred to any successor Person, then "S&P" shall mean any other national recognized rating agency (other than Moody's) that rates debt securities having a maturity at original issuance of at least one year and that shall have been designated by VoiceStream or VoiceStream Holdings, as the case may be, by a written notice given to the Trustee. "Stated Maturity," when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the date on which the principal of such Security or such installment of interest is due and payable. "Statistical Release" means the statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded United States government securities adjusted to constant maturities, or, if such statistical release is not published at the time of any determination under this Indenture, then such other reasonably comparable index which shall be designated by VoiceStream or VoiceStream Holdings, as the case may be. "Step-Down Date" has the meaning specified in the form of the Securities set forth in Section 202. "Step-Up" has the meaning specified in the form of the Securities set forth in Section 202. "Strategic Equity Infusion" means an equity investment in VoiceStream or VoiceStream Holdings, as the case may be, made by a Strategic Investor in an aggregate amount of not less than $250 million. 23 "Strategic Investment" means an Investment in one or more Persons engaged in a Telecommunications Business, provided that the aggregate amount of all such Investments does not exceed (1) $100 million or (2), provided that after giving effect to such Strategic Investment the Issuers would comply with the first paragraph of Section 1008, $175 million. "Strategic Investor" means a corporation, partnership or other entity engaged in one or more Telecommunications Businesses that has, or 80% or more of the voting stock of which is owned by a Person that has, an equity market capitalization, at the time of its initial Investment in the applicable Issuer, in excess of $1 billion. "Subsidiary" of any Person means (i) any corporation of which more than fifty percent (50%) of the outstanding Capital Stock (other than directors' qualifying shares) having ordinary Voting Power to elect its board of directors, regardless of the existence at the time of a right of the holders of any class or classes of securities of such corporation to exercise such Voting Power by reason of the happening of any contingency, or any entity other than a corporation of which more than fifty percent (50%) of the outstanding ownership interests, is at the time owned directly or indirectly by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, or (ii) any other entity which is directly or indirectly controlled or capable of being controlled by such Person, or by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person. "Successor Security" of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 307 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Telecommunications Asset" means any asset of a Telecommunications Business, including, without limitation, Equity Interests or joint venture, partnership or membership interests of an entity engaged in the Telecommunications Business. "Telecommunications Business" means the business of: - transmitting, or providing services relating to the transmission of, voice, video or data through owned or leased wireline or wireless transmission facilities; - creating, developing, acquiring, constructing, installing, repairing, maintaining or marketing communications-related systems, network equipment and facilities, software and other products; or - evaluating, owning, operating, participating in or pursuing any other business that is primarily related to those identified in clause (1) or (2) above (in the case of this clause (3), however, in a manner consistent with 24 VoiceStream's and, assuming completion of either of the Reorganizations, Omnipoint's or Aerial's, as applicable, manner of business on the date of this Indenture), and shall, in any event, include all businesses in which VoiceStream and, assuming completion of either of the Reorganizations, Omnipoint or Aerial, as applicable, or any of their Subsidiaries is engaged on the date of this Indenture or has entered into agreements to engage in or to acquire a company to engage in or contemplate engaging in, as expressly set forth in VoiceStream's Form 10/A filed with the Commission on April 13, 1999 or its Form 10-Q for the quarter ended June 30, 1999 or its current reports on Form 8-K filed prior to October 15, 1999 (or not required to be disclosed therein pursuant to the rules and regulations of the Commission) and, assuming completion of the Reorganizations, each of Omnipoint's and Aerial's Form 10-K for the fiscal year ended December 31, 1998 and Forms 10-Q and 8-K filed during calendar year 1999 prior to the date of the offering circular associated with the Securities (or not required to be disclosed therein pursuant to the rules and regulations of the Commission); provided that the determination of what constitutes a Telecommunications Business shall be made in good faith by the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be. "Telecommunications Indebtedness" means Indebtedness (including Acquired Indebtedness) of an Issuer or any of its Restricted Subsidiaries that is incurred for the (1) development, construction, acquisition, operations or improvement by such Issuer or any of its Restricted Subsidiaries of Telecommunications Assets (including any Indebtedness assumed in connection with an acquisition of Telecommunications Assets) or (2) acquisition of Equity Interests of a Person engaged in a Telecommunications Business; provided that with respect to clause (1) the net proceeds of such Telecommunications Indebtedness do not exceed 100% of the cost of construction, development, acquisition, operations or improvement of the applicable Telecommunications Assets. "Temporary Cash Investment" means: - Government Securities; - any time deposit account, money market deposit and certificate of deposit maturing not more than 270 days after the date of acquisition issued by, or time deposit of, an Eligible Institution; - commercial paper maturing not more than 270 days after the date of acquisition issued by a corporation (other than an Affiliate of either Issuer) with a rating, at the time as of which any investment therein is made, of "P-1" or higher according to Moody's Investors Service, Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or higher according to Duff & Phelps Credit Rating Co. (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)); 25 - any banker's acceptances or money market deposit accounts issued or offered by an Eligible Institution; - repurchase obligations with a term of not more than 7 days for Government Securities entered into with an Eligible Institution; and - any fund investing exclusively in investments of the types described in clauses (1) through (5) above. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "U.S. Government Obligations" has the meaning specified in Section 1204. "Unrestricted Securities Certificate" means a certificate substantially in the form set forth in Annex C. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of any Person may designate any Restricted Subsidiary to be an Unrestricted Subsidiary unless such Subsidiary owns any Common Stock or Preferred Stock of, or owns or holds any Lien on any property of, such Person or any Restricted Subsidiary; provided that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, the Fair Market Value of the Subsidiary at the time of such designation would be permitted as an investment under Section 1011. The Board of Directors of any Person may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of such Person; provided that immediately after giving effect to such designation (x) such Person would be permitted to Incur $1.00 of additional Indebtedness pursuant to the first paragraph of Section 1008 and (y) no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing. Any such designation by the Board of Directors shall be evidenced by a Board Resolution submitted to the Trustee. "Vice President," when used with respect to VoiceStream or VoiceStream Holdings, as the case may be, or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." 26 "VoiceStream" has the meaning set forth in the preamble. "VoiceStream Holdings" has the meaning set forth in the preamble. "Voting Power" of any Person means the aggregate number of votes of all classes of Capital Stock of such Person which ordinarily has voting power for the election of directors of such Person. "Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.2. Compliance Certificates and Opinions. Upon any application or request by an Issuer to the Trustee to take any action under any provision of this Indenture, such Issuer shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be given in the form of an Officers' Certificate, if to be given by an officer of such Issuer, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirement set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as in its reasonable judgment is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to 27 some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of an Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of such Issuer stating that the information with respect to such factual matters is in the possession of the Issuers, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.4. Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent(s) duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, by such Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and such Issuer, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee reasonably deems sufficient. (c) An Issuer may, in the circumstances permitted by the Trust Indenture Act, fix any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders. If not set by such Issuer prior to the first solicitation of a Holder made by any Person in 28 respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date, only the Holders on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or an Issuer in reliance thereon, whether or not notation of such action is made upon such Security. Section 1.5. Notices, Etc., to Trustee and Issuer. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by an Issuer shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Trust Officer, or (b) an Issuer by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to such Issuer, Attention: Chief Executive Officer, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by such Issuer with a copy to its General Counsel. Section 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 29 In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Section 1.7. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of this Indenture shall be deemed to apply. Section 1.8. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.9. Successors and Assigns. All covenants and agreements in this Indenture by an Issuer shall bind its successors and assigns, whether so expressed or not. Section 1.10. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.12. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York without giving effect to principles of conflicts of law. Section 1.13. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Purchase Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next 30 succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or Purchase Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date, Purchase Date or Stated Maturity, as the case may be. ARTICLE 2 SECURITY FORMS Section 2.1. Forms Generally. The Securities and the Trustee's certificates of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Upon their original issuance, Rule 144A Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct). Such Global Securities, together with their Successor Securities which are Global Securities other than the Regulation S Global Security, are collectively herein called the "Restricted Global Security". Upon their original issuance, Initial Regulation S Securities shall be issued in the form of one or more Global Securities registered in the name of DTC, as Depositary, or its nominee and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct), provided that upon such deposit all such Securities shall be credited to or through accounts maintained at DTC by or on behalf of Euroclear or Cedel. Such Global Securities, together with their Successor Securities which are Global Securities other than the Restricted Global Security, are collectively herein called the "Regulation S Global Security". Section 2.2. Form of Face of Security. THIS SECURITY HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE ISSUE PRICE OF THIS SECURITY IS 56.061% OF ITS PRINCIPAL AMOUNT, THE AMOUNT OF 31 ORIGINAL ISSUE DISCOUNT ON THIS SECURITY IS $1033.14 PER $1,000 OF STATED FACE AMOUNT, THE ISSUE DATE IS November 9, 1999 AND THE YIELD TO MATURITY IS 11 7/8%. [If the Security is a Restricted Security, then insert -- THIS SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND (B) IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.] [If the Security is a Regulation S Security, then insert -- THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS SECURITY IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.] [If the Security is a Global Security, then insert -- THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.] [If the Security is a Global Security and The Depository Trust Company is to be the Depositary therefor, then insert -- UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND 32 ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] 11 7/8% SENIOR DISCOUNT NOTES DUE 2009 No. __________ $________ [If Restricted Global Security - CUSIP Number ___________] [If Regulation S Global Security - CUSIP Number ___________] [If Non-Global Security - CUSIP Number ___________] [If Registered Security - CUSIP Number ___________] VoiceStream Wireless Corporation, a corporation duly organized and existing under the laws of Washington and VoiceStream Wireless Holding Corporation, a corporation organized and existing under the laws of Delaware (herein collectively referred to as the "Issuers," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to _____________, or registered assigns, the principal sum of ________ Dollars [if the Security is a Global Security, then insert -- , or such other principal amount (which, when taken together with the principal amounts of all other Outstanding Securities, shall not exceed $1,470,000,000 in the aggregate at any time) as may be set forth in the records of the Trustee hereinafter referred to in accordance with the Indenture,] on November 15, 2009, and to pay interest thereon from November 15, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on May 15 and November 15 in each year, commencing May 15, 2005, at the rate of 11 7/8% per annum, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of 13 7/8% per annum on any overdue principal and premium, if any, and on any overdue installment of interest until paid [if the Security is an Original Security, then insert -- , provided that if (i) the Issuers have not filed an Exchange Registration Statement under the Securities Act registering a security substantially identical to this Security for distribution pursuant to an Exchange Offer or, if applicable, a Resale Registration Statement registering this Security for resale, in either case by March 23, 2000, (ii) either the Exchange Registration Statement or, if applicable, the Resale Registration Statement has not become or been declared effective within 75 days after the filing of such Statement, (iii) the expiration of the Exchange Offer has not occurred within 45 days after the date on which the Exchange Registration Statement has become or been declared effective initially or (iv) either the Exchange Registration Statement or, if 33 applicable, the Resale Registration Statement is filed and declared effective but shall thereafter cease to be effective (except as specifically permitted pursuant to the agreement referred to below) without being succeeded immediately by an additional registration statement filed and declared effective, in each case (i) through (iv) upon the terms and conditions set forth in the Exchange and Registration Rights Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"; provided that no more than one Registration Default shall be deemed to be in effect at any one time), then interest will accrue (in addition to the stated interest on this Security) (the "Step-Up") at a rate of (i) 0.25% per annum for the first 90-day period, (ii) 0.50% per annum for the second 90-day period, (iii) 0.75% per annum for the third 90-day period and (iv) 1.00% per annum thereafter on, the Accreted Value prior to November 15, 2004, and the principal amount after November 15, 2004, of the Securities for the period from the occurrence of the Registration Default until such time (the "Step-Down Date") as no Registration Default is in effect (after which the interest rate will be restored to its initial rate). The Issuers shall provide the Trustee with written notice of the date of any Registration Default and the Step-Down Date. Interest accruing as a result of the Step-Up is referred to herein as "Special Interest."] The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date [if the Security is an Original Security, then insert - --, provided that any accrued and unpaid interest (including Special Interest) on this Security upon the issuance of an Exchange Security in exchange for this Security shall cease to be payable to the Holder hereof and shall be payable on the next Interest Payment Date for such Exchange Security to the Holder thereof on the related Regular Record Date]. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. The principal of this Security shall not accrue interest until November 15, 2004, except in the case of a default in payment of principal upon acceleration or redemption and, in such case, the interest payable pursuant to the preceding paragraph on the overdue principal as specified on the reverse hereof shall be payable on demand and, if not so paid on demand, such interest shall itself bear interest at the rate of 13 7/8% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest on unpaid interest shall also be payable on demand. 34 If either Reorganization is completed, immediately upon completion of such Reorganization, without any further act by any Person VoiceStream shall cease to be an Issuer of the Securities and any or all of its obligations under the Indenture as an Issuer shall effectively terminate, and VoiceStream Holdings shall remain as the sole Issuer of the Securities. If both Reorganizations are terminated, immediately upon the termination of the last of the Reorganizations to be terminated, without any further act by any person VoiceStream Holdings shall cease to be an Issuer of the Securities and any or all of its obligations under the Indenture as an Issuer shall effectively terminate, and VoiceStream shall remain as the sole Issuer of the Securities. Upon either of VoiceStream or VoiceStream Holdings being the sole Issuer, the term "Issuers" hereunder shall be deemed to be changed to "Issuer." Payment of the principal of (and premium, if any) and any such interest on this Security will be made at the Corporate Trust Office or at the office or agency of the Issuers maintained for that purpose in the Borough of Manhattan, New York City, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Issuers payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, each of the Issuers have caused this instrument to be duly executed. Dated: VoiceStream Wireless Corporation By -------------------------------- Title: Attest: - ------------------------------ Title: VoiceStream Wireless Holding Corporation By -------------------------------- Title: 35 Attest: - ------------------------------ Title: Section 2.3. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Issuers designated as their 11 7/8% Senior Discount Notes Due 2009 (herein called the "Securities"), limited in aggregate principal amount to $1,470,000,000, issued and to be issued from time to time under an Indenture, dated as of November 9, 1999 (herein called the "Indenture"), between the Issuers and Harris Trust Company of California, as Trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Issuers, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Until November 15, 2002, the Issuers may on any one or more occasions redeem up to 35% of the aggregate principal amount at maturity of the Securities originally issued at a redemption price of 111.875% of the Accreted Value of the Securities to be redeemed on the redemption date with the net cash proceeds of one or more Public Equity Offerings and/or Strategic Equity Infusions; provided that: (a) at least 65% of the aggregate principal amount at maturity of Securities originally issued remains outstanding immediately after the occurrence of such redemption (excluding Securities held by the Issuers or any of their respective Subsidiaries); and (b) the redemption occurs within 60 days of the date of the Public Equity Offering or Strategic Equity Infusion. Except pursuant to the preceding paragraph and the provisions of Section 1016 of the Indenture, the Securities will not be redeemable at the Issuers' option prior to November 15, 2004. On or after November 15, 2004, the Issuers may redeem all or a part of the Securities upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued interest, if any, on the Securities redeemed to the applicable Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on November 15 of the years indicated below:
Year Percentage ---- ---------- 2004 105.938% 2005 103.958% 2006 101.979% 2007 and thereafter 100.0%
36 Notice of any optional redemption of any Securities (or portion thereof) will be given to the Holders at their addresses appearing in the Security Register not less than 30 nor more than 60 days prior to the date fixed for redemption. The Securities do not have the benefit of any sinking fund obligations. In the event of redemption or purchase pursuant to an Offer to Purchase of this Security in part only, a new Security or Securities for the unredeemed or unpurchased portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, there may be declared due and payable the Default Amount of the Securities, in the manner and with the effect provided in the Indenture. Until and including November 15, 2004, the Default Amount in respect of this Security as of any particular date of acceleration shall equal the Accreted Value of this Security. Such Default Amount shall bear interest at the rate of 13 7/8% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of acceleration to the date payment has been made or duly provided for. On and after November 15, 2004, the Default Amount in respect of this Security shall equal 100% of the principal amount of the Security. Such Default Amount shall bear interest at the rate of 13 7/8% per annum from November 15, 2004 or the most recent Interest Payment Date to which interest has been paid or duly provided for. Upon payment of (i) the Default Amount so declared due and payable and any overdue installment of interest, (ii) interest on the Default Amount and (iii) as provided on the face hereof, interest on any overdue installment of interest or, if acceleration occurs prior to November 15, 2004, on the interest referred to in the third preceding sentence (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest on the Securities shall terminate. The Indenture provides that, subject to certain conditions, if (i) certain Net Available Proceeds are available to the Issuers as a result of Asset Dispositions or (ii) a Change of Control Triggering Event occurs, the Issuers shall be required to make an Offer to Purchase for Securities. The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth therein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuers and the rights of the Holders of the Securities under the Indenture at any time by the Issuers and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive 37 compliance by the Issuers with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuers, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the Corporate Trust Office or at the office or agency of the Issuers in the Borough of Manhattan, New York City, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Issuers may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuers, the Trustee nor any such agent shall be affected by notice to the contrary. Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months; provided, however, that any Special Interest on Original Securities shall be computed on the basis of a 365- or 366- day year, as the case may be, and the number of days actually elapsed. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. The Indenture and this Security shall be governed by and construed in accordance with the laws of the State of New York. 38 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased in its entirety by the Issuers pursuant to Section 1014 or 1016 of the Indenture, check the box: [ ] If you want to elect to have only a part of this Security purchased by the Issuers pursuant to Section 1014 or 1016 of the Indenture, state the amount: $ Dated: Your Signature: -------------------------------- (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ---------------------------- (Signature must be guaranteed by an eligible guarantor institution which is a member of or participant in the Securities Transfer Agent Medallion Program) (STAMP) Section 2.4. Form of Trustee's Certificate of Authentication. This is one of the Securities referred to in the within-mentioned Indenture. Harris Trust Company of California, as Trustee By -------------------------------- Authorized Officer ARTICLE 3 THE SECURITIES Section 3.1. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered from time to time under this Indenture is limited to $1,470,000,000, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 304, 305, 306, 307, 906 or 1108 or in connection with an Offer to Purchase pursuant to Section 1014 or 1016. The Securities shall be known and designated as the "11 7/8% Senior Discount Notes Due 2009" of the Issuers. Their Stated Maturity shall be November 15, 2009 and they shall bear interest at the rate of 11 7/8% per annum, from November 15, 2004 or from the most recent Interest Payment Date to which interest has been paid or duly provided 39 for, as the case may be, payable semi-annually on May 15 and November 15, commencing on May 15, 2005, to the Holders of record on the immediately preceding May 1 and November 1, until the principal thereof is paid or made available for payment; provided, however, with respect to Original Securities, that if a Registration Default occurs (provided that no more than one Registration Default shall be deemed to be in effect at any one time), then a Step-Up will occur for the period from the occurrence of the Registration Default until the Step-Down Date (after which the interest rate will be restored to its initial rate). The Issuers shall provide the Trustee with written notice of the date of any Registration Default and the Step-Down Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be May 1 or November 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Accrued Special Interest, if any, shall be paid in cash in arrears semi-annually on May 15 and November 15 in each year and the amount of accrued Special Interest shall be determined on the basis of the number of days actually elapsed and computed as provided in Section 311. The principal of (and premium, if any) and interest on the Securities shall be payable at the Corporate Trust Office or at the office or agency of the Issuers in the City and State of New York maintained for such purpose; provided, however, that at the option of the Issuers payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. The Securities shall be subject to repurchase by the Issuers pursuant to an Offer to Purchase as provided in Sections 1014 and 1016. The Securities shall be redeemable as provided in Article Eleven. The Securities shall be subject to defeasance at the option of the Issuers as provided in Article Twelve. Section 3.2. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiples thereof. Section 3.3. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of each of VoiceStream or VoiceStream Holdings by its Chairman or Vice Chairman of the Board, its President, or one of its Vice Presidents, attested by its Secretary, one of its Assistant Secretaries or its Chief Financial Officer. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of an Issuer shall bind such Issuer, notwithstanding that such 40 individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Issuers may deliver Securities executed by the Issuers to the Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Securities; and the Trustee in accordance with such an Issuer Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. At any time and from time to time after the execution and delivery of this Indenture and after the effectiveness of a registration statement under the Securities Act with respect thereto, the Issuers may deliver Exchange Securities executed by the Issuers to the Trustee for authentication, together with an Issuer Order for the authentication and delivery of such Exchange Securities and a like principal amount of Original Securities for cancellation in accordance with Section 310 of this Indenture, and the Trustee in accordance with the Issuer Order shall authenticate and deliver such Securities. Prior to authenticating such Exchange Securities, and accepting any additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, if requested, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating in substance (a) that all conditions hereunder precedent to the authentication and delivery of such Exchange Securities have been complied with and that such Exchange Securities, when such Securities have been duly authenticated and delivered by the Trustee (and subject to any other conditions specified in such Opinion of Counsel), have been duly issued and delivered and will constitute valid and legally binding obligations of the Issuers, as applicable, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (b) that the issuance of the Exchange Securities in exchange for Original Securities has been effected in compliance with the Securities Act. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Section 3.4. Temporary Securities. Pending the preparation of definitive Securities, the Issuers may execute, and upon Issuer Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of 41 which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Issuers will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at any office or agency of the Issuers designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities the Issuers shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 3.5. Global Securities. (a) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated by the Issuers for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture. (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (i) such Depositary (A) has notified the Issuers that it is unwilling or unable to continue as Depositary for such Global Security or (B) has ceased to be a clearing agency registered as such under the Exchange Act, (ii) there shall have occurred and be continuing an Event of Default or any event which after notice or lapse of time or both would be an Event of Default with respect to such Global Security, (iii) the Issuers execute and deliver to the Trustee an Issuer Order stating that they elect to cause the issuance of the Securities in certificated form and that all Global Securities shall be exchanged in whole for Securities that are not Global Securities (in which case such exchange shall be effected by the Trustee) or (iv) pursuant to the following sentence. All or any portion of a Global Security may be exchanged for a Security that has a like aggregate principal amount and is not a Global Security, upon 20 days' prior request made by the Depositary or its authorized representative to the Trustee. (c) If any Global Security is to be exchanged for other Securities or canceled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation as provided in this Article Three. If any Global Security is to be exchanged for other Securities or canceled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, then either (i) such Global Security shall be so surrendered for exchange or cancellation as provided in this Article Three or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so 42 exchanged or canceled, or equal to the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Security Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 305(b) and as otherwise provided in this Article Three, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Issuers shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article Three if such order, direction or request is given or made in accordance with the Applicable Procedures. (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article Three, Section 906, 1014 or 1016 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof. (e) The Depositary or its nominee, as registered owner of a Global Security, shall be the Holder of such Global Security for all purposes under this Indenture and the Securities, and owners of beneficial interests in a Global Security shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner's beneficial interest in a Global Security will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members. Section 3.6. Registration, Registration of Transfer and Exchange Generally; Certain Transfers and Exchanges; Securities Act Legends. (a) Registration, Registration of Transfer and Exchange Generally. The Issuers shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Issuers shall provide for the registration of Securities and of transfers and exchanges of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers and exchanges of Securities as herein provided. Such Security Register shall distinguish between Original Securities and Exchange Securities. Upon surrender for registration of transfer of any Security at an office or agency of the Issuers designated pursuant to Section 1002 for such purpose, the Issuers shall 43 execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture. At the option of the Holder, Securities may be exchanged for new Securities of any authorized denominations, of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Issuers shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuers, evidencing the same debt, and (except for the differences