Document:

<PAGE>

                                                                    Exhibit 10.1

                    * * * * * * * * * * * * * * * * * * * *

                                     Lease

                    * * * * * * * * * * * * * * * * * * * *

                                    Between

                         TARGETED GENETICS CORPORATION
                                    (Tenant)

                                      and

                         CARRAMERICA REALTY CORPORATION
                                   (Landlord)

                                 June 30, 2000
<PAGE>

                                 NET RENT FORM
                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     ----
<S>      <C>                                                                          <C>
1.       LEASE AGREEMENT............................................................   3
2.       RENT.......................................................................   3
 A.      Types of Rent..............................................................   3
  (1)    Base Rent..................................................................   4
  (2)    Operating Cost Share Rent..................................................   4
  (3)    Tax Share Rent.............................................................   4
  (4)    Additional Rent............................................................   4
  (5)    Rent.......................................................................   4
 B.      Payment of Operating Cost Share Rent and Tax Share Rent....................   4
  (1)    Payment of Estimated Operating Cost Share Rent and Tax Share Rent..........   4
  (2)    Correction of Operating Cost Share Rent....................................   4
  (3)    Correction of Tax Share Rent...............................................   5
 C.      Definitions................................................................   5
  (1)    Included Operating Costs...................................................   5
  (2)    Excluded Operating Costs...................................................   5
  (3)    Taxes......................................................................   6
  (4)    Lease Year.................................................................   7
  (5)    Fiscal Year................................................................   7
 D.      Computation of Base Rent and Rent Adjustments..............................   7
  (1)    Prorations.................................................................   7
  (2)    Default Interest...........................................................   7
  (3)    Rent Adjustments...........................................................   7
  (4)    Books and Records..........................................................   8
  (5)    Miscellaneous..............................................................   8
 E.      Real Estate Taxes and Assessments..........................................   8
3.       PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF PREMISES   8
 A.      Condition of Premises......................................................   8
 B.      Tenant's Possession........................................................   8
 C.      Tenant's Maintenance.......................................................   9
 D.      Landlord's Maintenance.....................................................   9
 E.      Landlord's Failure to Maintain.............................................   9
4.       PROJECT SERVICES...........................................................   9
 A.      Intentionally Omitted......................................................   9
 B.      Elevators..................................................................   9
 C.      Electricity................................................................   9
 D.      Water......................................................................   9
 E.      Janitorial and Garbage Service.............................................  10
 F.      Interruption of Services...................................................  10
5.       ALTERATIONS AND REPAIRS....................................................  10
</TABLE>
<PAGE>

<TABLE>
<S>      <C>                                                                          <C>
 A.      Landlord's Consent and Conditions..........................................  10
 B.      Damage to Systems..........................................................  11
 C.      No Liens...................................................................  12
 D.      Ownership of Improvements..................................................  12
 E.      Removal at Termination.....................................................  12
6.       USE OF PREMISES............................................................  12
7.       GOVERNMENTAL REQUIREMENTS AND BUILDING RULES...............................  13
8.       WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE...............................  13
 A.      Indemnification............................................................  13
 B.      Tenant's Insurance.........................................................  14
 C.      Insurance Certificates.....................................................  15
 D.      Landlord's Insurance.......................................................  15
9.       FIRE AND OTHER CASUALTY....................................................  15
 A.      Termination................................................................  15
 B.      Restoration................................................................  16
10.      EMINENT DOMAIN.............................................................  16
11.      RIGHTS RESERVED TO LANDLORD................................................  16
 A.      Name.......................................................................  16
 B.      Signs......................................................................  16
 C.      Window Treatments..........................................................  16
 D.      Keys.......................................................................  17
 E.      Access.....................................................................  17
 F.      Preparation for Reoccupancy................................................  17
 G.      Heavy Articles.............................................................  17
 H.      Show Premises..............................................................  17
 I.      Intentionally Omitted......................................................  17
 J.      Use of Lockbox.............................................................  17
 K.      Repairs and Alterations....................................................  17
 L.      Landlord's Agents..........................................................  18
 M.      Building Services..........................................................  18
 N.      Other Actions..............................................................  18
12.      TENANT'S DEFAULT...........................................................  18
 A.      Rent Default...............................................................  18
 B.      Assignment/Sublease or Hazardous Substances Default........................  18
 C.      Other Performance Default..................................................  18
 D.      Credit Default.............................................................  18
 E.      Abandonment Default........................................................  19
13.      LANDLORD REMEDIES..........................................................  19
 A.      Termination of Lease or Possession.........................................  19
 B.      Lease Termination Damages..................................................  19
 C.      Possession Termination Damages.............................................  19
 D.      Landlord's Remedies Cumulative.............................................  20
 E.      WAIVER OF TRIAL BY JURY....................................................  20
 F.      Litigation Costs...........................................................  20
14.      SURRENDER..................................................................  20
15.      HOLDOVER...................................................................  20
</TABLE>
<PAGE>

<TABLE>
<S>      <C>                                                                          <C>
16.      SUBORDINATION TO GROUND LEASES AND MORTGAGES...............................  21
 A.      Subordination..............................................................  21
 B.      Termination of Ground Lease or Foreclosure of Mortgage.....................  21
 C.      Security Deposit...........................................................  21
 D.      Notice and Right to Cure...................................................  21
 E.      Definitions................................................................  21
17.      ASSIGNMENT AND SUBLEASE....................................................  22
 A.      In General.................................................................  22
 B.      Landlord's Consent.........................................................  22
 C.      Procedure..................................................................  22
 D.      Permitted Transfers........................................................  23
 E.      Excess Payments............................................................  23
 F.      Recapture..................................................................  23
 G.      Permitted Encumbrance......................................................  23
18.      CONVEYANCE BY LANDLORD.....................................................  24
19.      ESTOPPEL CERTIFICATE.......................................................  24
20.      SECURITY DEPOSIT...........................................................  24
21.      FORCE MAJEURE..............................................................  25
22.      LANDLORD'S DEFAULT.........................................................  26
23.      NOTICES....................................................................  26
 A.      Landlord...................................................................  27
 B.      Tenant.....................................................................  27
24.      QUIET POSSESSION...........................................................  27
25.      REAL ESTATE BROKER.........................................................  27
26.      MISCELLANEOUS..............................................................  28
 A.      Successors and Assigns.....................................................  28
 B.      Date Payments Are Due......................................................  28
 C.      Meaning of "Landlord", "Re-Entry," "including" and "Affiliate..............  28
 D.      Time of the Essence........................................................  28
 E.      No Option..................................................................  28
 F.      Severability...............................................................  28
 G.      Governing Law..............................................................  28
 H.      Lease Modification.........................................................  28
 I.      No Oral Modification.......................................................  28
 J.      Landlord's Right to Cure...................................................  28
 K.      Captions...................................................................  28
 L.      Authority..................................................................  28
 M.      Landlord's Enforcement of Remedies.........................................  29
 N.      Entire Agreement...........................................................  29
 O.      Landlord's Title...........................................................  29
 P.      Light and Air Rights.......................................................  29
 Q.      Singular and Plural........................................................  29
 R.      No Recording by Tenant.....................................................  29
 S.      Exclusivity................................................................  29
 T.      No Construction Against Drafting Party.....................................  29
 U.      Survival...................................................................  29
</TABLE>
<PAGE>

<TABLE>
<S>      <C>                                                                          <C>
 V.      Rent Not Based on Income...................................................  29
 W.      Building Manager and Service Providers.....................................  29
 X.      Late Charge and Interest on Late Payments..................................  30
 Y.      Tenant's Financial Statements..............................................  30
 Z.      Parking....................................................................  30
27.      UNRELATED BUSINESS INCOME..................................................  30
28.      HAZARDOUS SUBSTANCES.......................................................  30
29.      EXCULPATION................................................................  31
</TABLE>

APPENDIX A - PLAN OF THE PREMISES
APPENDIX B - RULES AND REGULATIONS
APPENDIX C - TENANT IMPROVEMENT AGREEMENT
APPENDIX D - MORTGAGES CURRENTLY AFFECTING THE PROJECT
APPENDIX E - COMMENCEMENT DATE CONFIRMATION
APPENDIX F - LEGAL DESCRIPTION
ADDENDUM 1 - EXTENSION OPTION
<PAGE>

                                     LEASE

        THIS LEASE (the "Lease") is made as of ____________, 2000 between
CarrAmerica Realty Corporation, a Maryland corporation (the "Landlord") and the
Tenant as named in the Schedule below.  The term "Project" means the building
(the "Building") known as "Building A" and the land (the "Land") located at
22011 - 26th Avenue S.E., Bothell, Washington  98021.  "Premises" means that
part of the Project leased to Tenant described in the Schedule and outlined on
Appendix A.  The Land is legally described on Appendix F hereto.

        The following schedule (the "Schedule") is an integral part of this
Lease.  Terms defined in this Schedule shall have the same meaning throughout
the Lease.

                                    SCHEDULE

        1. Tenant:  Targeted Genetics Corporation, a Washington corporation
        2. Premises:  Building A, Canyon Park East, 22011 - 26th Avenue S.E.,
           Bothell, Washington.
        3. Rentable Square Feet of the Premises:  75,692, representing the gross
           building area determined in accordance with BOMA standard Z61.1-1996,
           less major building penetrations
        4. Tenant's Proportionate Share:  (a) 100% (based upon a total of 75,692
           rentable square feet for Building A) as to all Operating Costs
           relating solely to Building A, including, without limitation,
           building management fee in the sum of three percent (3%) of Base
           Rent, window cleaning and property insurance; (b) 100% of all other
           Operating Costs of the Project, including without limitation,
           landscape costs, parking lot repair and maintenance, and Landlord's
           liability insurance costs; (c) 100% of all Taxes payable by Landlord;
           and (d) an amount fairly and equitably apportioned by Landlord, based
           on the rentable square feet in the Premises and the total rentable
           square feet in the remainder of the buildings in Landlord's Pacific
           Northwest portfolio, of Landlord's administration and overhead costs.
        5. Security Deposit:  See Section 20.
        6. Tenant's Real Estate Broker for this Lease:  The Staubach Company
        7. Landlord's Real Estate Broker for this Lease:  Collier's
           International
        8. Tenant Improvements, if any:  See the Tenant Improvement Agreement
           attached hereto as Appendix C.
        9. Commencement Date:  The date that Landlord delivers possession of the
           Premises to Tenant in accordance with Section 3A, currently estimated
           to be October 1, 2000. Landlord shall give Tenant at least forty-five
           (45) days' written notice of its good faith estimate of the
           Commencement Date. Landlord and Tenant shall execute a Commencement
           Date Confirmation substantially in the form of Appendix E promptly
           following the Commencement Date.
       10. Termination Date/Term:  Fifteen (15) years after the Commencement
           Date, or if the Commencement Date is not the first day of a month,
           then fifteen (15) years

                                       2
<PAGE>

           after the first day of the following month, subject to the terms of
           Tenant's Extension Option set forth in Addendum 1 hereto.
       11. Guarantor:  N/A
       12. Base Rent:

                           Annual Base Rent
                             Per Rentable            Annual            Monthly
            Period           Square Foot            Base Rent         Base Rent
            ------         ----------------      -------------       -----------
          Months 1 - 3         $11.25*           $  851,535.00*      $      0.00

          Months 4 - 12        $11.25*           $  851,535.00*      $ 94,615.00

          Years 2 - 5          $15.00            $1,135,380.00       $ 94,615.00

          Years 6 - 10         $18.00            $1,362,456.00       $113,538.00

          Years 11 - 15        $21.61            $1,635,704.00       $136,308.67

*Annualized amounts based on 3 months' initial free Base Rent.

     1.   LEASE AGREEMENT.  On the terms stated in this Lease, Landlord leases
          ---------------
the Premises to Tenant, and Tenant leases the Premises from Landlord, for the
Term beginning on the Commencement Date and ending on the Termination Date
unless extended or sooner terminated pursuant to this Lease.

     2.   RENT.
          ----

     A.   Types of Rent.  Tenant shall pay the following Rent in the form of a
          -------------
check to Landlord at the following address:

          CarrAmerica Realty Corporation
          t/a Canyon Park East
          P.O. Box 100267
          Atlanta, GA 30384-0566

or by wire transfer as follows:

          NationsBank, N.A. (South)
          ABA Number 061-000-052
          Account Number 00 325 580 8067

or in such other manner as Landlord may notify Tenant:

                                       3
<PAGE>

          (1) Base Rent in monthly installments in advance, the first monthly
              ---------
     installment payable concurrently with the execution of this Lease and
     thereafter on or before the first day of each month of the Term in the
     amount set forth on the Schedule.

          (2) Operating Cost Share Rent in an amount equal to the Tenant's
              -------------------------
     Proportionate Share of the Operating Costs for the applicable fiscal year
     of the Lease, paid monthly in advance in an estimated amount.  Definitions
     of Operating Costs and Tenant's Proportionate Share, and the method for
     billing and payment of Operating Cost Share Rent are set forth in Sections
     2B, 2C and 2D.

          (3) Tax Share Rent in an amount equal to the Tenant's Proportionate
              --------------
     Share of the Taxes for the applicable fiscal year of this Lease, paid
     monthly in advance in an estimated amount.  A definition of Taxes and the
     method for billing and payment of Tax Share Rent are set forth in Sections
     2B, 2C and 2D.

          (4) Additional Rent in the amount of all costs, expenses, liabilities,
              ---------------
     and amounts which Tenant is required to pay under this Lease, excluding
     Base Rent, Operating Cost Share Rent, and Tax Share Rent, but including any
     interest for late payment of any item of Rent.

          (5) Rent as used in this Lease means Base Rent, Operating Cost Share
              ----
     Rent, Tax Share Rent and Additional Rent.  Tenant's agreement to pay Rent
     is an independent covenant, with no right of setoff, deduction or
     counterclaim of any kind.