between Original Securities and Exchange Securities provided for herein) entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Issuers or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuers and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Issuers may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 305, 306, 906, 1014 or 1016 not involving any transfer. The Issuers shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (b) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Securities, transfers and exchanges of Securities and beneficial interests in a Global Security of the kinds specified in this Section 306(b) shall be made only in accordance with this Section 306(b). (i) Restricted Global Security to Regulation S Global Security. If the owner of a beneficial interest in the Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(i) and 44 Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Regulation S Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Restricted Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) a Regulation S Certificate, in the form of Annex A hereto, duly executed by the owner of such beneficial interest in the Restricted Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall reduce the principal amount of the Restricted Global Security and increase the principal amount of the Regulation S Global Security by such specified principal amount as provided in Section 305(c). (ii) Regulation S Global Security to Restricted Global Security. If the owner of a beneficial interest in the Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected only in accordance with this Clause (b)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) an order given by the Depositary or its authorized representative directing that a beneficial interest in the Restricted Global Security in a specified principal amount be credited to a specified Agent Member's account and that a beneficial interest in the Regulation S Global Security in an equal principal amount be debited from another specified Agent Member's account and (B) if such transfer is to occur during the Restricted Period, a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by the owner of such beneficial interest in the Regulation S Global Security or his attorney duly authorized in writing, then the Trustee, as Security Registrar, shall reduce the principal amount of the Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount as provided in Section 305(c). (iii) Restricted Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, such transfer may be effected only in accordance with the provisions of this Clause (b)(iii) and Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) such Security as provided in Section 306(a) and instructions satisfactory to the Trustee directing that a beneficial interest in the Restricted Global Security or Regulation S Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) a Restricted Securities Certificate, if the specified account is to be credited with a beneficial interest in the Restricted Global Security, or a Regulation S Certificate, if the specified account is to be credited with a beneficial interest in the Regulation S Global Security, in either case satisfactory to the Trustee and duly 45 executed by such Holder or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 306(a) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal amount as provided in Section 305(c). (iv) Regulation S Non-Global Security to Restricted Global Security or Regulation S Global Security. If the Holder of a Regulation S Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, such transfer may be effected only in accordance with this Clause (b)(iv) and Clause (b)(vii) below and subject to the Applicable Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) such Security as provided in Section 306(a) and instructions satisfactory to the Trustee directing that a beneficial interest in the Restricted Global Security or Regulation S Global Security in a specified principal amount not greater than the principal amount of such Security be credited to a specified Agent Member's account and (B) if the transfer is to occur during the Restricted Period and the specified account is to be credited with a beneficial interest in the Restricted Global Security, a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by such Holder or his attorney duly authorized in writing, then the Trustee, as Security Registrar but subject to Clause (b)(vii) below, shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 306(a) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal amount as provided in Section 305(c). (v) Non-Global Security to Non-Global Security. A Security that is not a Global Security may be transferred, in whole or in part, to a Person who takes delivery in the form of another Security that is not a Global Security as provided in Section 3.06(a), provided that, if the Security to be transferred in whole or in part is a Restricted Security, or is a Regulation S Security and the transfer is to occur during the Restricted Period, then the Trustee shall have received (A) a Restricted Securities Certificate, in the form of Annex B hereto, duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Restricted Security, or (B) a Regulation S Certificate, satisfactory to the Trustee and duly executed by the transferor Holder or his attorney duly authorized in writing, in which case the transferee Holder shall take delivery in the form of a Regulation S Security (subject in each case to Section 306(c)). (vi) Exchanges between Global Security and Non-Global Security. A beneficial interest in a Global Security may be exchanged for a Security that is not a Global Security as provided in Section 305, provided that, if such interest is a beneficial interest in the Restricted Global Security, or if such interest is a 46 beneficial interest in the Regulation S Global Security and such exchange is to occur during the Restricted Period, then such interest shall be exchanged for a Restricted Security (subject in each case to Section 306(c)). A Security that is not a Global Security may be exchanged for a beneficial interest in a Global Security only if (A) such exchange occurs in connection with a transfer effected in accordance with Clause (b)(iii) or (iv) above or (B) such Security is a Regulation S Security and such exchange occurs after the Restricted Period. (vii) Regulation S Global Security to be Held Through Euroclear or Cedel during Restricted Period. The Issuers shall use their best efforts to cause the Depositary to ensure that, until the expiration of the Restricted Period, beneficial interests in the Regulation S Global Security may be held only in or through accounts maintained at the Depositary by Euroclear or Cedel (or by Agent Members acting for the account thereof), and no person shall be entitled to effect any transfer or exchange that would result in any such interest being held otherwise than in or through such an account; provided that this Clause (b)(vii) shall not prohibit any transfer or exchange of such an interest in accordance with Clause (b)(ii) or (vi) above. (c) Securities Act Legends. Rule 144A Securities and their Successor Securities shall bear a Restricted Securities Legend, and Initial Regulation S Securities and their Successor Securities shall bear a Regulation S Legend, subject to the following: (i) subject to the following Clauses of this Section 306(c), a Security or any portion thereof which is exchanged, upon transfer or otherwise, for a Global Security or any portion thereof shall bear the Securities Act Legend borne by such Global Security while represented thereby; (ii) subject to the following Clauses of this Section 306(c), a new Security which is not a Global Security and is issued in exchange for another Security (including a Global Security) or any portion thereof, upon transfer or otherwise, shall bear the Securities Act Legend borne by such other Security, provided that, if such new Security is required pursuant to Section 306(b)(v) or (vi) to be issued in the form of a Restricted Security, it shall bear a Restricted Securities Legend and, if such new Security is so required to be issued in the form of a Regulation S Security, it shall bear a Regulation S Legend; (iii) Registered Securities shall not bear a Securities Act Legend; (iv) after November 9, 2001, a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if the Trustee has received an Unrestricted Securities Certificate, in the form of Annex C hereto, duly executed by the Holder of such legended Security or his attorney duly authorized in writing, and after such date and receipt of such certificate, the Trustee shall authenticate and deliver such a new Security in exchange for or in lieu of such other Security as provided in this Article Three; 47 (v) a new Security which does not bear a Securities Act Legend may be issued in exchange for or in lieu of a Security (other than a Global Security) or any portion thereof which bears such a legend if, in the Issuers' judgment, placing such a legend upon such new Security is not necessary to ensure compliance with the registration requirements of the Securities Act, and the Trustee, at the direction of the Issuers, shall authenticate and deliver such a new Security as provided in this Article Three; and (vi) notwithstanding the foregoing provisions of this Section 306(c), a Successor Security of a Security that does not bear a particular form of Securities Act Legend shall not bear such form of legend unless the Issuers has reasonable cause to believe that such Successor Security is a "restricted security" within the meaning of Rule 144, in which case the Trustee, at the direction of the Issuers, shall authenticate and deliver a new Security bearing a Restricted Securities Legend in exchange for such Successor Security as provided in this Article Three. Section 3.7. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Issuers shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Issuers and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Issuers or the Trustee that such Security has been acquired by a bona fide purchaser, the Issuers shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Issuers in their discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Issuers may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Issuers, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. 48 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 3.8. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Issuers, at its election in each case, as provided in Clause (1) or (2) below: (1) The Issuers may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuers shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Issuers shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Issuers of such Special Record Date and, in the name and at the expense of the Issuers, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Issuers may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuers to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. 49 Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.9. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Issuers, the Trustee and any agent of the Issuers or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 308) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Issuers, the Trustee nor any agent of the Issuers or the Trustee shall be affected by notice to the contrary. None of the Issuers, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Section 3.10. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any Offer to Purchase pursuant to Section 1014 or 1016 shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Issuers may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Issuers may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by an Issuer Order. Section 3.11. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months; provided, however, that any Special Interest on Original Securities shall be computed on the basis of a 365- or 366- day year, as the case may be, and the number of days actually elapsed. ARTICLE 4 SATISFACTION AND DISCHARGE Section 4.1. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and 50 the Trustee, on demand of and at the expense of the Issuers, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 307 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuers and thereafter repaid to the Issuers or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers, and the Issuers, in the case of (i), (ii) or (iii) above, have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Issuers have paid or caused to be paid all other sums payable hereunder by the Issuers; and (c) the Issuers have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture pursuant to this Article Four, the obligations of the Issuers to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. 51 Section 4.2. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. ARTICLE 5 REMEDIES Section 5.1. Events of Default. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of the principal of (or premium, if any, on) any Security at its Maturity; or (b) default in the payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days; or (c) default in the performance, or breach, of the provisions under Sections 801 and 802 of this Indenture; or (d) default in the performance, or breach, of any covenant or agreement of the Issuers in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 30 days after there has been given, by registered or certified mail, to the Issuers by the Trustee or to the Issuers and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (e) a default or defaults under any bond(s), debenture(s), note(s) or other evidence(s) of Indebtedness by either Issuer or any of their respective Restricted Subsidiaries or under any mortgage(s), indenture(s) or instrument(s) under which there may be issued or by which there may be secured or evidenced any Indebtedness of such type by the Issuers or any of their respective Restricted Subsidiaries with a principal amount then outstanding, individually or in the aggregate, in excess of $25 million, whether such Indebtedness now exists or shall hereafter be created, which default or defaults shall constitute a failure to pay any portion of the principal of such Indebtedness at final maturity after the expiration of any applicable grace period with respect thereto or 52 shall have resulted in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable; or (f) a final judgment or final judgments for the payment of money are entered against either Issuer or any of their respective Restricted Subsidiaries in an aggregate amount in excess of $25 million by a court or courts of competent jurisdiction, which judgments remain undischarged or unbonded for a period (during which execution shall not be effectively stayed) of 60 days after the right to appeal all such judgments has expired; or (g) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of either Issuer or any of their respective Restricted Subsidiaries in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging either Issuer or any of their Restricted Subsidiaries a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Issuer or any such Restricted Subsidiary under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Issuer or any such Restricted Subsidiary or of any substantial part of the property of such Issuer or any such Restricted Subsidiary, or ordering the winding up or liquidation of the affairs of such Issuer or any such Restricted Subsidiary, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (h) the commencement by either Issuer or any of their respective Restricted Subsidiaries of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by either Issuer or any of their respective Restricted Subsidiaries to the entry of a decree or order for relief in respect of such Issuer or any such respective Restricted Subsidiaries in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against such Issuer or any such Restricted Subsidiary, or the filing by either Issuer or any of their respective Restricted Subsidiaries of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by either Issuer or any of their respective Restricted Subsidiaries to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of such Issuer or any such Restricted Subsidiary or of any substantial part of the property of such Issuer or any such Restricted Subsidiary, or the making by either Issuer or any of their respective Restricted Subsidiaries of an assignment for the benefit of creditors, or the admission by either Issuer or any of their respective Restricted Subsidiaries in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by either Issuer or any of their respective Restricted Subsidiaries in furtherance of any such action. 53 Section 5.2. Acceleration of Maturity; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(7) or (8)) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the Default Amount of all the Securities to be due and payable immediately, by a notice in writing to the Issuers (and to the Trustee if given by Holders), and upon any such declaration such Default Amount and any accrued interest shall become immediately due and payable. If an Event of Default specified in Section 501(7) or (8) occurs, the Default Amount and any accrued interest on the Securities then Outstanding shall ipso facto become immediately due and payable without any declaration or other Act on the part of the Trustee or any Holder. Until and including November 15, 2004, the "Default Amount" in respect of any particular Security as of any particular date of acceleration shall equal the Accreted Value of the Security. On and after November 15, 2004, the Default Amount in respect of any particular Security shall equal 100% of the principal amount of the Security. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Issuers and the Trustee, may rescind and annul such declaration and its consequences if (a) the Issuers have paid or deposited with the Trustee a sum sufficient to pay (i) all overdue interest on all Securities, (ii) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration (including any Securities required to have been purchased on the Purchase Date pursuant to an Offer to Purchase made by the Issuers) and, to the extent that payment of such interest is lawful, interest thereon at the rate provided by the Securities, (iii) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate provided by the Securities, and (iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (b) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. 54 No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee. The Issuers covenant that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof or, with respect to any Security required to have been purchased pursuant to an Offer to Purchase made by the Issuers, at the Purchase Date thereof, the Issuers will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate provided by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Issuers fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Issuers or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Issuers or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 5.4. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to either Issuer (or any other obligor upon the Securities), its property or its creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that 55 the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and may be a member of the creditors' committee. Section 5.5. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 5.6. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively. Section 5.7. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; 56 (b) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. Section 5.8. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 308) interest on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date or, in the case of an Offer to Purchase made by the Issuers and required to be accepted as to such Security, on the Purchase Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 5.9. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Issuers, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.10. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 307, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and 57 remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 5.11. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 5.12. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that (a) such direction shall not be in conflict with any rule of law or with this Indenture, (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (c) subject to the provisions of Section 601, the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith shall determine that the action or proceedings so directed might involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forebearances specified in or pursuant to such direction shall be unduly prejudicial to the interest of holders of the Securities not joining in the giving of said direction, it being understood that the Trustee shall have no duty to ascertain whether or not such actions or forebearances are unduly prejudicial to such holders. Section 5.13. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any default hereunder and its consequences, except a default (a) in the payment of the principal of (or premium, if any) or interest on any Security (including any Security which is required to have been purchased pursuant to an Offer to Purchase which has been made by the Issuers), or 58 (b) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 5.14. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided, that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Issuers. Section 5.15. Waiver of Stay or Extension Laws. The Issuers covenant (to the extent that they may lawfully do so) that they will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Issuers (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law and covenant that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 THE TRUSTEE Section 6.1. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. 59 Section 6.2. Notice of Defaults. The Trustee shall give the Holders notice of any default hereunder as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(4), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. Section 6.3. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, Officers' Certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuers mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) before the Trustee acts or refrains from acting, the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document unless requested to do so by the Holders of not less than a majority in principal amount of the Securities then outstanding, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuers, personally or by agent or attorney; 60 (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder; (i) the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Issuers, except as otherwise provided herein, but the Trustee may require of the Issuers full information and advice as to the performance of the covenants, conditions and agreements contained herein and shall be entitled in connection herewith to examine the books, records and premises of the Issuers; and (j) (j) except for (i) a default under Sections 501(1) or (2) hereof, or (ii) any other event of which the Trustee has "actual knowledge" and which event, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Indenture, the Trustee shall not be deemed to have notice of any default or Event of Default unless specifically notified in writing of such event by the Issuers or the Holders of not less than 25% in aggregate principal amount of the Securities then outstanding; as used herein, the term "actual knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. Section 6.4. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Issuers, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Issuers of Securities or the proceeds thereof. Section 6.5. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Issuers, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Issuers with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. Section 6.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuers. 61 Section 6.7. Compensation and Reimbursement. The Issuers agree (a) to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture, including costs of collection (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and (c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Issuers under this Section shall survive the satisfaction and discharge of this Indenture. As security for the performance of such obligations of the Issuers, the Trustee shall have a claim prior to the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) and interest on particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Article Five hereof, the expenses (including reasonable fees and expenses of its counsel) and the compensation for the services in connection therewith are intended to constitute expense of administration under any applicable bankruptcy law. Section 6.8. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 6.9. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has (or in the case of a Person included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 and its Corporate Trust Office in New York City or Los Angeles. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such 62 Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.10. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Issuers. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Issuers. (d) If at any time: (i) the Trustee shall fail to comply with Section 608 after written request therefor by the Issuers or by any Holder who has been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Issuers or by any such Holder, or (iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Issuers by a Board Resolution may remove the Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuers, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Issuers and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become 63 the successor Trustee and supersede the successor Trustee appointed by the Issuers. If no successor Trustee shall have been so appointed by the Issuers or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Issuers shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 106. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Section 6.11. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuers and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Issuers or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Issuers shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 6.12. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.13. Preferential Collection of Claims Against the Issuers. If and when the Trustee shall be or become a creditor of the Issuers (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust 64 Indenture Act regarding the collection of claims against the Issuers (or any such other obligor). Section 6.14. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption or pursuant to Section 307, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Issuers and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having (or in the case of a corporation included in a bank holding company system, the related bank holding company having) a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Issuers. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuers. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Issuers and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers 65 and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities described in the within-mentioned Indenture. Harris Trust Company of California, As Trustee By -------------------------------- As Authenticating Agent By -------------------------------- Authorized Officer ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS Section 7.1. Issuers to Furnish Trustee Names and Addresses of Holders. The Issuers will furnish or cause to be furnished to the Trustee (a) semi-annually, not more than 15 days after each May 1 and November 1, commencing May 1, 2005, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Issuers of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar. Section 7.2. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may 66 destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities and the corresponding rights and duties of the Trustee, shall be provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Issuers and the Trustee that neither the Issuers nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to the names and addresses of Holders made pursuant to the Trust Indenture Act. Section 7.3. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Securities are listed, with the Commission and with the Issuers. The Issuers will notify the Trustee when the Securities are listed on any stock exchange. Section 7.4. Reports by Issuers. The Issuers shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission. ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 8.1. Issuers May Consolidate, Etc. Only on Certain Terms. The Issuers (a) shall not consolidate with or merge into any other Person; (b) shall not permit any other Person to consolidate with or merge into either Issuer; and (c) shall not, directly or indirectly, transfer, convey, sell, lease or otherwise dispose of all or substantially all of either Issuer's properties and assets as an entirety; unless, in any such transaction: (a) (1) such Issuer is the surviving entity or (2) in the case such Issuer shall consolidate with or merge into another Person or shall directly or indirectly transfer, convey, sell, lease or otherwise dispose of all or substantially all of its properties and assets as an entirety, the Person formed by such consolidation or into which such Issuer is 67 merged or the Person which acquires by transfer, conveyance, sale, lease or other disposition all or substantially all of the properties and assets of such Issuer as an entirety (for purposes of this Article Eight, a "Successor Company") shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume by an indenture supplemental hereto executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance of every covenant of this Indenture on the part of such Issuer to be performed or observed; (b) immediately after giving effect to such transaction and treating any Indebtedness Incurred by the Issuers or any of their respective Restricted Subsidiaries as a result of such transaction as having been Incurred by the Issuers or such Restricted Subsidiary at the time of such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing; (c) (1) immediately after giving effect to such transaction, and treating any Indebtedness Incurred by the Issuers or any of their respective Restricted Subsidiaries as a result of such transaction as having been Incurred at the time of such transaction, the Issuers or the Successor Company would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph under Section 1008 or (2) after giving effect to such transaction the Indebtedness to EBITDA Ratio is not higher than the Indebtedness to EBITDA Ratio prior to giving effect to such transaction; and (d) such Issuer has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, lease or disposition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, and, with respect to such Officer's Certificate, setting forth the manner of determination of the ability to Incur Indebtedness in accordance with Clause (3) of Section 801 or of the comparison of the Indebtedness to EBITDA Ratio prior to and immediately after giving effect to the transaction of such Issuer or, if applicable, of the Successor Company as required pursuant to the foregoing. Section 8.2. Successor Substituted. Upon any consolidation of either Issuer with, or merger of either Issuer into, any other Person or any transfer, conveyance, sale, lease or other disposition of all or substantially all of the properties and assets of such Issuer as an entirety in accordance with Section 801, the Successor Company shall succeed to, and be substituted for, and may exercise every right and power of, such Issuer under this Indenture with the same effect as if such successor Person had been named as such Issuer herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. 68 Section 8.3. Effect of the Reorganizations. (a) VoiceStream and VoiceStream Holdings are the initial issuers of the Securities. If either Reorganization is completed, immediately upon such Reorganization without any further act by any Person, VoiceStream shall cease to be an Issuer of the Securities and any or all of its obligations under this Indenture as an Issuer shall effectively terminate, and VoiceStream Holdings shall remain as the sole Issuer of the Securities. If both Reorganizations are terminated, immediately upon the termination of the last of the Reorganizations to be terminated, without any further act by any Person, VoiceStream Holdings shall cease to be an Issuer of the Securities and any or all of its obligations under this Indenture as an Issuer shall effectively terminate, and VoiceStream shall remain as the sole Issuer of the Securities. Upon either of VoiceStream or VoiceStream Holdings being the sole Issuer, the term "Issuers" hereunder shall be deemed to read "Issuer." (b) Notwithstanding anything contained in this Indenture to the contrary, the Reorganizations and the transactions contemplated thereby shall be deemed not to violate the provisions of this Indenture. The Issuers shall not be required to take any actions they would otherwise be obligated to take under this Indenture as a result of the Reorganizations and the transactions contemplated thereby, nor will the provisions of this Indenture with respect to Change of Control Triggering Event contained in Section 1016 or Asset Dispositions contained in Section 1014 be applicable. ARTICLE 9 SUPPLEMENTAL INDENTURES Section 9.1. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Issuers, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to either Issuer and the assumption by any such successor of the covenants of such Issuer herein and in the Securities; or (b) to add to the covenants of the Issuers for the benefit of the Holders, or to surrender any right or power herein conferred upon the Issuers; or (c) to secure the Securities pursuant to the requirements of Section 1012 or otherwise; or (d) to comply with any requirements of the Commission in order to effect and maintain the qualification of this Indenture under the Trust Indenture Act; or (e) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other 69 provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this Clause (5) shall not adversely affect the interests of the Holders in any material respect. Section 9.2. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Issuers and the Trustee, the Issuers, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) change the Stated Maturity of the principal of, or any instalment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable thereon, or change the place of payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date or, in the case of an Offer to Purchase which has been made, on or after the applicable Purchase Date), or (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section, Section 513 or Section 1018, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby, or (d) following the mailing of an Offer with respect to an Offer to Purchase pursuant to Sections 1014 or 1016, modify the provisions of this Indenture with respect to such Offer to Purchase in a manner adverse to such Holder. Notice shall be given to all Holders and the Trustee at least 10 Business Days prior to the adoption of any proposed amendment pursuant to this Section 902. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. 70 Section 9.3. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by, and that all conditions precedent have been met under, this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 9.4. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 9.5. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act. Section 9.6. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Issuers shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Issuers, to any such supplemental indenture may be prepared and executed by the Issuers and authenticated and delivered by the Trustee in exchange for Outstanding Securities. Section 9.7. Notice of Supplemental Indenture. Promptly after the execution by the Issuers and the Trustee of any supplemental indenture pursuant to Section 902, the Issuers shall transmit to the Holders a notice setting forth the substance of such supplemental indenture. ARTICLE 10 COVENANTS Section 10.1. Payment of Principal, Premium and Interest. The Issuers will duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of the Securities and this Indenture. 71 Section 10.2. Maintenance of Office or Agency. The Issuers will maintain in the Borough of Manhattan, New York City, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuers in respect of the Securities and this Indenture may be served. The Issuers will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuers shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Issuers hereby appoint the Trustee as their agent to receive all such presentations, surrenders, notices and demands. The Issuers may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan, New York City) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Issuers of their obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Issuers will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Section 10.3. Money for Security Payments to be Held in Trust. If the Issuers shall at any time act as their own Paying Agent, they will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of their action or failure so to act. Whenever the Issuers shall have one or more Paying Agents, they will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Issuers will promptly notify the Trustee of their action or failure so to act. The Issuers will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; 72 (b) give the Trustee notice of any default by the Issuers (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Issuers may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Issuers or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Issuers or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuers, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Issuers on Issuer Request, or (if then held by the Issuers) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Issuers for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuers as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuers cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York City, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuers. Section 10.4. Existence. Subject to Article Eight, the Issuers will do or cause to be done all things necessary to preserve and keep in full force and effect their existence, rights (charter and statutory) and franchises; provided, however, that the Issuers shall not be required to preserve any such right or franchise if the Board of Directors in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuers and that the loss thereof is not disadvantageous in any material respect to the Holders. Section 10.5. Maintenance of Properties. The Issuers will cause all properties used or useful in the conduct of its business or the business of any Restricted Subsidiary of the Issuers to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and 73 will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Issuers may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Issuers from discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Board of Directors in good faith, desirable in the conduct of their business or the business of any Restricted Subsidiary and not disadvantageous in any material respect to the Holders. Section 10.6. Payment of Taxes and Other Claims. The Issuers will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon the Issuers or any of their Restricted Subsidiaries or upon the income, profits or property of the Issuers or any of their Restricted Subsidiaries, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Issuers or any of their Restricted Subsidiaries; provided, however, that the Issuers shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. Section 10.7. Maintenance of Insurance. The Issuers shall, and shall cause any of their Restricted Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by the Issuers to be responsible to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties in accordance with good business practice. Section 10.8. Limitation on Consolidated Indebtedness. The Issuers shall not, and shall not permit any of their Restricted Subsidiaries to, Incur any Indebtedness unless the Issuers' Indebtedness to EBITDA Ratio at the end of the fiscal quarter immediately preceding the Incurrence of such Indebtedness, after giving pro forma effect to the Incurrence of such Indebtedness and any other Indebtedness Incurred since such date and the receipt and application of the proceeds thereof, would be less than 8.0 to 1 for the period ending December 31, 2005 and 7 to 1 thereafter. Notwithstanding the foregoing paragraph, the Issuers and/or any Restricted Subsidiary of the Issuers, as the case may be, may Incur the following Indebtedness: (a) Indebtedness of an Issuer or any of its Restricted Subsidiaries, as the case may be, that is outstanding or committed at the time of the issuance of the Securities; (b) Indebtedness of an Issuer or any of its Restricted Subsidiaries, as the case may be, that is outstanding or committed at the date hereof under the Credit Facility of up to $1.2 billion or, if the Omnipoint Reorganization is completed, under the Anticipated New Credit Facility of up to $3.0 billion (including any letters of credit issued 74 thereunder) and any renewal, extension, refinancing or refunding thereof in an amount which, together with any amount remaining outstanding or committed (x) under the Credit Facility, does not exceed $1.2 billion and (y) under the Anticipated New Credit Facility, does not exceed $3.0 billion, at any time outstanding; provided that this Clause (ii) shall not prohibit an Issuer or any of its Restricted Subsidiaries from Incurring additional Indebtedness under the Credit Facility or the Anticipated New Credit Facility otherwise permitted pursuant to this Section 1008; (c) Telecommunications Indebtedness; (d) Acquired Indebtedness of an Issuer or any of its Restricted Subsidiaries in connection with the acquisition of assets or a new Subsidiary and the incurrence by either Issuer's Restricted Subsidiaries of Indebtedness as a result of the designation of an Unrestricted Subsidiary as a Restricted Subsidiary; provided that, in the case of any such incurrence of Acquired Indebtedness, such Acquired Indebtedness was incurred by the prior owner of such assets or such Restricted Subsidiary prior to such acquisition by the applicable Issuer or one of its Restricted Subsidiaries and was not incurred in connection with, or in contemplation of, the acquisition by the applicable Issuer or one of its Restricted Subsidiaries; and provided further that, in the case of any incurrence pursuant to this clause (iv), as a result of such acquisition by an Issuer or one of its Restricted Subsidiaries, the Issuers and their respective Restricted Subsidiaries would be permitted to incur an additional $1.00 of Indebtedness pursuant to the first paragraph of this Section 1008, as applicable; (e) Indebtedness of an Issuer or any of its Restricted Subsidiaries represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of such Issuer or such Restricted Subsidiary, in an aggregate principal amount, including all Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (v), not to exceed $25 million at any one time outstanding; (f) Indebtedness owed by an Issuer to any Restricted Subsidiary of such Issuer (provided that such Indebtedness is at all times held by a Person which is a Restricted Subsidiary of the Issuer) or Indebtedness owed by a Restricted Subsidiary of such Issuer to such Issuer or a Restricted Subsidiary of such Issuer (provided that such Indebtedness is at all times held by such Issuer or a Person which is a Restricted Subsidiary of such Issuer); provided, however, that for purposes of this Section 1008, upon either (x) the transfer or other disposition by such Restricted Subsidiary or such Issuer of any Indebtedness so permitted to a Person other than such Issuer or another Restricted Subsidiary of such Issuer or (y) the issuance (other than directors' qualifying shares), sale, lease, transfer or other disposition of shares of Capital Stock (including by consolidation or merger) of such Restricted Subsidiary to a Person other than the Issuer or another such Restricted Subsidiary, the provisions of this Clause (vi) shall no longer be applicable to such Indebtedness and such Indebtedness shall be deemed to have been Incurred at the time of such transfer or other disposition; 75 (g) Indebtedness of an Issuer or any of its Restricted Subsidiaries to renew, extend, refinance or refund any Indebtedness of such Issuer or any of its Restricted Subsidiaries outstanding or committed on the date of renewal, extension, refinancing or refunding other than Indebtedness Incurred pursuant to Clause (ii) or (vi) above; provided, however, that such Indebtedness does not exceed the principal amount of outstanding or committed Indebtedness so renewed, extended, refinanced or refunded plus financing fees and other expenses (including make-whole or other repurchase payments or premiums) associated therewith; and provided further, that (A) such renewing, extending, refinancing or refunding Indebtedness has a final maturity date the same as or later than the final maturity date of the Indebtedness being renewed, extended, refinanced or refunded; (B) in the case of any refinancing or refunding of Indebtedness pari passu to the Securities, the refinancing or refunding Indebtedness is made pari passu or subordinated to the Securities and, in the case of any refinancing or refunding of Indebtedness subordinated to the Securities, the refinancing or refunding Indebtedness is made subordinate to the Securities to substantially the same extent as the Indebtedness refinanced or refunded; and (C) such renewing, extending, refinancing or refunding Indebtedness has an Average Life equal to or longer than the life of the Indebtedness being renewed, extended, refinanced or refunded; (h) any Guarantee by any Restricted Subsidiary of any Indebtedness incurred under the Credit Facility or the Anticipated New Credit Facility, as applicable, in compliance with this Section 1008; (i) Indebtedness of an Issuer of any of its Restricted Subsidiaries under (or constituting reimbursement obligations with respect to) letters of credit, performance or surety bonds or similar instruments issued in the ordinary course of a Telecommunications Business, including letters of credit in respect of workers' compensation claims or self-insurance, provided, however, that upon the drawing of any such letter of credit or other instrument, such obligations are reimbursed within 90 days following such drawing; (j) Indebtedness arising from agreements providing for indemnification, purchase price adjustments or similar obligations, or from guarantees of letters of credit, surety bonds or performance bonds securing any obligation of an Issuer or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets or Restricted Subsidiary of an Issuer (other than guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary of such Issuer for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by such Issuer or any Restricted Subsidiary in connection with such disposition; (k) Indebtedness Incurred by an Issuer or any of its Restricted Subsidiary under Interest Rate Agreements or Currency Protection Agreements to hedge permitted Indebtedness; (l) Indebtedness of Omnipoint, Aerial or any of their respective Subsidiaries that is outstanding or committed at the time of the issuance of the Securities; 76 (m) Indebtedness evidenced by the Securities or otherwise arising under this Indenture; (n) Indebtedness due and owing to governmental entities in connection with telecommunication license fees or Indebtedness incurred to finance the payment of deposits with and licensing fees to the FCC in connection with FCC license auctions; and (o) Indebtedness of an Issuer or any of its Restricted Subsidiaries not otherwise permitted to be Incurred pursuant to Clauses (i) through (xiv) above, which, together with any other outstanding Indebtedness Incurred pursuant to this Clause (xv), has an aggregate principal amount not in excess of $50 million at any time outstanding or committed. Notwithstanding the foregoing, the maximum amount of Indebtedness that either Issuer or any of its Restricted Subsidiaries may incur shall not be deemed to be exceeded due solely to the result of fluctuations in the exchange rates of currencies. For purposes of determining any particular amount of Indebtedness under the foregoing clauses, (1) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (2) any Liens granted pursuant to the equal and ratable provisions of Section 1012 shall not be treated as Indebtedness. For purposes of determining compliance with the Indebtedness incurrence restriction, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the above clauses, VoiceStream or VoiceStream Holdings, as the case may be, in its respective sole discretion shall classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of such clauses. Section 10.9. Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any Capital Stock of such Restricted Subsidiary or any other Restricted Subsidiary to any Person other than the Issuers or a Restricted Subsidiary; and will not permit any Restricted Subsidiary to issue shares of its Capital Stock or securities convertible into, or warrants, rights or options, to subscribe for or purchase shares of, its Capital Stock to any Person other than the Issuers or a Restricted Subsidiary, unless, in each such case: (a) immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under Section 1010; or (b) if such sale or disposition is effected in accordance with the provisions under Section 1014; 77 The foregoing shall not prohibit the issuance of Capital Stock of a Restricted Subsidiary of either Issuer pursuant to an employee stock option plan approved by the Boards of Directors of the Restricted Subsidiary and such Issuer. Section 10.10. Limitation on Restricted Payments. Each of the Issuers (i) shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, declare or pay any dividend, or make any distribution, of any kind or character (whether in cash, property or securities) in respect of any class of its or such Restricted Subsidiary's Capital Stock or to the holders of any class of its or such Restricted Subsidiary's Capital Stock (other than (a) any dividends or distributions payable solely in shares of its or such Restricted Subsidiary's Capital Stock or in options, warrants or other rights to acquire its or such Restricted Subsidiary's Capital Stock, (b) any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to such Issuer or another Restricted Subsidiary or (c) any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to any other shareholder of such Restricted Subsidiary, so long as such Issuer or its Restricted Subsidiaries receive their pro rata share of such dividends or distributions), (ii) shall not, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to purchase, redeem or otherwise acquire or retire for value (a) any Capital Stock of such Issuer or any Related Person (other than a Restricted Subsidiary) of such Issuer or (b) any options, warrants or rights to purchase or acquire shares of Capital Stock of such Issuer or any Related Person (other than a Restricted Subsidiary) of such Issuer, in each case other than pursuant to the cashless exercise of options, (iii) shall not make, or permit any of its Restricted Subsidiaries to make, any Investment other than a Permitted Investment and (iv) shall not, and shall not permit any Restricted Subsidiary of such Issuer to, redeem, defease (including, but not limited to, legal or covenant defeasance), repurchase, retire or otherwise acquire or retire for value prior to any scheduled maturity, repayment or sinking fund payment, Indebtedness of such Issuer or such Restricted Subsidiary (other than the Securities) which is subordinate in right of payment to the Securities (the transactions described in Clauses (i) through (iv) being referred to herein as "Restricted Payments"), if at the time thereof and giving effect thereto: (a) an Event of Default, or an event that with the lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and is continuing; (b) such Issuer would not be permitted to Incur an additional $1.00 of Indebtedness pursuant to the first paragraph of Section 1008; and (c) the aggregate of all Restricted Payments made on or after the date of this Indenture exceeds the sum of: (i) Cumulative EBITDA less 1.6 times Cumulative Interest Expense; (ii) 100% of the aggregate Net Cash Proceeds received by the Issuers since the date of this Indenture from the issue or sale of Equity Interests of 78 VoiceStream and VoiceStream Holdings or of debt securities of VoiceStream and VoiceStream Holdings that have been converted into such Capital Stock (other than to a Restricted Subsidiary); (iii) an amount equal to the net reduction in Investments made by an Issuer or a Restricted Subsidiary subsequent to the date of this Indenture in any Person resulting from: - payments of interest on debt, repayment of loans or advances, or other transfers or distributions of property, in each case to an Issuer or any Restricted Subsidiary from any Person; - to the extent that any Investment is sold for cash or otherwise liquidated or repaid for cash, the after-tax cash return of capital with respect to such Investment (less the cost of disposition, if any); and - the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, in which case such aggregate amount of the net reduction in Investments will not exceed the amount of such Investments previously made by the Issuers and their respective Restricted Subsidiaries in such Person or Unrestricted Subsidiary, as the case may be, which were treated as Restricted Payments; and - $50 million. So long as no Event of Default or event which with notice or lapse of time or both would become an Event of Default has occurred and is continuing (other than in the case of clause (2) below), the preceding provisions will not prohibit: (a) the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the foregoing provision; (b) the redemption, repurchase or other acquisition or retirement for value of any Indebtedness of an Issuer subordinated to the Securities in exchange for or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, or from the incurrence of Indebtedness pursuant to a refinancing permitted under clause (vii) of Section 1008; (c) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, in exchange for or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary) of Equity Interests (other than Disqualified Stock) of VoiceStream or VoiceStream Holdings, as the case may be; 79 (d) the repurchase, redemption or other acquisition of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, held by present or former employees, officers or directors of either Issuer or any of their respective Subsidiaries; provided that the aggregate price paid for all such repurchased, redeemed or otherwise acquired Equity Interests shall not exceed $2.0 million in any fiscal year; (e) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of VoiceStream or VoiceStream Holdings, as the case may be, to the extent necessary in the good faith judgment of the Board of Directors evidenced by a Board Resolution delivered to the trustee to prevent the loss or secure the renewal or reinstatement of any material license or franchise held by VoiceStream or VoiceStream Holdings, as the case may be, or any Restricted Subsidiary from any government agency; (f) the repurchase of Indebtedness subordinated to the Securities at a purchase price not greater than 101% of the principal amount thereof (plus accrued and unpaid interest) pursuant to a mandatory offer to repurchase made after a Change of Control Triggering Event, provided that the Issuers first make an Offer to Purchase the Securities (and repurchase all tendered Securities) pursuant to the provisions of Section 1016; (g) Permitted Investments; and (h) payments or distributions to dissenting stockholders pursuant to applicable law in connection with a consolidation, merger or transfer of assets that complies with the provisions of Section 801. Section 10.11. Limitations Concerning Distributions and Transfers By Restricted Subsidiaries. The Issuers shall not, and shall not permit any of their Restricted Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual restriction or prohibition on the ability of any Restricted Subsidiary (i) to pay, directly or indirectly, dividends or make any other distributions in respect of its Capital Stock or any other ownership interest or participation in, or measured by, its profits, to the Issuers or any of their respective Restricted Subsidiaries or pay any Indebtedness or other obligation owed to either Issuer or any Restricted Subsidiary; (ii) to make loans or advances to either Issuer or any of its Restricted Subsidiaries; or (iii) to transfer any of its property or assets to either Issuer or any of its Restricted Subsidiaries, except, in any such case, any restriction or prohibition: (a) pursuant to any agreement in effect on the date of this Indenture, or (b) pursuant to an agreement relating to any Indebtedness of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary was acquired by the applicable Issuer other than in anticipation of becoming a Restricted Subsidiary, or (c) pursuant to an agreement effecting a renewal, extension, refinancing or refunding of any agreement described in Clauses (a), (b) or (d); provided, however, that 80 the provisions contained in such renewal, extension, refinancing or refunding agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, or (d) pursuant to an agreement entered into after the date of this Indenture relating to any Indebtedness the Incurrence of which is permitted under this Indenture, provided, however, that the provisions contained in such agreement relating to such encumbrance or restriction are, taken as a whole, no more restrictive in any material respect than those contained in this Indenture or are no more restrictive in any material respect than those contained in the Credit Facility, or (e) pursuant to an agreement by which an Issuer or any of its Restricted Subsidiaries obtains financing, provided that (A) such restriction is not materially more restrictive than customary provisions in comparable financing agreements and (B) management of such Issuer determines that at the time such agreement is entered into such restriction will not materially impair the Issuers' ability to make payments on the Securities, such determination to be confirmed by an Officers' Certificate delivered to the Trustee, or (f) pursuant to applicable law, or (g) pursuant to customary provisions restricting subletting or assignment of property subject to any lease governing any leasehold interest of any Restricted Subsidiary of either Issuer, or (h) pursuant to purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (iii) of this Section 1011, or (i) pursuant to restrictions of the type referred to in clause (iii) of this Section 1011 contained in security agreements securing Indebtedness of either Issuer or a Restricted Subsidiary of either Issuer to the extent that such Liens were otherwise incurred in accordance with the provisions under Section 1012 and restrict the transfer of the collateral subject to such agreements without restricting the transfer of other property, or (j) pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, a Restricted Subsidiary of an Issuer. Nothing contained in the foregoing clauses shall prevent either Issuer or any of its Restricted Subsidiaries from (i) creating, incurring, assuming or suffering to exist any Liens otherwise permitted under this Indenture or (ii) restricting the sale or other disposition of property or assets of either Issuer or any of its Restricted Subsidiaries that secure Indebtedness of such Issuer or any of its Restricted Subsidiaries. 81 Section 10.12. Limitation on Liens. (a) The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property or assets now owned or hereafter acquired to secure any Indebtedness that is pari passu or subordinated to the Securities without making, or causing such Restricted Subsidiary to make, effective provision for securing the Securities (i) equally and ratably with such Indebtedness as to such property for so long as such Indebtedness will be so secured or (ii) in the event such Indebtedness is Indebtedness of an Issuer which is subordinate in right of payment to the Securities, prior to such Indebtedness as to such property for so long as such Indebtedness will be so secured. The foregoing restrictions will not apply to: (i) Liens in respect of Indebtedness existing at the date of this Indenture or that is outstanding or permitted under the Credit Facility or, assuming the Omnipoint Reorganization is completed, under the Anticipated New Credit Facility; (ii) Liens in favor of an Issuer or Liens in favor of a Wholly Owned Restricted Subsidiary of an Issuer on the assets or Capital Stock of another Wholly Owned Restricted Subsidiary of an Issuer; (iii) Liens to secure Indebtedness outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that (a) the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost, (b) such Lien does not extend to or cover any other property other than such item of property and any improvements on such item and (c) the Incurrence of such Indebtedness is otherwise permitted by Section 1008; (iv) Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition); (v) Liens to secure Indebtedness to extend, renew, refinance or refund (or successive extensions, renewals, refinancings or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing Clauses (i), (iii) and (iv) so long as such Lien does not extend to any other property and the principal amount of Indebtedness so secured is not increased except as otherwise permitted under Clause (ii) or (vii) of Section 1008; (vi) Liens securing any Indebtedness of any of the Restricted Subsidiaries of an Issuer that was permitted by the provisions of this Indenture to be Incurred; 82 (vii) Liens on any Capital Stock of any Unrestricted Subsidiary of an Issuer securing Indebtedness of such Subsidiary that is Non-Recourse Indebtedness; (viii) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature Incurred in the ordinary course of business (other than obligations for the payment of money); (ix) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted; provided that any reserve or other appropriate provision as shall be required in conformity with generally accepted accounting principles shall have been made therefor; (x) Carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business in respect of obligations that are not yet due, are bonded or are being contested in good faith by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Issuer or such Restricted Subsidiary, as the case may be, in conformity with generally accepted accounting principles; and (xi) Liens securing Interest Rate Agreements entered into in the ordinary course of business on any property also securing the permitted Indebtedness to which such Interest Rate Agreements relate. Section 10.13. Limitation on Transactions with Affiliates and Related Persons. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, directly or indirectly, enter into any transaction (including, without limitation, any purchase, sale, lease or exchange of property or rendering of any service) involving aggregate consideration in excess of $5 million, with or to any Affiliate or Related Person (other than a Restricted Subsidiary)(each of the foregoing, an "Affiliate Transaction"), unless management of the applicable Issuer shall determine (evidenced by an Officers' Certificate), that: (a) such transaction is in the best interests of the Issuers or such Restricted Subsidiary; and (b) such transaction is on terms no less favorable to the Issuers or such Restricted Subsidiary than those that could be obtained in a comparable arm's length transaction with a third party at the time. In the event that any transaction contemplated by the preceding paragraph involves aggregate consideration in excess of $10 million, a determination by a majority of the disinterested members of the Board of Directors of VoiceStream or VoiceStream Holdings, as the case may be (which determination shall be evidenced by a Board Resolution) will be required with respect to clause (1) and (2) above. 83 Notwithstanding the foregoing, the following items will not be deemed to be Affiliate Transactions: (a) transactions between or among an Issuer and/or its Restricted Subsidiaries (other than a Restricted Subsidiary in which an Affiliate or Related Person of the applicable Issuer, other than a Wholly Owned Restricted Subsidiary, owns any Capital Stock or any option, warrant or other right to purchase Capital Stock); (b) customary payment of compensation to employees, officers or consultants in the ordinary course of business and payment of reasonable directors fees and customary indemnification and insurance arrangements in favor of directors, regardless of affiliation with the Issuers; (c) Restricted Payments that are permitted by the provisions of Section 1010; (d) payments and other transactions required under or contemplated by any agreement in effect on the date of this Indenture and disclosed in VoiceStream's Form 10/A filed with the SEC on April 13, 1999, its Form 10-Q for the quarter ended June 30, 1999, its current reports on Form 8-K filed prior to October 15, 1999 (or not required to be disclosed therein pursuant to the rules and regulations of the Commission) and, assuming completion of the Reorganizations, each of Omnipoint's and Aerial's Form 10-K for the fiscal year ended December 31, 1998 and Forms 10-Q and 8-K filed during calendar year 1999 prior to the date of the offering circular associated with the Securities (or not required to be disclosed therein pursuant to the rules and regulations of the Commission), or any agreement in effect at the time that an entity becomes a Restricted Subsidiary or is merged into either Issuer (and was not entered into in anticipation of such acquisition), or any amendment thereto or replacement of such agreement so long as any such amendment or replacement is not disadvantageous to the Holders in any material respect; and (e) loans or advances to officers or employees of either Issuer or any Restricted Subsidiary to pay business related travel expenses or reasonable relocation costs of such officers or employees in connection with their employment by such Issuer or any of its Restricted Subsidiaries. Section 10.14. Limitation on Certain Asset Dispositions. (a) The Issuers will not, and will not permit any of their respective Restricted Subsidiaries to, consummate an Asset Disposition unless: (i) an Issuer (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Disposition at least equal to the Fair Market Value of the assets issued or sold or otherwise disposed of; and (ii) at least 75% of the consideration received in such Asset Disposition by such Issuer or such Restricted Subsidiary is in the form of cash or readily marketable cash equivalents, the assumption of Indebtedness of an Issuer or any Restricted Subsidiary or assets of a Telecommunications Business. 