     B.   Payment of Operating Cost Share Rent and Tax Share Rent.
          -------------------------------------------------------

          (1) Payment of Estimated Operating Cost Share Rent and Tax Share Rent.
              -----------------------------------------------------------------
     Landlord shall estimate the Operating Costs and Taxes payable by Landlord
     of the Project by April 1 of each fiscal year, or as soon as reasonably
     possible thereafter.  Landlord may revise these estimates whenever it
     obtains more accurate information, such as the final real estate tax
     assessment or tax rate for the Project.

          Within ten (10) days after receiving the original or revised estimate
     from Landlord, Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's
     Proportionate Share of this estimate, multiplied by the number of months
     that have elapsed in the applicable fiscal year to the date of such payment
     including the current month, minus payments previously made by Tenant for
     the months elapsed.  On the first day of each month thereafter, Tenant
     shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share of
     this estimate, until a new estimate becomes applicable.

          (2) Correction of Operating Cost Share Rent.  Landlord shall deliver
              ---------------------------------------
     to Tenant a report for the previous fiscal year (the "Operating Cost
     Report") by May 15 of each year, or as soon as reasonably possible
     thereafter, setting forth (a) the actual Operating Costs incurred, (b) the
     amount of Operating Cost Share Rent due from Tenant, and (c) the amount of
     Operating Cost Share Rent paid by Tenant.  Within twenty (20) days after
     such delivery, Tenant shall pay to Landlord the amount due minus the amount
     paid.  If the

                                       4
<PAGE>

     amount paid exceeds the amount due, Landlord shall apply the excess to
     Tenant's payments of Operating Cost Share Rent next coming due.

          (3) Correction of Tax Share Rent.  Landlord shall deliver to Tenant a
              ----------------------------
     report for the previous fiscal year (the "Tax Report") by May 15 of each
     year, or as soon as reasonably possible thereafter, setting forth (a) the
     actual Taxes payable by Landlord, (b) the amount of Tax Share Rent due from
     Tenant, and (c) the amount of Tax Share Rent paid by Tenant.  Within twenty
     (20) days after such delivery, Tenant shall pay to Landlord the amount due
     from Tenant minus the amount paid by Tenant.  If the amount paid exceeds
     the amount due, Landlord shall apply the excess to Tenant's payments of Tax
     Share Rent next coming due, or, as to any excess payment occurring at the
     end of the Lease term, promptly refund the same to Tenant.

     C.   Definitions.
          -----------

          (1) Included Operating Costs. "Operating Costs" means any expenses,
              ------------------------
     costs and disbursements of any kind other than Taxes, paid or incurred by
     Landlord in connection with the management, maintenance, operation,
     insurance, repair and other related activities in connection with any part
     of the Project and of the personal property, fixtures, machinery,
     equipment, systems and apparatus used in connection therewith, including
     the cost of providing those services required to be furnished by Landlord
     under this Lease.  Operating Costs shall also include the costs of any
     capital improvements which are intended to reduce Operating Costs or
     improve safety, and those made to keep the Project in compliance with
     governmental requirements applicable from time to time (collectively,
     "Included Capital Items"); provided, that Landlord shall be responsible, at
     its sole cost, for ensuring that the Project complies with governmental
     requirements applicable upon delivery of the Premises to Tenant, and the
     costs of any Included Capital Item shall be amortized by Landlord, together
     with an amount equal to interest at ten percent (10%) per annum, over the
     estimated useful life of such item and such amortized costs are only
     included in Operating Costs for that portion of the useful life of the
     Included Capital Item which falls within the Term.

          (2) Excluded Operating Costs.  Operating Costs shall not include:
              ------------------------

          (a)  costs of alterations of tenant premises;

          (b)  costs of capital improvements other than Included Capital Items;

          (c)  interest and principal payments on mortgages or any other debt
               costs, or rental payments on any ground lease of the Project;

          (d)  real estate brokers' leasing commissions;

          (e)  legal fees, space planner fees and advertising expenses incurred
               with regard to leasing the Building or portions thereof;

                                       5
<PAGE>

          (f)  any cost or expenditure for which Landlord is reimbursed, by
               insurance proceeds or otherwise, except for the deductible amount
               in connection with an insured loss;

          (g)  depreciation;

          (h)  franchise or income taxes imposed upon Landlord, except to the
               extent imposed in lieu of all or any part of Taxes;

          (i)  costs of correcting defects in construction of the Building (as
               opposed to the cost of normal repair, maintenance and replacement
               expected with the construction materials and equipment installed
               in the Building in light of their specifications);

          (j)  legal and auditing fees which are for the benefit of Landlord
               such as collecting delinquent rents, preparing tax returns and
               other financial statements, and audits other than those incurred
               in connection with the preparation of reports required pursuant
               to Section 2B above;

          (k)  the wages of any employee for services not related directly to
               the management, maintenance, operation and repair of the
               Building;

          (l)  fines, penalties and interest;

          (m)  repairs to the structural portions of the Building;

          (n)  any liabilities, costs or expenses associated with the removal,
               enclosure, encapsulation, or any other handling of any Hazardous
               Substances, as defined in Section 28, below, not caused by
               Tenant, its agents, employees, contractors, invitees or
               licensees, and/or for which Tenant is not otherwise liable under
               Section 28; and

          (o)  costs of repairing or replacing the structural elements of the
               Building, except for Included Capital Items, and except to the
               extent required in connection with routine maintenance and repair
               of said structural elements of the Building.

          (3) Taxes.  "Taxes" means any and all taxes, assessments and charges
              -----
     of any kind, general or special, ordinary or extraordinary, levied against
     the Project, which Landlord shall pay or become obligated to pay in
     connection with the ownership, leasing, renting, management, use,
     occupancy, control or operation of the Project or of the personal property,
     fixtures, machinery, equipment, systems and apparatus used in connection
     therewith.  To the extent, if any, that any of the following are not paid
     directly to the taxing authority by Tenant pursuant to Section 2E, below,
     Taxes shall include personal property taxes, sewer rents, water rents,
     special or general assessments, transit taxes, ad valorem taxes, and any
     tax levied on the rents hereunder or the interest of

                                       6
<PAGE>

     Landlord under this Lease (the "Rent Tax"). Taxes shall also include all
     fees and other costs and expenses paid by Landlord in reviewing any tax and
     in seeking a refund or reduction of any Taxes, whether or not the Landlord
     is ultimately successful.

          For any year, the amount to be included in Taxes (a) from taxes or
     assessments payable in installments, shall be the amount of the
     installments (with any interest) due and payable during such year, and (b)
     from all other Taxes, shall at Landlord's election be the amount accrued,
     assessed, or otherwise imposed for such year or the amount due and payable
     in such year.  Any refund or other adjustment to any Taxes by the taxing
     authority, shall apply during the year in which the adjustment is made.

          Taxes shall not include any net income (except Rent Tax), capital,
     stock, succession, transfer, franchise, gift, estate or inheritance tax,
     except to the extent that such tax shall be imposed in lieu of any portion
     of Taxes; nor shall Tenant's share of Tax Share Rent include the real
     estate taxes, special or general assessments or other ad valorem taxes on
     the Project payable directly by Tenant pursuant to Section 2E below.

          (4) Lease Year.  "Lease Year" means each consecutive twelve-month
              ----------
     period beginning with the Commencement Date, except that if the
     Commencement Date is not the first day of a calendar month, then the first
     Lease Year shall be the period from the Commencement Date through the final
     day of the twelve months after the first day of the following month, and
     each subsequent Lease Year shall be the twelve months following the prior
     Lease Year.

          (5) Fiscal Year.  "Fiscal Year" means the calendar year, except that
              -----------
     the first fiscal year and the last fiscal year of the Term may be a partial
     calendar year.

     D.   Computation of Base Rent and Rent Adjustments.
          ---------------------------------------------

          (1)  Prorations.  If this Lease begins on a day other than the first
               ----------
     day of a month, the Base Rent, Operating Cost Share Rent and Tax Share Rent
     shall be prorated for such partial month based on the actual number of days
     in such month.  If this Lease begins on a day other than the first day, or
     ends on a day other than the last day, of the fiscal year, Operating Cost
     Share Rent and Tax Share Rent shall be prorated for the applicable fiscal
     year.

          (2) Default Interest.  Any sum due from either party to the other not
              ----------------
     paid when due shall bear interest from the date due until paid at eighteen
     percent (18%) per annum.

          (3) Rent Adjustments.  The square footage of the Premises and the
              ----------------
     Building set forth in the Schedule are conclusively deemed to be the actual
     square footage thereof, without regard to any subsequent remeasurement of
     the Premises or the Building.  If any Operating Cost paid in one fiscal
     year relates to more than one fiscal year, Landlord may proportionately
     allocate such Operating Cost among the related fiscal years.

                                       7
<PAGE>

          (4) Books and Records.  Landlord shall maintain books and records
              -----------------
     reflecting the Operating Costs and Taxes in accordance with sound
     accounting and management practices consistently applied.  Tenant and its
     certified public accountant shall have the right to inspect Landlord's
     records at Landlord's office in King County, Washington, upon at least
     seventy-two (72) hours' prior notice during normal business hours during
     the ninety (90) days following the respective delivery of the Operating
     Cost Report or the Tax Report.  The results of any such inspection shall be
     kept strictly confidential by Tenant and its agents, and Tenant and its
     certified public accountant must agree, in their contract for such
     services, to such confidentiality restrictions and shall specifically agree
     that the results shall not be made available to any other tenant of
     Landlord.  Unless Tenant sends to Landlord any written exception to either
     such report within said ninety (90) day period, such report shall be deemed
     final and accepted by Tenant.  Tenant shall pay the amount shown on both
     reports in the manner prescribed in this Lease, whether or not Tenant takes
     any such written exception, without any prejudice to such exception.  If
     Tenant makes a timely exception, Landlord shall cause an independent
     certified public accountant approved by Tenant, which approval shall not be
     unreasonably withheld or delayed, to issue a final and conclusive
     resolution of Tenant's exception.  Tenant shall pay the cost of such
     certification unless Landlord's original determination of annual Operating
     Costs or Taxes overstated the amounts thereof by more than five percent
     (5%), in which event Landlord shall reimburse Tenant for the reasonable
     cost thereof.

          (5) Miscellaneous.  So long as Tenant is in default of any obligation
              -------------
     under this Lease, Tenant shall not be entitled to any refund of any amount
     from Landlord.  If this Lease is terminated for any reason prior to the
     annual determination of Operating Cost Share Rent or Tax Share Rent, either
     party shall pay the full amount due to the other within fifteen (15) days
     after Landlord's notice to Tenant of the amount when it is determined.
     Landlord may commingle any payments made with respect to Operating Cost
     Share Rent or Tax Share Rent, without payment of interest.

     E.  Real Estate Taxes and Assessments.  Tenant shall pay directly to the
         ---------------------------------
taxing authority, prior to delinquency, all real estate taxes, special or
general assessments, and/or other ad valorem taxes on the Project, and shall
simultaneously provide Landlord with a copy of Tenant's check or other
reasonable evidence of payment of the same.

     3.   PREPARATION AND CONDITION OF PREMISES; POSSESSION AND SURRENDER OF
          ------------------------------------------------------------------
PREMISES.
--------

     A.   Condition of Premises.  Landlord is leasing the Premises to Tenant "AS
          ---------------------
IS", without any obligation to alter, remodel, improve, repair or decorate any
part of the Premises; provided, however, that Landlord agrees to deliver the
Premises to Tenant with the roof watertight, the building systems in operating
condition, and any prior tenant's personal property removed.

     B.   Tenant's Possession.  Tenant's taking possession of any portion of the
          -------------------
Premises shall be conclusive evidence that the Premises was in good order,
repair and condition.  If Landlord authorizes Tenant to take possession of any
part of the Premises prior to the

                                       8
<PAGE>

Commencement Date for purposes of doing business, all terms of this Lease shall
apply to such pre-Term possession, including Base Rent at the rate set forth for
the First Lease Year in the Schedule prorated for any partial month.

     C.   Tenant's Maintenance.  Throughout the Term and subject to Landlord's
          --------------------
maintenance obligations under Section 3D, below, and Section 5B, Tenant shall
maintain the Premises in their condition as of the Completion Date, loss or
damage caused by the elements, ordinary wear, and fire and other casualty
excepted.  Tenant's obligations shall include maintenance and repair of the
electrical, plumbing and sewage systems, the heating, ventilating and air
conditioning systems, and the elevators, lobbies, stairwells, and restrooms
(except as set forth in Section 3D and 5B, below).  At the termination of this
Lease, or Tenant's right to possession, Tenant shall return the Premises to
Landlord in broom-clean condition.  To the extent Tenant fails to perform either
obligation, Landlord may, but need not, restore the Premises to such condition
and Tenant shall pay the cost thereof.

     D.   Landlord's Maintenance.  Subject to Tenant's reimbursement as part of
          ----------------------
Operating Cost Share Rent, to the extent permitted in this Lease, Landlord shall
maintain in good condition (ordinary wear and tear and damage caused by fire and
other casualty excepted) the structural and exterior components of the Building,
including without limitation, the foundations, bearing and exterior walls,
subflooring, roof structure and membrane, and unexposed (below grade)
electrical, plumbing and sewage systems.  Landlord shall also maintain and
repair the exterior common areas, parking areas (including restriping, sweeping
and snow removal), outdoor landscaping, walkways, and exterior lighting.
Landlord shall not be obligated to repair or replace any fixtures or equipment
installed by or for Tenant.

     E.   Landlord's Failure to Maintain.  In the event that Landlord shall fail
          ------------------------------
to perform any of its obligations under Section 3D, above (i) following written
notice and opportunity to cure given by Tenant in accordance with Section 22,
below, or (ii) in the case of an emergency, within a reasonable time,
considering the nature of the emergency, following written notice from Tenant,
then in either event, Tenant may perform such obligations on Landlord's behalf,
and Landlord shall reimburse Tenant for Tenant's reasonable out-of-pocket costs
incurred in connection therewith promptly following receipt of Tenant's invoices
therefor.