84 Within the applicable time period specified below, the Issuers or the Restricted Subsidiary may apply Net Available Proceeds from an Asset Disposition to (i) invest in assets of a Telecommunications Business or a Person engaged in a Telecommunications Business; or (ii) permanently repay any Indebtedness of the Issuers or any Indebtedness of a Restricted Subsidiary. Any Net Available Proceeds from Asset Dispositions that are not applied or invested in accordance with the preceding paragraph within 365 days from the date of such Asset Disposition, or within 18 months of such Asset Disposition if the applicable Issuer or a Restricted Subsidiary has entered into a binding agreement to invest in such assets or Person, will be deemed to constitute Excess Proceeds. When the aggregate amount of Excess Proceeds exceeds $10 million (taking into account income earned on such Excess Proceeds), the Issuers will be required to make an Offer to Purchase to all Holders of Securities and all holders of other senior indebtedness of the Issuers containing provisions similar to those set forth in this Indenture, on a pro rata basis according to principal amount, to purchase the maximum principal amount (or Accreted Value, as applicable) of Securities and such other senior indebtedness of the Issuers that may be purchased out of the Excess Proceeds. The offer price in any Offer to Purchase will be payable in cash and will be 100% of the principal amount of any Securities purchased after November 15, 2004, plus accrued and unpaid interest to the date of purchase, or 100% of the Accreted Value of the Securities purchased prior to November 15, 2004, in each case plus any accrued but unpaid Special Interest to but excluding the date of purchase. In the case of any other senior indebtedness, the offer price will be 100% of the principal amount (or accreted value, as applicable) of the indebtedness plus accrued and unpaid interest thereon, if any, to the date of purchase. If the aggregate principal amount (or Accreted Value, as applicable) of the Securities or other senior indebtedness surrendered for purchase exceeds the amount of Excess Proceeds, then the Securities and the other senior indebtedness of the Issuers will be purchased pro rata according to the outstanding principal amount of such Securities and other senior indebtedness with such adjustments as may be deemed appropriate by the Issuers so that only Securities in denominations of $1,000 or integral multiples thereof shall be purchased. To the extent that any portion of the amount of Net Available Proceeds remains after compliance with the preceding sentence and provided that all Holders of Securities and other senior indebtedness have been given the opportunity to tender their Securities or other senior indebtedness for purchase pursuant to the Offer to Purchase, the Issuers or the Restricted Subsidiary may use the remaining amount at their own discretion. (b) Not later than the date of the Offer with respect to an Offer to Purchase pursuant to this Section 1014, the Issuers shall deliver to the Trustee an Officers' Certificate as to (i) the Purchase Amount, (ii) the allocation of the Net Available Proceeds from the Asset Disposition pursuant to which such Offer is being made, including, if amounts are invested in Telecommunications Assets or a Person in the Telecommunications Business, the actual assets or Person acquired and (iii) the compliance of such allocation with the provisions of Clause (a). 85 The Issuers and the Trustee shall perform their respective obligations specified in the Offer to Purchase. On or prior to the Purchase Date, the Issuers shall (i) accept for payment (on a pro rata basis, if necessary) Securities or portions thereof tendered pursuant to the Offer, (ii) deposit with the Paying Agent (or, if the Issuers are acting as their own Paying Agent, segregate and hold in trust as provided in Section 1003) money sufficient to pay the purchase price of all Securities or portions thereof so accepted and (iii) deliver or cause to be delivered to the Trustee all Securities so accepted together with an Officers' Certificate stating the Securities or portions thereof accepted for payment by the Issuers. The Paying Agent (or the Issuers, if so acting) shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Security not accepted for payment shall be promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers shall publicly announce the results of the Offer on or as soon as practicable after the Purchase Date. (c) Notwithstanding the foregoing, this Section 1014 shall not apply to any Asset Disposition which constitutes a transfer, conveyance, sale, lease or other disposition of all or substantially all of the Issuers' properties or assets within the meaning of Section 801 hereof. Section 10.15. Limitation on Sale and Leaseback Transactions. The Issuers shall not, and shall not permit any of their respective Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to any property of an Issuer or any of its Restricted Subsidiaries (other than a Sale and Leaseback Transaction between an Issuer or a Restricted Subsidiary or any of them). The preceding paragraph shall not prohibit the Issuers or any of their respective Restricted Subsidiaries from entering into a Sale and Leaseback Transaction if: (a) the Issuers and their respective Restricted Subsidiaries would be entitled to create or incur a Lien to secure Indebtedness pursuant to the provisions of Section 1012 equal in amount to the Attributable Value of the Sale and Leaseback Transaction without equally and ratably securing the Securities; and (b) the Sale and Leaseback Transaction is treated as an Asset Disposition and the provisions of Section 1014 are satisfied with respect to such Sale and Leaseback Transaction. Section 10.16. Change of Control Triggering Event. (a) If a Change of Control Triggering Event occurs, the Issuers shall have the right to repurchase in whole the Securities at a redemption price equal to the greater of: (i) 101% of the aggregate principal amount of the Securities , if purchased on or after the Full Accretion Date, plus accrued and unpaid interest and Special Interest on the Securities, if any (subject to the right of Holders of 86 record on the relevant record date to receive interest due on the relevant Interest Payment Date), and 101% of the Accreted Value of the Securities, if purchased prior to the Full Accretion Date; and (ii) the sum of the present values of the remaining scheduled payments of principal and interest thereon (not including the portion of any such payments of interest accrued as of the Redemption Date) discounted to the Redemption Date on a semiannual basis at the Adjusted Treasury Rate, plus accrued and unpaid interest and Special Interest on the Securities, if any. A "Change of Control Triggering Event" will be deemed to have occurred if a Change of Control and a Rating Decline occur. A "Rating Decline" will be deemed to have occurred if at any time within the earlier of (1) 90 days after the date of public notice of a Change of Control, or of the intention of an Issuer or of any Person to effect a Change of Control and (2) the occurrence of the Change of Control (which period shall in either event be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by a Rating Agency), the rating of the Securities is decreased by either Rating Agency by one or more Gradations and the rating by both Rating Agencies on the Securities following such downgrade is below Investment Grade. Within 30 days following any Change of Control Triggering Event, the Issuers shall mail a notice to each Holder and each holder of senior Indebtedness of the Issuers containing similar provisions to those set forth in this Indenture describing the transaction or transactions that constitute the Change of Control Triggering Event and indicating the Issuers' intention to repurchase the Securities and such other senior Indebtedness (in which case the provisions of Clause (b) of this Section 1016 shall not be applicable) on the Change of Control Payment Date specified in the notice. The Change of Control Payment Date shall be no earlier than 30 days and not later than 60 days from the date the notice is mailed, pursuant to the procedures required by this Indenture and described in such notice. (b) If a Change of Control Triggering Event occurs, each Holder of Securities shall have the right to require the Issuers to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of such Holder's Securities pursuant to an Offer to Purchase. The offer price in any Offer to Purchase shall be payable in cash and shall be 101% of the aggregate principal amount of the Securities, if repurchased on or after the Full Accretion Date, plus accrued and unpaid interest and Special Interest on the Securities, if any (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date), to the date of purchase, and 101% of the Accreted Value of the Securities, if purchased prior to the Full Accretion Date, plus any accrued and unpaid Special Interest on the Securities, if any. Within 30 days following any Change of Control Triggering Event, the Issuers shall mail a notice to each Holder and each holder of senior Indebtedness of the Issuers containing provisions similar to those set forth in this Indenture describing the transaction or transactions that constitute the Change of Control Triggering Event and offering to repurchase Securities and such other senior Indebtedness on the Change of Control Payment Date specified in 87 the notice. The Change of Control Payment Date shall be no earlier than 30 days and not later than 60 days from the date the notice is mailed, pursuant to the procedures required by this Indenture and described in such notice. On the Change of Control Payment Date, the Issuers shall, to the extent lawful: (i) accept for payment all Securities or portions of Securities properly tendered pursuant to the Offer to Purchase; (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Securities or portions of Securities properly tendered; and (iii) deliver or cause to be delivered to the Trustee the Securities so accepted together with an Officers' Certificate stating the aggregate principal amount of Securities or portions of the Securities being purchased by the Issuers. The Paying Agent shall promptly mail to each Holder of Securities properly tendered the Change of Control Payment for such Securities, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Security equal in principal amount to any unpurchased portion of the Securities surrendered, if any; provided that the new Security shall be in a principal amount of $1,000 or an integral multiple of $1,000. (c) The provisions of this Section 1016 described above are applicable whether or not any other provisions of this Indenture are applicable. The Issuers shall comply with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations to the extent those laws and regulations are applicable to any Offer to Purchase. Section 10.17. Statement by Officers as to Default; Compliance Certificates. (a) Each Issuer shall deliver to the Trustee, within 90 days after the end of each fiscal year, and within 60 days after the end of each fiscal quarter (other than the fourth fiscal quarter), of such Issuer ending after the date hereof an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof such Issuer is in default in the performance and observance of any of the terms, provisions and conditions of Section 801 or Sections 1004 to 1016, inclusive, and if such Issuer shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) Each Issuer shall deliver to the Trustee, as soon as possible and in any event within 10 days after such Issuer becomes aware or should reasonably become aware of the occurrence of an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default, the period of existence thereof and the action which such Issuer proposes to take with respect thereto. 88 (c) Each Issuer shall deliver to the Trustee within 90 days after the end of each fiscal year a written statement by such Issuer's independent public accountants stating (A) that their audit examination has included a review of the terms of this Indenture and the Securities as they relate to accounting matters, and (B) whether, in connection with their audit examination, any event which, with notice or the lapse of time or both, would constitute an Event of Default has come to their attention and, if such a default has come to their attention, specifying the nature and period of the existence thereof. Section 10.18. Waiver of Certain Covenants. The Issuers may omit in any particular instance to comply with any covenant or condition set forth in Section 801 and Sections 1004 to 1016, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Issuers and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect; provided, however, with respect to an Offer to Purchase as to which an Offer has been mailed, no such waiver may be made or shall be effective against any Holder tendering Securities pursuant to such Offer, and the Issuers may not omit to comply with the terms of such Offer as to such Holder. Section 10.19. Provision of Financial Information. Whether or not required by the Commission, so long as any Securities are outstanding, VoiceStream or VoiceStream Holdings, as the case may be, shall file with the Commission the annual reports, quarterly reports and other documents which VoiceStream or VoiceStream Holdings, as the case may be, would have been required to file with the Commission pursuant to such Section 13(a) or 15(d)or any successor provision thereto if VoiceStream or VoiceStream Holdings, as the case may be, were so required, such documents to be filed with the Commission on or prior to the respective dates (the "Required Filing Dates") by which VoiceStream or VoiceStream Holdings, as the case may be, would have been required so to file such documents if VoiceStream or VoiceStream Holdings, as the case may be, were so required. In addition, whether or not required by the Commission, so long as any Securities are outstanding, VoiceStream or VoiceStream Holdings, as the case may be, shall furnish to the Holders of Securities and the Trustee within 15 days of each Required Filing Date copies of the annual reports, quarterly reports and other documents which VoiceStream or VoiceStream Holdings, as the case may be, files with the Commission pursuant to such Section 13(a) or 15(d) or any successor provision thereto or would have been required to file with the Commission pursuant to such Section 13(a) or 15(d) or any successor provisions thereto if VoiceStream or VoiceStream Holdings, as the case may be, were required to be subject to such Sections. If filing such documents by VoiceStream or VoiceStream Holdings, as the case may be, with the Commission is not permitted under 89 the Securities Exchange Act of 1934, the VoiceStream or VoiceStream Holdings, as the case may be, shall promptly upon written request supply copies of such documents to any prospective Holder. ARTICLE 11 REDEMPTION OF SECURITIES Section 11.1. Right of Redemption. The Issuers will not have the right to redeem any Securities prior to November 15, 2004 (other than out of the Net Cash Proceeds of a Public Equity Offering or Strategic Equity Infusion, as described below, or upon a Change of Control Triggering Event). The Securities will be redeemable at the option of the Issuers, in whole or in part, at any time on or after November 15, 2004, at the Redemption prices specified in the form of Security hereinbefore set forth together with any applicable accrued interest, if any, thereon to the Redemption Date. At any time on or prior to November 15, 2002, the Issuers may redeem, on one or more occasions, up to an aggregate of 35% of the aggregate principal amount at Maturity of the Securities originally outstanding at a redemption price equal to 111.875% of the Accreted Value thereof, together with accrued and unpaid interest, if any, to the date of redemption, with cash from the Net Cash Proceeds to the Issuers of one or more Public Equity Offerings or Strategic Equity Infusions; provided, that at least 65% of the aggregate principal amount of the Securities originally outstanding remain outstanding immediately after the occurrence of each such redemption; provided, further, that such notice of redemption shall be sent within 30 days after the date of closing of any such Public Equity Offering or Strategic Equity Infusion, and such redemption shall occur within 60 days after the date such notice is sent. Section 11.2. Applicability of Article. Redemption of Securities at the election of the Issuers, as permitted by any provision of this Indenture, shall be made in accordance with such provision and this Article. Section 11.3. Election to Redeem; Notice to Trustee. The election of the Issuers to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Issuers of less than all the Securities, the Issuers shall, at least 60 days prior to the Redemption Date fixed by the Issuers (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. Section 11.4. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by prorating, as nearly as may be practicable, the principal amount of Securities to be 90 redeemed. In any proration pursuant to this Section, the Trustee shall make such adjustments, reallocations and eliminations as it shall deem proper (and in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed) to the end that the principal amount of Securities so prorated shall be $1,000 or a multiple thereof, by increasing or decreasing or eliminating the amount which would be allocable to any Holder on the basis of exact proportion by an amount not exceeding $1,000. The Trustee shall promptly notify the Issuers and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 11.5. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date, (b) the Redemption Price, (c) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date, and (e) the place or places where such Securities are to be surrendered for payment of the Redemption Price. Notice of redemption of Securities to be redeemed at the election of the Issuers shall be given by the Issuers or, at the Issuers' request, by the Trustee in the name and at the expense of the Issuers. Section 11.6. Deposit of Redemption Price. Prior to any Redemption Date, the Issuers shall deposit with the Trustee or with a Paying Agent (or, if the Issuers are acting as their own Paying Agent, segregate and hold 91 in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) any applicable accrued interest on, all the Securities which are to be redeemed on that date. Section 11.7. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Issuers shall default in the payment of the Redemption Price and any applicable accrued interest) such Securities shall not bear interest and shall no longer accrete in value. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Issuers at the Redemption Price, together with any applicable accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 308. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate provided by the Security. Section 11.8. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Issuers designated for that purpose pursuant to Section 1002 (with, if the Issuers or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuers and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Issuers shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE 12 DEFEASANCE AND COVENANT DEFEASANCE Section 12.1. Issuers' Option to Effect Defeasance or Covenant Defeasance. The Issuers may at their option by Board Resolution, at any time, elect to have either Section 1202 or Section 1203 applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article Twelve. Section 12.2. Defeasance and Discharge. Upon the Issuers' exercise of the option provided in Section 1201 applicable to this Section, the Issuers shall be deemed to have been discharged from their obligations 92 with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Issuers shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Issuers, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Securities to receive, solely from the trust fund described in Section 1204 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest on such Securities when such payments are due, (B) the Issuers' obligations with respect to such Securities under Sections 304, 305, 306, 307, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article Twelve. Subject to compliance with this Article Twelve, the Issuers may exercise its option under this Section 1202 notwithstanding the prior exercise of its option under Section 1203. Section 12.3. Covenant Defeasance. Upon the Issuers' exercise of the option provided in Section 1201 applicable to this Section, (i) the Issuers shall be released from its obligations under Sections 1005 through 1016, inclusive, and Clauses (3) and (4) of Section 801 and (ii) the occurrence of an event specified in Sections 501(3) (with respect to Clauses (2), (3) or (4) of Section 801), 501(4) (with respect to any of Sections 1005 through 1016, inclusive), 501(5) and 501(6) shall not be deemed to be an Event of Default on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"). For this purpose, such covenant defeasance means that the Issuers may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, Clause or Article, whether directly or indirectly by reason of any reference elsewhere herein to any such Section, Clause or Article or by reason of any reference in any such Section, Clause or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. Section 12.4. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 1202 or Section 1203 to the then Outstanding Securities: (a) The Issuers shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article Twelve applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms, without the need for reinvestment, will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a 93 written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of (and premium, if any), and each installment of interest on the Securities on the Stated Maturity of such principal or instalment of interest in accordance with the terms of this Indenture and of such Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally Guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (b) In the case of an election under Section 1202, the Issuers shall have delivered to the Trustee an Opinion of Counsel stating that (x) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (c) In the case of an election under Section 1203, the Issuers shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred. (d) The Issuers shall have delivered to the Trustee an Officer's Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (e) Such defeasance or covenant defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to any securities of the Issuers. 94 (f) No Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as subsections 501(7) and (8) are concerned, at any time during the period ending on the 121st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (g) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Issuers are a party or by which it is bound. (h) The Issuers shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 1202 or the covenant defeasance under Section 1203 (as the case may be) have been complied with. (i) Such defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder. Section 12.5. Deposited Money and U.S. Government Obligations to be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee--collectively, for purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in respect of the Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuers acting as their own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Issuers shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1204 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article Twelve to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuers from time to time upon Issuers' Request any money or U.S. Government Obligations held by it as provided in Section 1204 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. 95 Section 12.6. Reinstatement. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 1202 or 1203 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuers' obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article Twelve until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1202 or 1203; provided, however, that if the Issuers make any payment of principal of (and premium, if any) or interest on any Security following the reinstatement of their obligations, the Issuers shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or the Paying Agent. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 96 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. VOICESTREAM WIRELESS CORPORATION By: -------------------------------- Name: Donald Guthrie Title: Vice Chairman Attest: - ------------------------- Name: Alan R. Bender VOICESTREAM WIRELESS HOLDING CORPORATION By: -------------------------------- Name: Donald Guthrie Title: Vice Chairman Attest: - -------------------------- Name: Alan R. Bender Harris Trust Company of California, as Trustee By: -------------------------------- Authorized Officer 97 STATE OF ___________) ss.: COUNTY OF __________) On the __th day of November, 1999, before me personally came Donald Guthrie, to me known, who, being by me duly sworn, did depose and say that he is Vice Chairman of VoiceStream Wireless Corporation, one of the corporations described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. ------------------------------ STATE OF ___________) ss.: COUNTY OF __________) On the __th day of November, 1999, before me personally came Donald Guthrie, to me known, who, being by me duly sworn, did depose and say that he is Vice Chairman of VoiceStream Wireless Holding Corporation, one of the corporations described in and which executed the foregoing instrument; and that he signed his name thereto by authority of the Board of Directors of said corporation. ------------------------------ 98 STATE OF ) ss.: COUNTY OF ) On the __th day of November, 1999, before me personally came Esther Cervantes, to me known, who, being by me duly sworn, did depose and say that she is the Vice President of Harris Trust Company of California, one of the entities described in and which executed the foregoing instrument; and that she signed her name thereto by authority of the Board of Directors of said corporation. ----------------------------- 99 ANNEX A -- Form of Regulation S Certificate REGULATION S CERTIFICATE (FOR TRANSFERS PURSUANT TO SECTION 306(B)(I), (III) AND (V) OF THE INDENTURE) Harris Trust Company of California, as Trustee 601 S. Figueroa Street, Suite 4900 Los Angeles, CA 90017 Re: 11 7/8% Senior Discount Notes Due 2009 of VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (the "Securities") Reference is made to the Indenture, dated as of November 9, 1999 (the "Indenture"), from VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (collectively, the "Issuers") to Harris Trust Company of California, as Trustee. Terms used herein and defined in the Indenture or in Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). -------------------------------- CERTIFICATE No(s). -------------------------- The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of a Regulation S Security. In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: A-1 (1) Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904: (A) the Owner is not a distributor of the Securities, an affiliate of the Issuers or any such distributor or a person acting on behalf of any of the foregoing; (B) the offer of the Specified Securities was not made to a person in the United States; (C) either: (i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or (ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (D) no directed selling efforts have been made in the United States by or on behalf of the Owner or any affiliate thereof; (E) if the Owner is a dealer in securities or has received a selling concession, fee or other renumeration in respect of the Specified Securities, and the transfer is to occur during the Restricted Period, then the requirements of Rule 904(c)(1) have been satisfied; and (F) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. (2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (A) the transfer is occurring after November 9, 2000 and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (B) the transfer is occurring after November 9, 2001 and the Owner is not, and during the preceding three months has not been, an affiliate of the Issuers. A-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers and the Initial Purchasers. Dated: ----------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) A-3 ANNEX B -- Form of Restricted Securities Certificate RESTRICTED SECURITIES CERTIFICATE (FOR TRANSFERS PURSUANT TO SECTION 306(B)(II), (III), (IV) AND (V) OF THE INDENTURE) Harris Trust Company of California, as Trustee 601 S. Figueroa Street, Suite 4900 Los Angeles, CA 90017 Re: 11 7/8% Senior Discount Notes Due 2009 of VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (the "Securities") Reference is made to the Indenture, dated as of November 9, 1999 (the "Indenture"), from VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (collectively, the "Issuers") to Harris Company Trust of California, as Trustee. Terms used herein and defined in the Indenture or in Rule 144A or Rule 144 under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $_____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). -------------------------------- CERTIFICATE No(s). -------------------------- The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of a Restricted Security or, if pursuant to Rule 144, in the form of a Security bearing no Securities Act Legend pursuant to Section 306(c). In connection with such transfer, the Owner hereby certifies that, unless such transfer is being effected pursuant to an effective registration statement under the Securities Act, it is being effected in accordance with Rule 144A or Rule 144 under the Securities Act and all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as: B-1 (1) Rule 144A Transfers. If the transfer is being effected in accordance with Rule 144A: (A) the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a "qualified institutional buyer" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and (B) the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer; and (2) Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (A) the transfer is occurring after November 9, 2000 and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (B) the transfer is occurring after November 9, 2001 and the Owner is not, and during the preceding three months has not been, an affiliate of the Issuers. This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers and the Initial Purchasers. Dated: ------------------------------------ (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: --------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) B-2 ANNEX C -- Form of Unrestricted Securities Certificate UNRESTRICTED SECURITIES CERTIFICATE (FOR REMOVAL OF SECURITIES ACT LEGENDS PURSUANT TO SECTION 306(C)) Harris Trust Company of California, as Trustee 601 S. Figueroa Street, Suite 4900 Los Angeles, CA 90017 Re: 11 7/8% Senior Discount Notes Due 2009 of VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (the "Securities") Reference is made to the Indenture, dated as of November 9, 1999 (the "Indenture"), from VoiceStream Wireless Corporation and VoiceStream Wireless Holding Corporation (collectively, the "Issuers") to Harris Trust Company of California, as Trustee. Terms used herein and defined in the Indenture or in Rule 144 under the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so defined. This certificate relates to U.S. $_____________ principal amount of Securities, which are evidenced by the following certificate(s) (the "Specified Securities"): CUSIP No(s). -------------------------------- CERTIFICATE No(s). -------------------------- The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". If the Specified Securities are represented by a Global Security, they are held through the Depositary or an Agent Member in the name of the Undersigned, as or on behalf of the Owner. If the Specified Securities are not represented by a Global Security, they are registered in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for Securities bearing no Securities Act Legend pursuant to Section 306(c) of the Indenture. In connection with such exchange, the Owner hereby certifies that the exchange is occurring after November 9, 2001 and the Owner is not, and during the preceding three months has not been, an affiliate of the Issuers. The Owner also acknowledges that any future transfers of the Specified Securities must comply with all applicable securities laws of the states of the United States and other jurisdictions. C-1 This certificate and the statements contained herein are made for your benefit and the benefit of the Issuers and the Initial Purchasers. Dated: ----------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: -------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) C-2 RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND INDENTURE, DATED AS OF NOVEMBER 9, 1999
Trust Indenture Indenture Act Section Section --------------- --------- Section 310(a)(1) .............................................. 609 (a)(2) ......................................................... 609 (a)(3) ......................................................... Not Applicable (a)(4) ......................................................... Not Applicable (b) ............................................................ 608, 610 Section 311(a) ................................................. 613(a) (b) ............................................................ 613(b) (b)(2) ......................................................... 703(a)(2), 703(b) Section 312(a) ................................................. 701, 702(a) (b) ............................................................ 702(b) (c) ............................................................ 702(c) Section 313(a) ................................................. 703(a) (b) ............................................................ 703(b) (c) ............................................................ 703(a), 703(b) (d) ............................................................ 703(c) Section 314(a) ................................................. 704 (b) ............................................................ Not Applicable (c)(1) ......................................................... 102 (c)(2) ......................................................... 102 (c)(3) ......................................................... Not Applicable (d) ............................................................ Not Applicable (e) ............................................................ 102 Section 315(a) ................................................. 601(a) (b) ............................................................ 602, 703(a)(6) (c) ............................................................ 601(b) (d)(1) ......................................................... 601(a)(1) (d)(2) ......................................................... 601(c)(2) (d)(3) ......................................................... 601(c)(3)
i (e) ............................................................ 514 Section 316(a) ................................................. 101 (a)(1)(A) ...................................................... 502, 512 (a)(1)(B) ...................................................... 513 (a)(2) ......................................................... Not Applicable (b) ............................................................ 508 Section 317(a)(1) .............................................. 503 (a)(2) ......................................................... 504 (b) ............................................................ 1003 Section 318(a) ................................................. 107
Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of this Indenture. ii -----END PRIVACY-ENHANCED MESSAGE-----