     4.   PROJECT SERVICES.
          ----------------

     Landlord shall furnish services as follows:

     A.   Intentionally Omitted.
          ---------------------

     B.   Elevators.  Landlord shall provide 24-hour elevator service to Tenant.
          ---------

     C.   Electricity.  Landlord shall provide sufficient electricity to operate
          -----------
normal office lighting and equipment.

     D.   Water.  Landlord shall furnish hot and cold tap water for drinking and
          -----
toilet purposes.

                                       9
<PAGE>

     E.   Janitorial and Garbage Service.  Tenant shall provide its own
          ------------------------------
janitorial services and shall procure collection services for all manufacturing
waste.  Landlord shall provide garbage collection services for normal office
waste.

     F.   Interruption of Services.  If any of the Building equipment or
          ------------------------
machinery which Landlord is otherwise responsible to maintain and repair
hereunder ceases to function properly for any cause Landlord shall use
reasonable diligence to repair the same promptly.  Landlord's inability to
furnish, to any extent, the Project services set forth in this Section 4, or any
cessation thereof resulting from any causes, including any entry for repairs
pursuant to this Lease, and any renovation, redecoration or rehabilitation of
any area of the Building shall not render Landlord liable for damages to either
person or property or for interruption or loss to Tenant's business, nor be
construed as an eviction of Tenant, nor work an abatement of any portion of
Rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
However, in the event that an interruption of the Project services set forth in
this Section 4 causes the Premises to be untenantable for a period of at least
five (5) consecutive business days, monthly Rent shall thereafter be abated
proportionately.

     5.   ALTERATIONS AND REPAIRS.
          -----------------------

     A.   Landlord's Consent and Conditions.  Other than the Initial
          ---------------------------------
Improvements to be made by Tenant pursuant to Appendix C hereto, Tenant shall
not make any improvements or alterations to the Premises (the "Work") without in
each instance submitting plans and specifications for the Work to Landlord and
obtaining Landlord's prior written consent which shall not be unreasonably
withheld or delayed, except that Landlord's consent shall not be required for
interior, non-structural alterations that do not exceed Fifty Thousand Dollars
($50,000.00) in cost per project so long as (a) such Work does not impact the
base structural components or systems of the Building; provided, however, that
Tenant may make minor modifications to the Building's systems without the
Landlord's consent, and (b) such Work is not visible from outside the Premises.
Notwithstanding the foregoing, Landlord may withhold its consent in its sole
discretion for any Work which (a) impacts the base structural components or,
except as permitted above, the systems of the Building, (b) is visible from
outside the Premises, or (c) would require penetration of the roof of the
Building; provided, however, that Landlord shall not unreasonably withhold,
condition or delay its consent to additional equipment to support the Building
systems or services or to roof penetrations related to the same (provided,
however, that at Landlord's request, Tenant shall use Landlord's contractor in
connection with any roof penetrations) or to existing equipment installations.
Notwithstanding any provision to the contrary, Tenant shall, at Tenant's cost,
on or before the expiration or sooner termination of the Lease, upon Landlord's
request, return to the condition existing as of the date hereof, any portion of
the Building systems modified by Tenant pursuant to the terms of this Section,
and, as to any improvements or alterations for which Tenant shall have otherwise
obtained Landlord's consent, upon Landlord's request given at the time of its
consent to the Work.  In the event Landlord shall have failed to make such
request at the time of giving its consent, Tenant may surrender the improvements
or alterations to Landlord at the expiration or sooner termination of this
Lease.

                                       10
<PAGE>

     Tenant shall reimburse Landlord for actual reasonable costs incurred for
review of the plans and all other items submitted by Tenant.  Tenant shall pay
for the cost of all Work.  All Work shall become the property of Landlord upon
its installation, except for Tenant's trade fixtures and for items which
Landlord requires Tenant to remove at Tenant's cost at the termination of the
Lease pursuant to Section 5E.

     The following requirements shall apply to all Work:

          (1) Prior to commencement, Tenant shall furnish to Landlord building
     permits, certificates of insurance satisfactory to Landlord, and, at
     Landlord's request, evidence reasonably satisfactory to Landlord of
     Tenant's ability to pay all costs.

          (2) Tenant shall perform all Work so as to maintain peace and harmony
     among other contractors serving the Project and shall avoid interference
     with other work to be performed or services to be rendered in the Project.

          (3) The Work shall be performed in a good and workmanlike manner,
     meeting the standard for construction and quality of materials in the
     Building, and shall comply with all insurance requirements and all
     applicable governmental laws, ordinances and regulations ("Governmental
     Requirements").

          (4) Tenant shall perform all Work so as to minimize or prevent
     disruption to other tenants, and Tenant shall comply with all reasonable
     requests of Landlord in response to complaints from other tenants.

          (5) Tenant shall perform all Work in compliance with Landlord's
     "Policies, Rules and Procedures for Construction Projects" in effect at the
     time the Work is performed.

          (6) Tenant shall permit Landlord to supervise all Work.  If Landlord's
     employees or contractors perform the Work, Landlord may charge a
     supervisory fee not to exceed fifteen percent (15%) of labor, material, and
     all other costs of the Work.

          (7) Upon completion, Tenant shall furnish Landlord with contractor's
     affidavits and full and final statutory waivers of liens, as-built plans
     and specifications, and receipted bills covering all labor and materials,
     and all other close-out documentation required in Landlord's "Policies,
     Rules and Procedures for Construction Projects".

     B.   Damage to Systems.  If any part of the mechanical, electrical or other
          -----------------
systems that Landlord is required to maintain and repair under Section 3D above
shall be damaged, Tenant shall promptly notify Landlord, and Landlord shall
repair such damage.  Landlord may also at any reasonable time make any repairs
or alterations which Landlord deems necessary for the safety or protection of
the Project, or which Landlord is required to make by any court or pursuant to
any Governmental Requirement.  Tenant shall at its expense make all other
repairs necessary to keep the Premises, and Tenant's fixtures and personal
property, in good order, condition and repair; to the extent Tenant fails to do
so, Landlord may make such repairs itself.

                                       11
<PAGE>

The cost of any repairs made by Landlord on account of Tenant's default, or on
account of the mis-use or neglect by Tenant or its invitees, contractors or
agents anywhere in the Project, shall become Additional Rent payable by Tenant
on demand.

     C.   No Liens.  Tenant has no authority to cause or permit any lien or
          --------
encumbrance of any kind to affect Landlord's interest in the Project; any such
lien or encumbrance shall attach to Tenant's interest only.  If any mechanic's
lien shall be filed or claim of lien made for work or materials furnished to
Tenant, then Tenant shall at its expense within ten (10) days after notice
thereof either discharge or contest the lien or claim.  If Tenant contests the
lien or claim, then Tenant shall (i) within such ten (10) day period, provide
Landlord adequate security for the lien or claim, (ii) contest the lien or claim
in good faith by appropriate proceedings that operate to stay its enforcement,
and (iii) pay promptly any final adverse judgment entered in any such
proceeding.  If Tenant does not comply with these requirements, Landlord may
discharge the lien or claim, and the amount paid, as well as attorney's fees and
other expenses incurred by Landlord, shall become Additional Rent payable by
Tenant on demand.

     D.   Ownership of Improvements.  All Work as defined in this Section 5,
          -------------------------
including partitions, hardware, equipment, machinery and all other improvements
and all fixtures except trade fixtures and except Tenant's movable equipment and
machinery, constructed in the Premises by either Landlord or Tenant, shall
become Landlord's property upon installation without compensation to Tenant,
unless Landlord consents otherwise in writing.

     E.   Removal at Termination.  Upon the termination of this Lease or
          ----------------------
Tenant's right of possession Tenant shall remove from the Project its trade
fixtures, furniture, moveable equipment and other personal property, any
improvements which Landlord elects or shall have elected to be removed by Tenant
pursuant to Section 5A, and any improvements to any portion of the Project other
than the Premises.  Tenant shall repair all damage caused by the installation or
removal of any of the foregoing items.  If Tenant does not timely remove such
property, then Tenant shall be conclusively presumed to have, at Landlord's
election (i) conveyed such property to Landlord without compensation or (ii)
abandoned such property, and Landlord may dispose of or store any part thereof
in any manner at Tenant's sole cost, without waiving Landlord's right to claim
from Tenant all expenses arising out of Tenant's failure to remove the property,
and without liability to Tenant or any other person.  Landlord shall have no
duty to be a bailee of any such personal property.  If Landlord elects
abandonment, Tenant shall pay to Landlord, upon demand, any expenses incurred
for disposition.  Notwithstanding the foregoing, Landlord acknowledges and
agrees that Tenant may surrender to Landlord with the Premises, at the
expiration or sooner termination of this Lease, the following items contemplated
to be installed or constructed in the Premises as part of Tenant's Initial
Improvements:  HVAC system and related ducting, chilled water system and piping;
E-power generator and pad; plumbing; piping (stainless steel process related);
walls; doors; flooring; lighting; wiring; boilers and piping; air compressor;
RODI water system and piping; water for injection still, tanks and piping; Waste
Kill system; and additional loading docks and loading dock doors.

     6.   USE OF PREMISES.  Tenant shall use the Premises only for general
          ---------------
office, laboratory (including wet lab), research and product development and/or
pharmaceutical manufacturing purposes.  Tenant shall not allow any use of the
Premises which will negatively

                                       12
<PAGE>

affect the cost of coverage of Landlord's insurance on the Project without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed. Tenant shall in any event pay, as part of Operating Cost
Share Rent, any increased cost of insurance resulting from Tenant's use of the
Premises. Tenant shall not allow any use of the Premises which would interfere
with the operation of the Project by Landlord. Tenant shall not permit any
nuisance or waste upon the Premises, or allow any offensive noise or odor
outside the Building.

     Notwithstanding any other term or provision hereof, if any governmental
authority shall deem the Premises to be a "place of public accommodation" under
the Americans with Disabilities Act or any other comparable law as a result of
Tenant's use, Tenant shall either modify its use to cause such authority to
rescind its designation or be responsible for any alterations, structural or
otherwise, required to be made to the Building under such laws.

     7.   GOVERNMENTAL REQUIREMENTS AND BUILDING RULES.  Tenant shall comply
          --------------------------------------------
with all Governmental Requirements applying to its use of the Premises.  Tenant
shall also comply with all reasonable rules established for the Project from
time to time by Landlord.  The present rules and regulations are contained in
Appendix B.  Failure by another tenant to comply with the rules or failure by
Landlord to enforce them shall not relieve Tenant of its obligation to comply
with the rules or make Landlord responsible to Tenant in any way.  Landlord
shall use reasonable efforts to apply the rules and regulations uniformly with
respect to Tenant and tenants in the Building under leases containing rules and
regulations similar to this Lease.  In the event of alterations and repairs
performed by Tenant, Tenant shall comply with the provisions of Section 5 of
this Lease and also Landlord's "Policies, Rules and Regulations for Construction
Projects."

     8.   WAIVER OF CLAIMS; INDEMNIFICATION; INSURANCE.
          --------------------------------------------

     A.   Indemnification.  Except to the extent caused by the negligence or
          ---------------
willful misconduct of Landlord, Tenant shall indemnify, defend and hold harmless
Landlord and its officers, directors, employees and agents against any claim by
any third party for injury to any person or damage to or loss of any property
occurring in the Project and arising from the use of the Premises or from any
other act or omission or negligence of Tenant or any of Tenant's employees or
agents.  Tenant's obligations under this section shall survive the termination
of this Lease.

     Except to the extent caused by the negligence or willful misconduct of
Tenant, Landlord shall indemnify, defend and hold harmless Tenant and its
officers, directors, employees and agents against any claim by any third party
for damage to person or damage to or loss of any property occurring on or about
the Project arising from any act or omission or negligence of Landlord or any of
Landlord's employees or agents.  Landlord's obligations under this section shall
survive the termination of this Lease.

     AS BETWEEN LANDLORD AND TENANT ONLY, EACH HEREBY WAIVES ITS IMMUNITY WITH
RESPECT TO THE OTHER UNDER THE INDUSTRIAL INSURANCE ACT (RCW TITLE 51) AND/OR
THE LONGSHOREMAN'S AND HARBORWORKER'S ACT AND/OR ANY EQUIVALENT ACTS AND EACH

                                       13
<PAGE>

EXPRESSLY AGREES TO ASSUME POTENTIAL LIABILITY FOR ACTIONS BROUGHT AGAINST THE
OTHER BY THE WAIVING PARTY'S EMPLOYEES.  THIS WAIVER HAS BEEN SPECIFICALLY
NEGOTIATED BY THE PARTIES TO THIS LEASE AND EACH PARTY HAS HAD THE OPPORTUNITY
TO, AND HAS BEEN ENCOURAGED, TO CONSULT WITH INDEPENDENT COUNSEL REGARDING THIS
WAIVER.

     B.   Tenant's Insurance.  Tenant shall maintain insurance as follows, with
          ------------------
such other terms, coverages and insurers, as Landlord shall reasonably require
from time to time:

          (1) Commercial General Liability Insurance, with (a) Contractual
     Liability including the indemnification provisions contained in this Lease,
     (b) a severability of interest endorsement, (c) limits of not less than One
     Million Dollars ($1,000,000) combined single limit per occurrence and not
     less than One Million Dollars ($1,000,000) in the aggregate for bodily
     injury, sickness or death, and property damage, and umbrella coverage of
     not less than Five Million Dollars ($5,000,000).

          (2) Property Insurance against "All Risks" of physical loss covering
     the replacement cost of all improvements constructed by Tenant, fixtures
     and personal property.  Tenant waives all rights of subrogation, and
     Tenant's property insurance shall include a waiver of subrogation in favor
     of Landlord.

          (3) Workers' compensation or similar insurance in form and amounts
     required by law, and Employer's Liability with not less than the following
     limits:

                    Each Accident             $500,000
                    Disease--Policy Limit     $500,000
                    Disease--Each Employee    $500,000

          Such insurance shall contain a waiver of subrogation provision in
     favor of Landlord and its agents.

     Tenant's insurance shall be primary and not contributory to that carried by
Landlord, its agents, or mortgagee.  Landlord, and if any, Landlord's building
manager or agent and ground lessor shall be named as additional insureds as
respects to insurance required of the Tenant in Section 8B(1).  The company or
companies writing any insurance which Tenant is required to maintain under this
Lease, as well as the form of such insurance, shall at all times be subject to
Landlord's reasonable approval, and any such company shall be licensed to do
business in the state in which the Building is located.  Such insurance
companies shall have a A.M. Best rating of A VI or better.  Tenant shall have
the right to maintain its required insurance under blanket policies, provided
that Landlord, Landlord's building manager or agent and ground lessor, if any,
are named therein as additional insureds with respect to the insurance required
in Section 8B(1) and provided that the coverage afforded Landlord and such
parties will not be reduced or diminished by reason thereof.

                                       14
<PAGE>

     Tenant shall cause any contractor of Tenant performing construction work on
the Premises to maintain insurance as follows, with such other terms, coverages
and insurers, as Landlord shall reasonably require from time to time:

          (1) Commercial General Liability Insurance, including contractor's
     liability coverage, contractual liability coverage, completed operations
     coverage, broad form property damage endorsement, and contractor's
     protective liability coverage, to afford protection with limits, for each
     occurrence, of not less than One Million Dollars ($1,000,000) with respect
     to personal injury, death or property damage.

          (2) Workers' compensation or similar insurance in form and amounts
     required by law, and Employer's Liability with not less than the following
     limits:

                    Each Accident             $500,000
                    Disease--Policy Limit     $500,000
                    Disease--Each Employee    $500,000

          Such insurance shall contain a waiver of subrogation provision in
     favor of Landlord and its agents.

     Tenant's contractor's insurance shall be primary and not contributory to
that carried by Tenant, Landlord, their agents or mortgagees.  Tenant and
Landlord, and if any, Landlord's building manager or agent, mortgagee or ground
lessor shall be named as additional insured on Tenant's contractor's insurance
policies.

     C.   Insurance Certificates.  Tenant shall deliver to Landlord certificates
          ----------------------
evidencing all required insurance no later than five (5) days prior to the
Commencement Date and each renewal date.  Each certificate will provide for
thirty (30) days prior written notice of cancellation to Landlord and Tenant.

     D.   Landlord's Insurance.  Landlord shall maintain "All-Risk" property
          --------------------
insurance at full replacement cost, including earthquake insurance and loss of
rents, on the Building, and Commercial General Liability insurance policies with
respect to Landlord's maintenance and operation of the Project, each with such
terms, coverages and conditions as are normally carried by reasonably prudent
owners of properties similar to the Project.  With respect to property
insurance, Landlord and Tenant mutually waive all rights of subrogation, and the
respective "All-Risk" coverage property insurance policies carried by Landlord
and Tenant shall contain enforceable waiver of subrogation endorsements.

     9.   FIRE AND OTHER CASUALTY.
          -----------------------

     A.   Termination.  If a fire or other casualty causes substantial damage to
          -----------
the Building or the Premises, Landlord shall engage a registered architect
qualified to evaluate a special purpose facility such as the Premises to certify
within sixty (60) days of the casualty to both Landlord and Tenant the amount of
time needed to restore the Building and the Premises to tenantability, using
standard working methods.  If the time needed exceeds eighteen (18) months

                                       15
<PAGE>

from the beginning of the restoration, or two (2) months therefrom if the
restoration would begin during the last twelve (12) months of the Lease, then
either Landlord or Tenant may terminate this Lease by notice to the other party
within thirty (30) days after the notifying party's receipt of the architect's
certificate. Notwithstanding the foregoing, if flood or other peril for which
Landlord is not required to carry insurance causes substantial damage to the
Premises or the Building, Landlord may also terminate this Lease by written
notice given to Tenant within sixty (60) days from the date of the casualty. The
termination shall be effective thirty (30) days from the date of the notice and
Rent shall be paid by Tenant to that date, with an abatement for any portion of
the Premises which has been untenantable after the casualty.

     B.   Restoration.  If a casualty causes damage to the Building or the
          -----------
Premises but this Lease is not terminated for any reason, then subject to the
rights of any mortgagees or ground lessors, Landlord shall obtain the applicable
insurance proceeds and diligently restore the Building and the Premises subject
to current Governmental Requirements.  Tenant shall replace its damaged
improvements, personal property and fixtures.  Rent shall be abated on a per
diem basis during the restoration for any portion of the Premises which is
untenantable.

     10.  EMINENT DOMAIN.  If a part of the Project is taken by eminent domain
          --------------
or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking.  If any
substantial portion of the Project is taken without affecting the Premises, then
Landlord may terminate this Lease as of the date of such taking.  Rent shall
abate from the date of the taking in proportion to any part of the Premises
taken.  The entire award for a taking of any kind shall be paid to Landlord, and
Tenant shall have no right to share in the award; provided, however, that Tenant
shall be entitled to recover a portion of the award attributable to the Initial
Improvements paid for by Tenant, which shall be determined by dividing the
number of years then remaining in the primary term of the Lease by 20, and
multiplying the quotient by the value of such Initial Improvements as determined
by the condemning authority.  All obligations accrued to the date of the taking
shall be performed by the party liable to perform said obligations, as set forth
herein.

     11.  RIGHTS RESERVED TO LANDLORD.
          ---------------------------

     Landlord may exercise at any time any of the following rights respecting
the operation of the Project without liability to the Tenant of any kind:

     A.   Name.  To change the name or street address of the Building or the
          ----
suite number(s) of the Premises.

     B.   Signs.  To install and maintain any building and/or Project
          -----
identification signs on the exterior of the Building, and to approve, prior to
installation, any of Tenant's signs in the Premises visible from the common
areas or the exterior of the Building.  Landlord's approval shall not be
unreasonably withheld or delayed.

     C.   Window Treatments.  To approve, prior to installation, any shades,
          -----------------
blinds, ventilators or window treatments of any kind, as well as any lighting
within the Premises that

                                       16
<PAGE>

may be visible from the exterior of the Building or any interior common area.
Landlord's approval shall not be unreasonably withheld or delayed.

     D.   Keys.  To retain and use at any time passkeys to enter the Premises or
          ----
any door within the Premises. Tenant may install its own security systems in the
Building, provided that Tenant shall provide Landlord with keys or pass cards
for any locks installed by Tenant.

     E.   Access.  At reasonable times and upon reasonable notice (except in an
          ------
emergency) to have access to inspect the Premises, and to perform its
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.  Landlord shall observe any reasonable safety and
security procedures of Tenant, provided that Landlord has received reasonable
advance written notice of the same.  Except in an emergency, Landlord shall be
accompanied by a representative of Tenant whenever entering Tenant's production
areas within the Premises.

     F.   Preparation for Reoccupancy.  To decorate, remodel, repair, alter or
          ---------------------------
otherwise prepare the Premises for reoccupancy at any time after Tenant abandons
the Premises, without relieving Tenant of any obligation to pay Rent.

     G.   Heavy Articles.  To approve the weight, size, placement and time and
          --------------
manner of movement within the mezzanine area of the Building of any safe,
central filing system or other heavy article of Tenant's property.  Tenant shall
move its property entirely at its own risk.

     H.   Show Premises.  To show the Premises to prospective purchasers,
          -------------
brokers, lenders, investors, rating agencies or others at any reasonable time,
provided that Landlord gives prior notice to Tenant, and provided that Landlord
and any such persons do not materially interfere with Tenant's use of the
Premises, observe any reasonable safety and security procedures of which Tenant
has provided Landlord with advance written notice, and are accompanied by a
representative of Tenant whenever entering Tenant's production areas.  Subject
to the foregoing requirements, Landlord may also show the Premises to
prospective tenants during the last twelve (12) months of the Lease term.

     I.   Intentionally Omitted.
          ---------------------

     J.   Use of Lockbox.  To designate a lockbox collection agent for
          --------------
collections of amounts due Landlord.  In that case, the date of payment of Rent
or other sums shall be the date of the agent's receipt of such payment or the
date of actual collection if payment is made in the form of a negotiable
instrument thereafter dishonored upon presentment.  However, Landlord may reject
any payment for all purposes as of the date of receipt or actual collection by
mailing to Tenant within 21 days after such receipt or collection a check equal
to the amount sent by Tenant.

     K.   Repairs and Alterations.  Subject to Tenant's prior approval in each
          -----------------------
of the following instances, which approval shall not be unreasonably withheld,
conditioned or delayed, to make repairs or alterations to the Project and in
doing so transport any required material through the Premises, to temporarily
close entrances, doors, corridors, elevators and other

                                       17
<PAGE>

facilities in the Project, to temporarily open any ceiling in the Premises, or
to temporarily suspend services in the Building; provided, however, that
Tenant's approval shall not be required to the extent any of the foregoing is
necessary in an emergency. Landlord shall in any event use reasonable efforts to
provide Tenant with reasonable notice before entering the Premises for any of
the foregoing purposes in an emergency and to minimize interruption of Tenant's
business activities in the Premises, and Landlord shall not unreasonably
interfere with Tenant's access to the Premises. Landlord may perform any such
repairs or alterations during ordinary business hours, except that Tenant may
require any Work in the Premises to be done after business hours if Tenant pays
Landlord for overtime and any other expenses incurred. Landlord may do or permit
any work on any nearby building, land, street, alley or way.

     L.   Landlord's Agents.  If Tenant is in default under this Lease,
          -----------------
possession of Tenant's funds or negotiation of Tenant's negotiable instrument by
any of Landlord's agents shall not waive any breach by Tenant or any remedies of
Landlord under this Lease.

     M.   Building Services.  To install, use and maintain through the Premises,
          -----------------
pipes, conduits, wires and ducts serving the Building, provided that such
installation, use and maintenance does not unreasonably interfere with Tenant's
use of the Premises.

     N.   Other Actions.  To take any other action which Landlord deems
          -------------
reasonable in connection with the operation, maintenance or preservation of the
Building.

     12.  TENANT'S DEFAULT.
          ----------------

     Any of the following shall constitute a default by Tenant:

     A.   Rent Default.  Tenant fails to pay any Rent within five (5) days
          ------------
following written notice that the same is past due.

     B.   Assignment/Sublease or Hazardous Substances Default.  Tenant defaults
          ---------------------------------------------------
after ten (10) days' written notice and opportunity to cure in Tenant's
obligations under Section 17 Assignment and Sublease or Section 28 Hazardous
Substances;

     C.   Other Performance Default.  Tenant fails to perform any other
          -------------------------
obligation to Landlord under this Lease, and, in the case of only the first two
(2) such failures during the Term of this Lease, this failure continues for
thirty (30) days after written notice from Landlord, except that if Tenant
begins to cure its failure within the thirty (30) day period but cannot
reasonably complete its cure within such period, then, so long as Tenant
continues to diligently attempt to cure its failure, the thirty (30) day period
shall be extended to ninety (90) days, or such lesser period as is reasonably
necessary to complete the cure;

     D.   Credit Default.  One of the following credit defaults occurs:
          --------------

          (1) Tenant commences any proceeding under any law relating to
     bankruptcy, insolvency, reorganization or relief of debts, or seeks
     appointment of a receiver, trustee, custodian or other similar official for
     the Tenant or for any substantial part of its property,

                                       18
<PAGE>

     or any such proceeding is commenced against Tenant and either remains
     undismissed for a period of thirty days or results in the entry of an order
     for relief against Tenant which is not fully stayed within seven days after
     entry;

          (2) Tenant becomes insolvent or bankrupt, does not generally pay its
     debts as they become due, or admits in writing its inability to pay its
     debts, or makes a general assignment for the benefit of creditors;

          (3) Any third party obtains a levy or attachment under process of law
     against Tenant's leasehold interest.

     E.   Abandonment Default.  Tenant abandons the Premises.
          -------------------

     13.  LANDLORD REMEDIES.
          -----------------

     A.   Termination of Lease or Possession.  If Tenant defaults, Landlord may
          ----------------------------------
elect by notice to Tenant either to terminate this Lease or to terminate
Tenant's possession of the Premises without terminating this Lease.  In either
case, Tenant shall immediately vacate the Premises and deliver possession to
Landlord, and Landlord may repossess the Premises and may, at Tenant's sole
cost, remove any of Tenant's signs and any of its other property, without
relinquishing its right to receive Rent or any other right against Tenant.

     B.   Lease Termination Damages.  If Landlord terminates the Lease, Tenant
          -------------------------
shall pay to Landlord all Rent due on or before the date of termination, plus
Landlord's reasonable estimate of the aggregate Rent that would have been
payable from the date of termination through the Termination Date (excluding any
additional Base Rent payable by Tenant as a result of any Overstandard Tenant
Improvement Allowance paid by Landlord in accordance with Appendix C hereto),
reduced by the rental value of the Premises calculated as of the date of
termination for the same period, taking into account anticipated vacancy prior
to reletting, reletting expenses and market concessions, both discounted to
present value at the rate of five percent (5%) per annum.  If Landlord shall
relet any part of the Premises for any part of such period before such present
value amount shall have been paid by Tenant or finally determined by a court,
then the amount of Rent payable pursuant to such reletting (taking into account
vacancy prior to reletting and any reletting expenses or concessions) shall be
deemed to be the reasonable rental value for that portion of the Premises relet
during the period of the reletting.  In addition, Tenant shall immediately pay
to Landlord upon such termination the unpaid principal balance of any
Overstandard Tenant Improvement Allowance paid by Landlord pursuant to Appendix
C hereto.

     C.   Possession Termination Damages.  If Landlord terminates Tenant's right
          ------------------------------
to possession without terminating the Lease and Landlord takes possession of the
Premises itself, Landlord may relet any part of the Premises for such Rent, for
such time, and upon such terms as Landlord in its sole discretion shall
determine.  Any proceeds from reletting the Premises shall first be applied to
the expenses of reletting, including redecoration, repair, alteration,
advertising, brokerage, legal, and other reasonably necessary expenses.  If the
reletting proceeds after payment of expenses are insufficient to pay the full
amount of Rent under this Lease, Tenant

                                       19
<PAGE>

shall pay such deficiency to Landlord monthly upon demand as it becomes due. Any
excess proceeds shall be retained by Landlord.

     D.   Landlord's Remedies Cumulative.  All of Landlord's remedies under this
          ------------------------------
Lease shall be in addition to all other remedies Landlord may have at law or in
equity.  Waiver by Landlord of any breach of any obligation by Tenant shall be
effective only if it is in writing, and shall not be deemed a waiver of any
other breach, or any subsequent breach of the same obligation.  Landlord's
acceptance of payment by Tenant shall not constitute a waiver of any breach by
Tenant, and if the acceptance occurs after Landlord's notice to Tenant, or
termination of the Lease or of Tenant's right to possession, the acceptance
shall not affect such notice or termination.  Acceptance of payment by Landlord
after commencement of a legal proceeding or final judgment shall not affect such
proceeding or judgment.  Landlord may advance such monies and take such other
actions for Tenant's account as reasonably may be required to cure or mitigate
any default by Tenant.  Tenant shall immediately reimburse Landlord for any such
advance, and such sums shall bear interest at the default interest rate until
paid.

     E.   WAIVER OF TRIAL BY JURY.  EACH PARTY WAIVES TRIAL BY JURY IN THE EVENT
          -----------------------
OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION WITH THIS LEASE.
EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN CONNECTION WITH THIS
LEASE IN A FEDERAL OR STATE COURT LOCATED IN WASHINGTON, CONSENTS TO THE
JURISDICTION OF SUCH COURTS, AND WAIVES ANY RIGHT TO HAVE ANY PROCEEDING
TRANSFERRED FROM SUCH COURTS ON THE GROUND OF IMPROPER VENUE OR INCONVENIENT
FORUM.

     F.   Litigation Costs.  Tenant shall pay Landlord's reasonable attorneys'
          ----------------
fees and other costs in enforcing this Lease, whether or not suit is filed.

     14.  SURRENDER.  Upon termination of this Lease or Tenant's right to
          ---------
possession, Tenant shall return the Premises to Landlord in good order and
condition, ordinary wear and casualty damage excepted.  If Landlord requires
Tenant to remove any alterations as permitted in this Lease, then Tenant shall
remove the alterations in a good and workmanlike manner and restore the Premises
to its condition prior to their installation.

     15.  HOLDOVER.  Tenant shall have no right to holdover possession of the
          --------
Premises after the expiration or termination of this Lease without Landlord's
prior written consent, which consent may be withheld in Landlord's sole and
absolute discretion.  If Tenant retains possession of any part of the Premises
after the Term, Tenant shall become a month-to-month tenant for the entire
Premises upon all of the terms of this Lease as might be applicable to such
month-to-month tenancy, except that Tenant shall pay all of Base Rent, Operating
Cost Share Rent and Tax Share Rent at 125% the rate in effect immediately prior
to such holdover, computed on a monthly basis for each full or partial month
Tenant remains in possession.  Tenant shall also pay Landlord all of Landlord's
direct and consequential damages.  No acceptance of Rent or other payments by
Landlord under these holdover provisions shall operate as a waiver of Landlord's
right to regain possession or any other of Landlord's remedies.

                                       20
<PAGE>

     16.  SUBORDINATION TO GROUND LEASES AND MORTGAGES.
          --------------------------------------------

     A.   Subordination.  This Lease shall be subordinate to any present or
          -------------
future ground lease or mortgage respecting the Project, and any amendments to
such ground lease or mortgage, at the election of the ground lessor or mortgagee
as the case may be, effected by notice to Tenant in the manner provided in this
Lease; provided, however, that as to any future ground lease or mortgage, the
ground lessor or mortgagee agrees not to disturb Tenant's possession of the
Premises pursuant to this Lease so long as Tenant shall be timely complying with
its obligations hereunder.  The subordination shall be effective upon such
notice, but at the request of Landlord or ground lessor or mortgagee, Tenant
shall within ten (10) days of the request, execute and deliver to the requesting
party any reasonable documents provided to evidence the subordination.  Any
mortgagee has the right, at its option, to subordinate its mortgage to the terms
of this Lease, without notice to, nor the consent of, Tenant.

     B.   Termination of Ground Lease or Foreclosure of Mortgage.  If any ground
          ------------------------------------------------------
lease is terminated or mortgage foreclosed or deed in lieu of foreclosure given
and the ground lessor, mortgagee, or purchaser at a foreclosure sale shall
thereby become the owner of the Project, Tenant shall attorn to such ground
lessor or mortgagee or purchaser without any deduction or setoff by Tenant, and
this Lease shall continue in effect as a direct lease between Tenant and such
ground lessor, mortgagee or purchaser.  The ground lessor or mortgagee or
purchaser shall be liable as Landlord only during the time such ground lessor or
mortgagee or purchaser is the owner of the Project.  At the request of Landlord,
ground lessor or mortgagee, Tenant shall execute and deliver within ten (10)
days of the request any commercially reasonable document furnished by the
requesting party to evidence Tenant's agreement to attorn.

     C.   Security Deposit.  Any ground lessor or mortgagee shall be responsible
          ----------------
for the return of any security deposit by Tenant only to the extent the security
deposit is received by such ground lessor or mortgagee.

     D.   Notice and Right to Cure.  The Project is subject to any ground lease
          ------------------------
and mortgage identified with name and address of ground lessor or mortgagee in
Appendix D to this Lease (as the same may be amended from time to time by
written notice to Tenant).  Tenant agrees to send by registered or certified
mail to any ground lessor or mortgagee identified either in such Appendix or in
any later notice from Landlord to Tenant a copy of any notice of default sent by
Tenant to Landlord.  If Landlord fails to cure such default within the required
time period under this Lease, but ground lessor or mortgagee begins to cure
within ten (10) days after such period and proceeds diligently to complete such
cure, then ground lessor or mortgagee shall have such additional time as is
necessary to complete such cure, including any time necessary to obtain
possession if possession is necessary to cure, and Tenant shall not begin to
enforce its remedies so long as the cure is being diligently pursued; provided,
however, that the foregoing shall not preclude Tenant from making emergency
repairs on Landlord's behalf, as permitted in Section 4E, above.

     E.   Definitions.  As used in this Section 16, "mortgage" shall include
          -----------
"deed of trust" and/or "trust deed" and "mortgagee" shall include "beneficiary"
and/or "trustee", "mortgagee" shall include the mortgagee of any ground lessee,
and "ground lessor", "mortgagee", and

                                       21
<PAGE>

"purchaser at a foreclosure sale" shall include, in each case, all of its
successors and assigns, however remote.

     17.  ASSIGNMENT AND SUBLEASE.
          -----------------------

     A.   In General.  Tenant shall not, without the prior consent of Landlord
          ----------
in each case, (i) make or allow any assignment or transfer, by operation of law
or otherwise, of any part of Tenant's interest in this Lease, (ii) grant or
allow any lien or encumbrance, by operation of law or otherwise, upon any part
of Tenant's interest in this Lease (except as permitted in Section 17G, below),
(iii) sublet any part of the Premises, or (iv) permit anyone other than Tenant
and its employees to occupy any part of the Premises.  Tenant shall remain
primarily liable for all of its obligations under this Lease, notwithstanding
any assignment or transfer.  No consent granted by Landlord shall be deemed to
be a consent to any subsequent assignment or transfer, lien or encumbrance,
sublease or occupancy.  Tenant shall pay all of Landlord's reasonable attorneys'
fees and other expenses incurred in connection with any consent requested by
Tenant or in reviewing any proposed assignment or subletting.  Any assignment or
transfer, grant of lien or encumbrance, or sublease or occupancy without
Landlord's prior written consent shall be void.  Except in the case of a
Permitted Transfer, as defined in Section 17D, below, if Tenant shall assign
this Lease or sublet the Premises in its entirety any rights of Tenant to renew
this Lease, extend the Term or to lease additional space in the Project shall be
extinguished thereby and will not be transferred to the assignee or subtenant,
all such rights being personal to the Tenant named herein.

     B.   Landlord's Consent.  Landlord will not unreasonably withhold its
          ------------------
consent to any proposed assignment or subletting.  It shall be reasonable for
Landlord to withhold its consent to any assignment or sublease if (i) Tenant is
in default under this Lease, (ii) the financial responsibility, nature of
business, and character of the proposed assignee or subtenant are not all
reasonably satisfactory to Landlord, (iii) in the reasonable judgment of
Landlord the purpose for which the assignee or subtenant intends to use the
Premises (or a portion thereof) is not in keeping with Landlord's standards for
the Building or are in violation of the terms of this Lease or any other leases
in the Project, (iv) the proposed assignee or subtenant is a government entity,
or (v) the proposed assignment is for less than the entire Premises or for less
than the remaining Term of the Lease.  The foregoing shall not exclude any other
reasonable basis for Landlord to withhold its consent.

     C.   Procedure.  Tenant shall notify Landlord of any proposed assignment or
          ---------
sublease at least thirty (30) days prior to its proposed effective date.  The
notice shall include the name and address of the proposed assignee or subtenant,
its corporate affiliates in the case of a corporation and its partners in a case
of a partnership, an execution copy of the proposed assignment or sublease, and
sufficient information to permit Landlord to determine the financial
responsibility and character of the proposed assignee or subtenant.  As a
condition to any effective assignment of this Lease, the assignee shall execute
and deliver in form satisfactory to Landlord at least fifteen (15) days prior to
the effective date of the assignment, an assumption of all of the obligations of
Tenant under this Lease.  As a condition to any effective sublease, subtenant
shall execute and deliver in form satisfactory to Landlord at least fifteen (15)
days prior to the effective date of the sublease, an agreement to comply with
all of Tenant's obligations

                                       22
<PAGE>

under this Lease, and at Landlord's option, an agreement (except for the
economic obligations which subtenant will undertake directly to Tenant) to
attorn to Landlord under the terms of the sublease in the event this Lease
terminates before the sublease expires.

     D.   Permitted Transfers.  Notwithstanding the terms of Section 17B, above,
          -------------------
and subject to Tenant's compliance with the terms set forth in Section 17C,
above, Landlord agrees to consent to Tenant's assignment of this Lease or
subletting of all or a portion of the Premises to (i) an Affiliate of Tenant;
(ii) a successor corporation of Tenant by merger; or (iii) subject to Landlord's
reasonable approval of such entity's financial ability to perform its
obligations under this Lease, an entity that purchases substantially all of
Tenant's assets as a going concern ("Permitted Transfers").

     E.   Excess Payments.  If Tenant shall assign this Lease or sublet any part
          ---------------
of the Premises for consideration in excess of the pro-rata portion of Rent
applicable to the space subject to the assignment or sublet, then Tenant shall
pay to Landlord as Additional Rent 50% of any such excess immediately upon
receipt, after deduction of Tenant's reasonable out-of-pocket costs incurred in
connection with the assignment or sublease.

     F.   Recapture.  Except in the case of a Permitted Transfer, Landlord may,
          ---------
by giving written notice to Tenant within thirty (30) days after receipt of
Tenant's notice of assignment, terminate this Lease as of the effective date of
the proposed assignment and all obligations under this Lease shall expire except
as to any obligations that expressly survive any termination of this Lease.

     G.   Permitted Encumbrance.  Notwithstanding the terms of Section 17A(ii);
          ---------------------
(i) Tenant may grant to Medeva Pharmaceuticals, Inc., a Delaware corporation, or
to Celltech Group plc, a public limited liability company organized under the
laws of England, or to an Affiliate of either of them, a security interest in
Tenant's interest in this Lease; (ii) Landlord will accept such entity as the
tenant under this Lease if the applicable entity succeeds to Tenant's interest
as a result of the foreclosure or other exercise of the security interest; and
(iii) Landlord agrees not to terminate this Lease as a result of Tenant's
default without giving the applicable entity notice of the specific default(s)
(which may include a contemporaneous copy of any default notice delivered to
Tenant) and the same opportunity to cure the default given to Tenant under the
terms of this Lease (except that a default by Tenant under Section 12D of this
Lease shall not be grounds for termination of this Lease if the applicable
entity assumes the obligations of Tenant under this Lease as provided in Section
17G); all of the foregoing provided that at the time the security interest is
entered into (a) the applicable entity agrees in writing with Landlord that, if
it takes possession of the Premises, it will assume Tenant's obligations under
this Lease which accrue or continue after the date it takes possession and that
it will timely cure any prior defaults of Tenant of which it has received
notice, (b) the interest of such entity shall in all respects remain subordinate
to the interests of Landlord hereunder and to any future lender of Landlord, and
(c) at the request of Landlord and/or any Landlord lender, such entity will
execute such commercially reasonable documents as may be required to further
evidence such subordination.  Such entity shall provide Landlord with its
address for notices.  Landlord's consent to Tenant's granting a security
interest in Tenant's leasehold interest to any other entity shall not be
unreasonably withheld or delayed, provided that (w) Landlord is reasonably
satisfied that such entity possesses

                                       23
<PAGE>

the experience and financial ability to perform the obligations of Tenant
hereunder, (x) such entity agrees in writing with Landlord at the time the
security interest is entered into that, if it takes possession of the Premises,
it will assume Tenant's obligations under this Lease which accrue or continue
after the date it takes possession and that it will timely cure any prior
defaults of Tenant of which it has received notice, (y) the interest of such
entity shall in all respects remain subordinate to the interests of Landlord
hereunder and of any future Landlord lender, and (z) at the request of Landlord
and and/or any Landlord lender, such entity will execute such commercially
reasonable documents as may be required to further evidence such subordination.
Nothing contained in this Section 17G shall in any way diminish or affect any
right of Landlord against the Tenant should Tenant default in its obligations
under the terms of this Lease, except Landlord's right to terminate the tenancy
as provided herein. Landlord's delivery of any default notice to any entity
holding a security interest in Tenant's leasehold interest shall not afford such
entity any greater time period or rights to cure than those afforded Tenant in
this Lease. Tenant may grant only one security interest in Tenant's leasehold
interest at a time. No security interest in Tenant's leasehold interest will be
valid or enforceable as against Landlord unless entered into in strict
compliance with this section.

     18.  CONVEYANCE BY LANDLORD.  If Landlord shall at any time transfer its
          ----------------------
interest in the Project or this Lease, Landlord shall be released of any
obligations accruing after such transfer (but not any surviving indemnities
relating to events or obligations accruing prior to the transfer), except the
obligation to return to Tenant any security deposit not delivered to its
transferee, and Tenant shall look solely to Landlord's successors for
performance of such obligations.  This Lease shall not be affected by any such
transfer.

     19.  ESTOPPEL CERTIFICATE.  Each party shall, within ten (10) days of
          --------------------
receiving  a request from the other party, execute, acknowledge in recordable
form, and deliver to the other party or its designee a certificate stating,
subject to a specific statement of any applicable exceptions, that the Lease as
amended to date is in full force and effect, that the Tenant is paying Rent and
other charges on a current basis, and that to the best of the knowledge of the
certifying party, the other party has committed no uncured defaults and has no
offsets or claims.  The certifying party may also be required to state the date
of commencement of payment of Rent, the Commencement Date, the Termination Date,
the Base Rent, the current Operating Cost Share Rent and Tax Share Rent
estimates, the status of any improvements required to be completed by Landlord,
the amount of any security deposit, and such other matters as may be reasonably
requested.  Failure to deliver such statement within the time required shall be
conclusive evidence against the non-certifying party that this Lease, with any
amendments identified by the requesting party, is in full force and effect, that
there are no uncured defaults by the requesting party, that not more than one
month's Rent has been paid in advance, that the non-certifying party has not
paid any security deposit, and that the non-certifying party has no claims or
offsets against the requesting party.

     20.  SECURITY DEPOSIT.  Tenant shall deposit with Landlord on the date of
          ----------------
this Lease, as security for the performance of all of its obligations under this
Lease, an irrevocable, standby letter of credit (the "Letter of Credit"), in
form and content reasonably satisfactory to Landlord, in the amount of One
Million Dollars ($1,000,000.00).  Provided that Tenant is not in default under
the terms of this Lease at the times the reductions would otherwise occur, the

                                       24
<PAGE>

amount of the Letter of Credit may be reduced by twenty percent (20%) at the
expiration of each of the first four (4) years of the Lease term; in no event
shall the Letter of Credit be reduced below Two Hundred Thousand Dollars
($200,000.00).

     In addition to the foregoing Letter of Credit, if Tenant should elect to
have Landlord provide the Overstandard Tenant Improvement Allowance provided for
in paragraph 4 of Appendix C hereto, Tenant shall deposit with Landlord, within
ten (10) days following Tenant's written notice of its election to do so, a
second Letter of Credit in the amount of $3,784,600.00, in form and content
reasonably satisfactory to Landlord; provided, however, that the amount of such
Letter of Credit may be reduced to the amount of the Overstandard Tenant
Improvement Allowance actually paid by Landlord, if less, upon determination of
such amount.  Provided that Tenant is not in default under the terms of this
Lease at the times the reductions would otherwise occur, the amount of the
second Letter of Credit may be reduced by 1/15, or 6.67%, at the expiration of
each year of the primary term of this Lease.

     Tenant may at any time deposit cash amounts with Landlord equivalent to the
amounts of the Letter(s) of Credit set forth above, and such cash and/or the
Letter(s) of Credit shall be deemed the "Security Deposit."  If Landlord draws
the full amount of the Letter(s) of Credit as a result of Tenant's failure to
renew or replace the Letter(s) of Credit, the funds drawn shall be deemed to be
cash amounts applicable to the required amount of the Security Deposit.  If
Tenant defaults under this Lease, Landlord may use any part of the Security
Deposit to make any defaulted payment, to pay for Landlord's cure of any
defaulted obligation, or to compensate Landlord for any loss or damage resulting
from any default.  To the extent any portion of the deposit is used, or should
the amount available to Landlord be less than the full amount required hereunder
if Tenant fails to renew or replace the Letter(s) of Credit, Tenant shall within
five (5) days after demand from Landlord restore the deposit to its full amount,
and Tenant's failure to do so shall be deemed a default hereunder without the
necessity of any further notice under Article 12 of this Lease.  Landlord may
keep the Security Deposit in its general funds and shall not be required to pay
interest to Tenant on the deposit amount.  If Tenant shall perform all of its
obligations under this Lease and return the Premises to Landlord at the end of
the Term, Landlord shall return all of the remaining Security Deposit to Tenant
within thirty (30) days after the end of the Term.  The Security Deposit shall
not serve as an advance payment of Rent or a measure of Landlord's damages for
any default under this Lease.

     If Landlord transfers its interest in the Project or this Lease, Landlord
may transfer the Security Deposit to its transferee.  Upon such transfer,
Landlord shall have no further obligation to return the Security Deposit to
Tenant, and Tenant's right to the return of the Security Deposit shall apply
solely against Landlord's transferee.

     21.  FORCE MAJEURE.  Neither party shall be in default under this Lease to
          -------------
the extent it is unable to perform any of its obligations on account of any
strike or labor problem, energy shortage, governmental pre-emption or
prescription, national emergency, or any other cause of any kind beyond its
reasonable control ("Force Majeure"); provided, however, that the foregoing
shall not excuse either party from failure to timely perform its monetary
obligations under this Lease.

                                       25
<PAGE>

     22.  LANDLORD'S DEFAULT.  If Landlord breaches any of its obligations under
          ------------------
this Lease, Tenant shall notify Landlord in writing, specifically identifying
the obligation Tenant claims to have been breached.  Landlord shall not be
deemed to be in default unless such breach continues for thirty (30) days after
such written notice from Tenant, except that if Landlord begins to cure its
failure within the thirty (30) day period but cannot reasonably complete its
cure within such period, then the thirty (30) day period shall be extended to
ninety (90) days, or such longer period as may reasonably be necessary to
complete the cure, so long as Landlord shall be diligently and expeditiously
prosecuting such cure to completion.  Nothing contained herein shall be deemed
to prevent Tenant from effecting emergency maintenance or repairs in accordance
with the provisions of Section 4E, above.

     23.  NOTICES.  All notices, consents, approvals and similar communications
          -------
to be given by one party to the other under this Lease, shall be given in
writing, mailed or personally delivered as follows:

                                       26
<PAGE>

     A.   Landlord.  To Landlord as follows:
          --------

          CarrAmerica Realty Corporation
          10785 Willows Road N.E., Suite 250
          Redmond, Washington  98052
          Attn:  Market Officer

          with a copy to:

          CarrAmerica Realty Corporation
          1850 K Street, NW
          Suite 500
          Washington, D.C. 20006
          Attn:  Lease Administration

or to such other person at such other street address as Landlord may designate
by notice to Tenant.

     B.   Tenant.  To Tenant as follows:
          ------
          Targeted Genetics
          Attn: Senior Director of Operations
          1100 Olive Way, Suite 100
          Seattle, Washington 98101

or to such other person at such other street address as Tenant may designate by
notice to Landlord.

     Mailed notices shall be sent by United States certified or registered mail,
or by a reputable national overnight courier service, postage prepaid.  Mailed
notices shall be deemed to have been given on the earlier of actual delivery or
three (3) business days after posting in the United States mail in the case of
registered or certified mail, and one business day in the case of overnight
courier.

     24.  QUIET POSSESSION.  So long as Tenant shall perform all of its
          ----------------
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord.

     25.  REAL ESTATE BROKER.  Tenant represents to Landlord that Tenant has not
          ------------------
dealt with any real estate broker with respect to this Lease except for any
broker(s) listed in the Schedule, and no other broker is in any way entitled to
any broker's fee or other payment in connection with this Lease.  Tenant shall
indemnify and defend Landlord against any claims by any other broker or third
party for any payment of any kind in connection with this Lease.

                                       27
<PAGE>

     26.  MISCELLANEOUS.
          -------------

     A.   Successors and Assigns.  Subject to the limits on Tenant's assignment
          ----------------------
contained in Section 17, the provisions of this Lease shall be binding upon and
inure to the benefit of all successors and assigns of Landlord and Tenant.

     B.   Date Payments Are Due.  Except for payments to be made by Tenant under
          ---------------------
this Lease which are due upon demand or are due in advance (such as Base Rent),
Tenant shall pay to Landlord any amount for which Landlord renders a statement
of account within ten days of Tenant's receipt of Landlord's statement.

     C.   Meaning of "Landlord", "Re-Entry," "including" and "Affiliate".  The
          --------------------------------------------------------------
term "Landlord" means only the owner of the Project and the lessor's interest in
this Lease from time to time.  The words "re-entry" and "re-enter" are not
restricted to their technical legal meaning.  The words "including" and similar
words shall mean "without limitation."  The word "affiliate" shall mean a person
or entity controlling, controlled by or under common control with the applicable
entity.  "Control" shall mean the power directly or indirectly, by contract or
otherwise, to direct the management and policies of the applicable entity.

     D.   Time of the Essence.  Time is of the essence of each provision of this
          -------------------
Lease.

     E.   No Option.  This document shall not be effective for any purpose until
          ---------
it has been executed and delivered by both parties; execution and delivery by
one party shall not create any option or other right in the other party.

     F.   Severability.  The unenforceability of any provision of this Lease
          ------------
shall not affect any other provision.

     G.   Governing Law.  This Lease shall be governed in all respects by the
          -------------
laws of the state in which the Project is located, without regard to the
principles of conflicts of laws.

     H.   Lease Modification.  Tenant agrees to modify this Lease in any way
          ------------------
requested by a mortgagee which does not cause increased expense to Tenant or
otherwise materially adversely affect Tenant's interests under this Lease.

     I.   No Oral Modification.  No modification of this Lease shall be
          --------------------
effective unless it is a written modification signed by both parties.

     J.   Landlord's Right to Cure. Landlord may cure any default by Tenant; any
          ------------------------
expenses incurred shall become Additional Rent due from Tenant on demand by
Landlord.

     K.   Captions.  The captions used in this Lease shall have no effect on the
          --------
construction of this Lease.

     L.   Authority.  Landlord and Tenant each represents to the other that it
          ---------
has full power and authority to execute and perform this Lease.

                                       28
<PAGE>

     M.   Landlord's Enforcement of Remedies.  Landlord may enforce any of its
          ----------------------------------
remedies under this Lease either in its own name or through an agent.

     N.   Entire Agreement.  This Lease, together with all Appendices,
          ----------------
constitutes the entire agreement between the parties.  No representations or
agreements of any kind have been made by either party which are not contained in
this Lease.

     O.   Landlord's Title.  Landlord's title shall always be paramount to the
          ----------------
interest of the Tenant, and nothing in this Lease shall empower Tenant to do
anything which might in any way impair Landlord's title.

     P.   Light and Air Rights.  Landlord does not grant in this Lease any
          --------------------
rights to light and air in connection with Project.  Landlord reserves to
itself, the Land, the Building below the improved floor of each floor of the
Premises, the Building above the ceiling of each floor of the Premises, the
exterior of the Premises and the areas on the same floor outside the Premises,
along with the areas within the Premises required for the installation and
repair of utility lines and other items required to serve other tenants of the
Building.

     Q.   Singular and Plural.  Wherever appropriate in this Lease, a singular
          -------------------
term shall be construed to mean the plural where necessary, and a plural term
the singular.  For example, if at  any time two parties shall constitute
Landlord or Tenant, then the relevant term shall refer to both parties together.

     R.   No Recording by Tenant.  Tenant shall not record in any public records
          ----------------------
any memorandum or any portion of this Lease; provided, however, that upon the
request of either party, the parties shall execute a memorandum of this Lease in
commercially reasonable form for recording by and at the expense of the
requesting party.

     S.   Exclusivity.  Landlord does not grant to Tenant in this Lease any
          -----------
exclusive right except the right to occupy its Premises.

     T.   No Construction Against Drafting Party.  The rule of construction that
          --------------------------------------
ambiguities are resolved against the drafting party shall not apply to this
Lease.

     U.   Survival.  All obligations of Landlord and Tenant under this Lease
          --------
shall survive the termination of this Lease.

     V.   Rent Not Based on Income.  No rent or other payment in respect of the
          ------------------------
Premises shall be based in any way upon net income or profits from the Premises.
Tenant may not enter into or permit any sublease or license or other agreement
in connection with the Premises which provides for a rental or other payment
based on net income or profit.

     W.   Building Manager and Service Providers.  Landlord may perform any of
          --------------------------------------
its obligations under this Lease through its employees or third parties hired by
the Landlord.

                                       29
<PAGE>

     X.   Late Charge and Interest on Late Payments.  Without limiting the
          -----------------------------------------
provisions of Section 12A, if Tenant fails to pay any installment of Rent or
other charge to be paid by Tenant pursuant to this Lease within five (5)
business days after the same becomes due and payable, then Tenant shall pay a
late charge equal to the greater of five percent (5%) of the amount of such
payment or $250.  In addition, interest shall be paid by Tenant to Landlord on
any late payments of Rent from the date due until paid at the rate provided in
Section 2D(2).  Such late charge and interest shall constitute Additional Rent
due and payable by Tenant to Landlord upon the date of payment of the delinquent
payment referenced above.

     Y.   Tenant's Financial Statements.  Within ten (10) days after Landlord's
          -----------------------------
written request therefor, Tenant shall deliver to Landlord the current audited
annual and quarterly financial statements of Tenant, and annual audited
financial statements of the two (2) years prior to the current year's financial
statements, each with an opinion of a certified public accountant and including
a balance sheet and profit and loss statement, all prepared in accordance with
generally accepted accounting principles consistently applied.

     Z.   Parking.  Landlord shall maintain a parking ratio of three (3) cars
          -------
per 1,000 rentable square feet of Premises in the parking area serving the
Premises.  The parking areas on the Project are shown on the attached Appendix
A-2 hereto.  Landlord shall not knowingly permit any person or entity other than
Tenant to park vehicles in the parking areas on the Project.

     27.  UNRELATED BUSINESS INCOME.  If Landlord is advised by its counsel at
          -------------------------
any time that any part of the payments by Tenant to Landlord under this Lease
may be characterized as unrelated business income under the United States
Internal Revenue Code and its regulations, then Tenant shall enter into any
amendment proposed by Landlord to avoid such income, so long as the amendment
does not require Tenant to make more payments or accept fewer services from
Landlord, than this Lease provides.

     28.  HAZARDOUS SUBSTANCES. Except for those Hazardous Substances reasonably
          --------------------
related to Tenant's permitted business operations in the Premises, Tenant shall
not cause or permit any Hazardous Substances to be brought upon, produced,
stored, used, discharged or disposed of in or near the Project.  Any and all
such Hazardous Substances shall be produced, stored, used, discharged and
disposed of in full compliance with all applicable Governmental Requirements and
the requirements of regulatory authorities having jurisdiction.  "Hazardous
Substances" include those hazardous substances described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq., any other applicable federal, state or
local law, and the regulations adopted under these laws.  Tenant hereby agrees
that it will be fully liable for and shall indemnify, defend, and hold harmless
Landlord, its agents, contractors, stockholders, directors, successors,
representatives, and assigns, from and against all losses, costs, claims,
liabilities, damages, cleanup costs, fines, penalties, and expenses (including
attorneys' and consultants' fees), arising from Tenant's production, use,
storage, discharge or disposal of Hazardous Substances on or about the Premises
or the Project in violation of the terms of this Lease.  Tenant shall give
Landlord immediate notice of any violation of the requirements of this Section
28, as well as copies of any notices of violation received by Tenant from any
third party.  At the request of

                                       30
<PAGE>

Landlord, Tenant shall provide Landlord with the names and approximate amounts
of the Hazardous Substances that Tenant has used and stored on or about the
Premises, as well as copies of governmental reports prepared by or on behalf of
Tenant in connection with such Hazardous Substances and other information as
Landlord may reasonably request from time to time regarding Tenant's use and
storage of Hazardous Substances. To the best of Landlord's knowledge, (a) no
Hazardous Substances in reportable quantities are present in the Building or the
Project as of the date of this Lease; (b) no underground storage tanks are
present on the Project; and (c) no action, proceeding or claim is pending or
threatened regarding the Building or the Project concerning any Hazardous
Substances.

     29.  EXCULPATION.  Landlord shall have no personal liability under this
          -----------
Lease; its liability shall be limited to its interest in the Project, and shall
not extend to any other property or assets of the Landlord.  In no event shall
any officer, director, employee, agent, shareholder, partner, member or
beneficiary of Landlord be personally liable for any of Landlord's obligations
hereunder.

                                       31
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Lease.

                         LANDLORD:

                         CARRAMERICA REALTY CORPORATION,
                         a Maryland corporation

                         By:        /s/ Philip L. Hawking
                            -----------------------------
                         Print Name:  Philip L. Hawking
                                    ---------------------
                         Print Title:  C.O.O.
                                     --------------------

                         TENANT:

                         TARGETED GENETICS CORPORATION,
                         a Washington corporation

                         By:        /s/ H. Stewart Parker
                            -----------------------------
                         Print Name:  H. Stewart Parker
                                    ---------------------
                         Print Title:  Pres. & CEO
                                     --------------------

                                       32
<PAGE>

DISTRICT OF COLUMBIA   )
                       ) ss.
                       )

     On this 17th day of July 2000, before me, the undersigned, a Notary Public
in and for the District of Columbia, duly commissioned and sworn as such,
personally appeared Philip A. Hawking, to me known to be the Chief Operating
Officer of CarrAmerica Realty Corporation, the corporation that executed the
within and foregoing instrument, and acknowledged the said instrument to be the
free and voluntary act and deed of said corporation for the uses and purposes
therein mentioned, and on oath stated that he was authorized to execute said
instrument, and that the seal affixed is the corporate seal of said corporation.

     WITNESS my hand and official seal the day and year in this certificate
first above written.
                                /s/ Alice Anne Arth
                         -------------------------------------------------
                         Printed Name:   Alice Anne Arth
                                         ---------------------------------
                         NOTARY PUBLIC in and for the District of Columbia,
                         residing at   Washington D.C.
                                       -----------------------------------
                         My commission expires:    April 30, 2003
                                                   -----------------------

STATE OF WASHINGTON  )
                     )  ss.
COUNTY OF    KING    )

  I CERTIFY that I know or have satisfactory evidence that H. Stewart Parker is
the person who appeared before me, and acknowledged that s/he signed this
instrument, on oath stated that s/he was authorized to execute the instrument,
and acknowledged it as the President/CEO of Targeted Genetics Corporation, to be
the free and voluntary act of such party for the uses and purposes mentioned in
the instrument.

  DATED:  7 July 2000
          -----------
                                /s/ Jeremiah Sadona
                         -------------------------------------------------
                                Jeremiah Sadona
                         -------------------------------------------------
                                (Print Name)
                         NOTARY PUBLIC in and for the State of Washington,
                         residing at   Seattle
                                       -----------------------------------
                         My commission expires:    April 30, 2001
                                                   -----------------------

                                       33
<PAGE>

                                   APPENDIX A

                              PLAN OF THE PREMISES
                              --------------------

                (Plan depicting the Premises and the Site Plan)
<PAGE>

                                   APPENDIX B

                             RULES AND REGULATIONS
                             ---------------------

     1.   Intentionally Omitted.

     2.   The Project directory shall be available to Tenant solely to display
names and their location in the Project, which display shall be as directed by
Landlord.

     3.   The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Tenant or used by Tenant for any purposes
other than for ingress to and egress from the Premises.  Tenant shall lend its
full cooperation to keep such areas free from all obstruction and in a clean and
sightly condition and shall move all supplies, furniture and equipment as soon
as received directly to the Premises and move all such items and waste being
taken from the Premises (other than waste customarily removed by employees of
the Building) directly to the shipping platform at or about the time arranged
for removal therefrom.  The halls, passages, exits, entrances, elevators,
stairways, balconies and roof are not for the use of the general public and
Landlord shall, in all cases, retain the right to control and prevent access
thereto by all persons whose presence in the judgment of Landlord, reasonably
exercised, shall be prejudicial to the safety, character, reputation and
interests of the Project.  Neither Tenant nor any employee or invitee of Tenant
shall go upon the roof of the Project, except to the extent necessary to repair
and maintain Tenant's rooftop equipment.

     4.   The toilet rooms, urinals, wash bowls and other apparatuses shall not
be used for any purposes other than that for which they were constructed, and no
foreign substance of any kind whatsoever shall be thrown therein, and to the
extent caused by Tenant or its employees or invitees, the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by Tenant.

     5.   Intentionally Omitted.

     6.   Tenant shall not use the Premises for housing, lodging or sleeping
purposes, or permit preparation or warming of food in the Premises (warming of
coffee and individual meals with employees and guests excepted).  Tenant shall
not occupy or use the Premises or permit the Premises to be occupied or used for
any purpose, act or thing which is in violation of any Governmental Requirement
or which may be dangerous to persons or property.

     7.   Intentionally Omitted.

     8.   Intentionally Omitted.

     9.   Intentionally Omitted.

     10.  Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as reasonably approved by Landlord.
<PAGE>

     11.  Intentionally Omitted.

     12.  Intentionally Omitted.

     13.  Without the prior written consent of Landlord, Tenant shall not use
the name of the Project or any picture of the Project in connection with, or in
promoting or advertising the business of, Tenant, except Tenant may use the
address of the Project as the address of its business.

     14.  Intentionally Omitted.

     15.  Tenant assumes full responsibility for protecting the Premises from
theft, robbery and pilferage, which may arise from a cause other than Landlord's
negligence, which includes keeping doors locked and other means of entry to the
Premises closed and secured.

     16.  Peddlers, solicitors and beggars shall be reported to the office of
the Project or as Landlord otherwise requests.

     17.  Tenant shall not advertise the business, profession or activities of
Tenant conducted in the Project in any manner which violates the letter or
spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities.

     18.  No bicycle or other vehicle and no pets shall be allowed in the
Premises, halls, freight docks, or any other parts of the Building except that
blind persons may be accompanied by "seeing eye" dogs.  Tenant shall not do
anything in the Premises reasonably tending to create, or maintain, a nuisance,
or do any act reasonably tending to injure the reputation of the Building.

     19.  Tenant acknowledges that Building security problems may occur which
may require the employment of extreme security measures in the day-to-day
operation of the Project.

     Accordingly:

          (a) Landlord may, at any time, or from time to time, or for regularly
scheduled time periods, as deemed advisable by Landlord and/or its agents, in
their sole discretion, require that persons entering or leaving the Project or
the Property identify themselves to watchmen or other employees designated by
Landlord, by registration, identification or otherwise.

          (b) Tenant agrees that it and its employees will cooperate fully with
Project employees in the implementation of any and all security procedures.

          (c) Such security measures shall be the sole responsibility of
Landlord, and Tenant shall have no liability for any action taken by Landlord in
connection therewith, it being understood that Landlord is not required to
provide any security procedures and shall have no liability for such security
procedures or the lack thereof.
<PAGE>

     20.  Tenant shall not do or permit the manufacture, sale, purchase or gift
of any fermented, intoxicating or alcoholic beverages without obtaining written
consent of Landlord.

     21.  Tenant shall not disturb the quiet enjoyment of any other tenant.

     22.  Intentionally Omitted.

     23.  Landlord may place and keep on the windows and doors of the Premises
at any time during the last twelve (12) months of the Lease term signs
advertising the Premises for Rent.

     24.  No equipment, mechanical ventilators, awnings, special shades or other
forms of window covering shall be permitted outside the windows of the Premises
without the prior written consent of Landlord, and then only at the expense and
risk of Tenant, and they shall be of such shape, color, material, quality,
design and make as may be approved by Landlord.

     25.  Tenant shall not during the term of this Lease canvas or solicit other
tenants of the Building for any purpose.

     26.  Tenant shall not install or operate any phonograph, musical or sound-
producing instrument or device that may be heard from outside the Building,
radio receiver or transmitter, TV transmitter, or similar device in the
Building, nor install or operate any antenna, aerial, wires or other equipment
outside the Building, nor operate any electrical device from which may emanate
electrical waves which may interfere with or impair radio or television
broadcasting or reception from or in the Building or elsewhere, without in each
instance the prior written approval of Landlord.  The use thereof, if permitted,
shall be subject to control by Landlord to the end that others shall not be
disturbed.

     27.  Tenant shall promptly remove all rubbish and waste from the Premises.

     28.  Tenant shall not exhibit, sell or offer for sale, Rent or exchange in
the Premises or at the Project any article, thing or service, except those
ordinarily embraced within the use of the Premises specified in Section 6 of
this Lease, without the prior written consent of Landlord.

     29.  Intentionally Omitted.

     30.  Tenant shall not overload any floors in the Premises or any public
corridors or elevators in the Building.

     31.  Tenant shall not do any painting in the Premises, or mark, paint, cut
or drill into, drive nails or screws into, or in any way deface any part of the
Premises or the Building, outside or inside, without the prior written consent
of Landlord.  The foregoing shall not be deemed to apply to hanging lightweight
personal items on the inside walls of the Premises.
<PAGE>

     32.  Whenever Landlord's consent, approval or satisfaction is required
under these Rules, then unless otherwise stated, any such consent, approval or
satisfaction must be obtained in advance, such consent or approval may be
granted or withheld in Landlord's sole discretion, and Landlord's satisfaction
shall be determined in its sole judgment.

     33.  Tenant and its employees shall cooperate in all fire drills conducted
by Landlord in the Building; provided, however, that Landlord agrees to
coordinate the same with Tenant in advance.
<PAGE>

                                   APPENDIX C

                          TENANT IMPROVEMENT AGREEMENT
                          ----------------------------

     1.   INITIAL IMPROVEMENTS.  Tenant shall improve the Premises, including
removal of some or all of the existing improvements, in accordance with plans
and specifications approved by Landlord (the "Plans"), which approval shall not
be unreasonably withheld or delayed (such improvements are referred to herein as
the "Initial Improvements").  Tenant's Initial Improvements shall include
supplementation, modification and replacement of the Building's HVAC system;
expansion of the water supply, including potentially replacing water mains and
lines; expansion of the electrical service facilities, including installation of
an auxiliary generator in the rear of the Building in a location to be
reasonably approved by Landlord; relocation and/or replacement of the existing
loading docks; construction of additional loading docks; enhancement of the roof
structure; demolition of the existing mezzanine, provided that Tenant constructs
another mezzanine in a location reasonably approved by Landlord and provided
that the leasable square footage of the Premises is not reduced; increasing the
sewer capacity; addition of discharge septic treatment facilities; relocating
Building entrances; and relocating and/or adding floor drains.  Tenant shall
perform the Initial Improvements at its own cost, subject to the Landlord's
Contribution (hereinafter defined).  Tenant shall cause the Plans to be
prepared, at Tenant's cost, by a registered professional architect, and
mechanical and electrical engineer(s).  Such engineer(s) shall be approved in
advance by Landlord, which approval shall not be unreasonably withheld or
delayed.  Tenant shall furnish the initial draft of the Plans to Landlord for
its review and approval as soon as reasonably possible.  Landlord shall within
two (2) weeks after receipt either provide comments to such Plans or approve the
same.  Landlord shall be deemed to have approved such Plans if it does not
timely provide comments on such Plans.  If Landlord provides Tenant with
comments to the initial draft of the Plans, Tenant shall provide revised Plans
to Landlord incorporating Landlord's comments within a reasonable time,
considering the scope of Landlord's comments, after receipt of Landlord's
comments.  Landlord shall within one week after receipt then either provide
comments to such revised Plans or approve such Plans.  Landlord shall be deemed
to have approved such revised Plans if Landlord does not timely provide comments
on such Plans.  The process described above shall be repeated, if necessary,
until the Plans have been finally approved by Landlord.  The parties agree in
any event to cooperate with each other in good faith throughout the foregoing
process to reach mutual approval of the Plans, taking into account the usability
and functionality of Tenant's proposed modifications to the Premises for future
occupants.  The parties shall signify their mutual approval of the Plans by
initialing the same.  The Initial Improvements shall be performed by a
contractor reasonably acceptable to Landlord (the "Contractor").  Tenant hereby
agrees that the Plans for the Initial Improvements shall comply with all
applicable Governmental Requirements.  Landlord's approval of any of the Plans
(or any modifications or changes thereto) shall not impose upon Landlord or its
agents or representatives any obligation with respect to the design of the
Initial Improvements or the compliance of such Initial Improvements or the Plans
with applicable Governmental Requirements.

   All Initial Improvements shall be insured under a construction property
insurance policy, insuring the full replacement value from time to time of the
Initial Improvements.  All Initial
<PAGE>

Improvements shall be constructed in a good and workmanlike manner, and only
good grades of material shall be used. All Initial Improvements shall be
performed in such a fashion and by such means as necessary to maintain a
professional work environment in the areas surrounding the space to be improved.
Tenant shall only use labor that will work in peace and harmony with other
contractors and workers serving the Building in constructing the Initial
Improvements. Tenant shall avoid actions which interfere with or delay the
activities of other contractors serving the Building and other tenants. All
Initial Improvements shall be performed in compliance with Landlord's "Policies,
Rules and Regulations for Construction Projects". Tenant shall permit Landlord
to observe and monitor all Initial Improvements.

     2.   CHANGE ORDERS.  If Tenant shall require improvements ("Change Orders")
to the Premises in addition to or substitution for the Initial Improvements,
Tenant shall deliver to Landlord for its approval, which approval will not be
unreasonably withheld or delayed, plans and specifications for such Change
Orders.  Landlord shall within one week after receipt of such initial draft of
plans and specifications for the Change Orders (the "Change Order Plans") either
provide comments to such Change Order Plans or approve the same, and Landlord's
failure to respond within one week after receipt of such initial draft shall be
deemed approval.  If Landlord provides Tenant with comments to the initial draft
of the Change Order Plans, Tenant shall provide revised Change Order Plans to
Landlord incorporating Landlord's comments within a reasonable time, considering
the scope of Landlord's comments, after receipt of Landlord's comments.
Landlord shall then either provide comments to such revised Change Order Plans
or approve such Change Order Plans, and Landlord's failure to respond within one
week after receipt of such revised Change Order Plans shall be deemed approval.
The process described in the previous sentence shall be repeated, if necessary,
until the Change Order Plans have been finally approved by Landlord.  The
parties agree to cooperate in good faith to reach mutual approval of any
proposed Change Orders, taking into account the usability and functionality of
the Premises for future occupants.  Tenant shall pay for all preparations and
revisions of the Change Order Plans and the construction of all Change Orders.

     3.   LANDLORD'S CONTRIBUTION.  Landlord shall contribute an amount up to
$10.00 per rentable square foot ("Landlord's Contribution") toward the costs
incurred for the Initial Improvements, inclusive of any permitting costs and
Tenant's reasonable out-of-pocket design and engineering fees, Landlord's
project management services, if any, and any Change Orders.  Landlord has no
obligation to pay for costs of the Initial Improvements or Change Orders in
excess of Landlord's Contribution, except as provided in paragraph 4 of this
Appendix below.  Upon written request of Tenant (not more frequently than twice
each month), Landlord shall pay all or any portion of the Landlord's
Contribution to Tenant, within thirty (30) days after receipt of (a) invoices,
(b) evidence satisfactory to Landlord that the work covered by such invoices has
been completed in a satisfactory manner, (c) all necessary lien waivers and
sworn affidavits, (d) marked electronic copies of, and, at Landlord's request,
marked reproducible copies of the originally approved Plans showing all
substantial changes made in constructing the Initial Improvements during such
period from the Plans as originally approved, (e) all close-out documentation
set forth in Landlord's "Policies, Rules and Procedures for Construction
Projects" in effect at the execution of the Lease, and (f) such other
documentation as Landlord may reasonably require under the circumstances.
Tenant shall deliver electronic copies of, and, at
<PAGE>

Landlord's request, reproducible as-built Plans to Landlord at the conclusion of
Initial Improvements.

     4.   OVERSTANDARD TENANT IMPROVEMENT ALLOWANCE.  In addition to the
Landlord's Contribution provided for in paragraph 3, above, Tenant may, by
giving Landlord written notice of its good faith intent to exercise its rights
under this paragraph no later than November 1, 2000, and its formal notice
confirming such election no later than February 1, 2001, elect to have Landlord
pay up to $50.00 per rentable square foot as an Overstandard Tenant Improvement
Allowance toward the costs incurred for the Initial Improvements, inclusive of
any permitting costs and Tenant's reasonable out-of-pocket design and
engineering fees, Landlord's project management services, if any, and any Change
Orders.  The Overstandard Tenant Improvement Allowance shall be payable by
Landlord to Tenant in the manner and in accordance with the criteria set forth
in paragraph 3, above, applicable to Landlord's Contribution.  In such event,
the Overstandard Tenant Improvement Allowance paid by Landlord, together with
interest thereon at thirteen percent (13%) per annum, shall be amortized over
the primary term of this Lease and paid by Tenant as additional Base Rent;
provided, however, that Tenant may pay to Landlord the unpaid principal balance
of the Overstandard Tenant Improvement Allowance at any time.

     5.   COMMENCEMENT DATE DELAY.  The Commencement Date shall be delayed for
each day after October 1, 2000 that Landlord fails to make the Premises
available to Tenant for construction of, or preparation for construction of, the
Initial Improvements, except to the extent that the delay shall be caused by any
act or omission by Tenant, its agents, contractors or persons employed by any of
such persons.

     6.   MISCELLANEOUS.

     Terms used in this Appendix C shall have the meanings assigned to them in
the Lease.  The terms of this Appendix C are subject to the terms of the Lease.
<PAGE>

                                   APPENDIX D

                   MORTGAGES CURRENTLY AFFECTING THE PROJECT
                   -----------------------------------------

                                     [None]
<PAGE>

                                   APPENDIX E

                         COMMENCEMENT DATE CONFIRMATION
                         ------------------------------

Landlord:      CarrAmerica Realty Corporation, a Maryland corporation

Tenant:        Targeted Genetics Corporation, a Washington corporation

     This Commencement Date Confirmation is made by Landlord and Tenant pursuant
to that certain Lease dated as of June _______, 2000 (the "Lease") for certain
premises known as Building A, Canyon Park East, Bothell, Washington (the
"Premises").  This Confirmation is made pursuant to Item 9 of the Schedule to
the Lease.

     1.   Lease Commencement Date, Termination Date.  Landlord and Tenant hereby
          -----------------------------------------
agree that the Commencement Date of the Lease is _____________, 2000, and the
Termination Date of the Lease is _______________, _____.

     2.   Acceptance of Premises.  Tenant has inspected the Premises and affirms
          ----------------------
that the Premises is acceptable in all respects in its current "as is"
condition.

     3.   Incorporation.  This Confirmation is incorporated into the Lease, and
          -------------
forms an integral part thereof.  This Confirmation shall be construed and
interpreted in accordance with the terms of the Lease for all purposes.

                              TENANT:

                              Targeted Genetics Corporation,
                              a Washington corporation

                              By:  /s/ H. Stewart Parker
                                   ---------------------
                              Print Name:  H. Stewart Parker
                                           -----------------
                              Print Title:  Pres. & CEO
                                            -----------

                              LANDLORD:

                              CarrAmerica Realty Corporation,
                              a Maryland corporation

                              By:  /s/ Philip L. Hawkins
                                   ---------------------
                              Print Name:  Philip L. Hawkins
                                           -----------------
                              Print Title:  C.O.O.
                                            ------
<PAGE>

                                   APPENDIX F

                               LEGAL DESCRIPTION
                               -----------------

PARCEL A:

TRACT 29A OF BINIDNG SITE PLAN RECORDED UNDER AUDITORS'S FILE NUMBER 9301205003,
BEGIN A PORTION OF SECTION29, TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M.

PARCEL B:

AN EASEMENT FOR UTILITIES, TRAFFIC FLOW AND RIGHT OF WAY ACCESS, INGRESS AND
EGRESS AS CREATED BY INSTRUMENT RECORDED JANUARY 17, 1990 UNDER AUDITOR'S FILE
NUMBER 9001170513, OVER AND ACROSS:

THAT PORTION OF THE SOUTHWEST AND SOUTHEAST QUARTERS OF SECTION 29, TOWNSHIP 27
NORTH, RANGE 5 EAST, W.M., IN SNOHOMISH COUNTY, WASHINGTON DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF TRACT 29A, AS SHOWN ON THE BINDING SITE
PLAN/RECORD OF SURVEY OF CANYON PARK BUSINESS CENTER AS RECORDED IN VOLUME 1 OF
BINDING SITE PLAN/RECORD SURVEYS, PAGES 189 THROUGHT 192 UNDER AUDITOR'S FILE
NUMBER 8912015002, RECORDS OF SAID COUNTY; THENCE NORTH 83 [degrees] 03'52" EAST
ALONG THE SOUTH LINE OF SAID TRACT A DISTANCE OF 326.46 FEET;
THENCE SOUTH 06 [degrees] 56'08" EAST 11.41 FEET;
THENCE SOUTH 83 [degrees] 03'52" WEST 273.62 FEET;
THENCE SOUTH 73 [degrees] 31'51" WEST 15.72 FEET TO THE POINT OF CURVE OF A 35
FOOT RADIUS CURVE TO THE LEFT;
THENCE WESTERLY ALONG SAID CURVE AN ARC DISTANCE OF 49.05 FEET TO THE EAST LINE
OF TRACT 29 ROAD AS SHOWN ON SAID BINDING SITE PLAN/RECORD OF SURVEY;
THENCE NORTH 16 [degrees] 28'09" WEST ALONG SAID EAST LINE 49.11 FEET TO THE
POINT OF THE BEGINNING.

PARCEL C:

A NON-EXCLUSIVE EASEMENT CREATED BY RECIPROCAL EASEMENT AGREEMENT RECORDED MARCH
6, 1991 UNDER AUDITOR'S FILE NUBMER 9103060251 FOR INGRESS, EGRESS AND UTILITIES
OVER TRACT 29 ROAD AND TRACT 29 ROAD EXTENSION DESCRIBED IN SAID INSTRUMENT AND
AS DELINEATED ON BINIDNG SITE PLAN/RECORD OF SURVEY RECORDED UNDER AUDITOR'S
FILE NUMBER 9301205003; SAID EASEMENT BEING A PORTION OF THE NORTHWEST QUARTER,
THE SOUTHWEST QUARTER AND THE SOTHEAST QUARTER OF SECTION 29, TOWNSHIP 27 NORTH,
RANGE 5 EAST, W.M. SITUATE IN THE COUNTY OF SNOHOMISH, STATE OF WASHINGTON.
<PAGE>

                                   ADDENDUM 1

                                EXTENSION OPTION
                                ----------------

   Subject to Subsection B below, Tenant may at its option extend the Term of
this Lease for a period of five (5) years.  Such period is called the "Renewal
Term."  The Renewal Term shall be upon the same terms contained in this Lease
excluding the provisions of Appendix C of this Lease and except for the payment
of Base Rent during the Renewal Term; and any reference in the Lease to the
"Term" of the Lease shall be deemed to include any Renewal Term and apply
thereto, unless it is expressly provided otherwise.  Tenant shall have no
additional extension options.

   A.  The Base Rent during the Renewal Term shall be the greater of (i) the
Base Rent applicable to the last day of the final Lease Year prior to the
Renewal Term, or (ii) the Market Rate (defined hereinafter) for such space for a
term commencing on the first day of the Renewal Term.  "Market Rate" shall mean
the then prevailing market rate for a comparable term commencing on the first
day of the Renewal Term for tenants of comparable size and creditworthiness for
comparable space in Canyon Park, North Creek, Redmond, and surrounding areas
(not taking into account, however, any incremental increased rental value of the
Premises resulting from Tenant's Initial Improvements, to the extent the same
were paid for directly by Tenant in excess of Landlord's contribution, and not
taking into account any subsequent alterations to the Premises paid for directly
by Tenant).

   B.  To exercise the option, Tenant must deliver a binding notice to Landlord
not less than twelve (12) months prior to the expiration of the initial Term of
this Lease.  Thereafter, the Market Rate for the Renewal Term shall be
calculated pursuant to Subsection C below and Landlord shall inform Tenant of
the Market Rate.  Such calculations shall be final and shall not be recalculated
at the actual commencement of the Renewal Term.  If Tenant fails to timely give
its notice of exercise, Tenant will be deemed to have waived its option to
extend.

   C.  Market Rate shall be determined as follows:

     (i) If Tenant provides Landlord with its binding notice of exercise
   pursuant to Subsection B above, then at some point between thirteen (13) and
   eleven (11) months prior to the commencement of the Renewal Term (or, at
   Landlord's election, at an earlier point), Landlord shall calculate and
   inform Tenant of the Market Rate.  If Tenant rejects the Market Rate as
   calculated by Landlord, Tenant shall inform Landlord of its rejection within
   ten (10) days after Tenant's receipt of Landlord's calculation, and Landlord
   and Tenant shall commence negotiations to agree upon the Market Rate.  If
   Tenant fails to timely reject Landlord's calculation of the Market Rate it
   will be deemed to have accepted such calculation.  If Landlord and Tenant are
   unable to reach agreement within twenty-one (21) days after Landlord's
   receipt of Tenant's notice of rejection, then the Market Rate shall be
   determined in accordance with (ii) below.

     (ii) If Landlord and Tenant are unable to reach agreement on the Market
   Rate within said twenty-one (21) day period, then within seven (7) days,
   Landlord and Tenant shall each
<PAGE>

   simultaneously submit to the other in a sealed envelope its good faith
   estimate of the Market Rate. If the higher of such estimates is not more than
   one hundred five percent (105%) of the lower, then the Market Rate shall be
   the average of the two. Otherwise, the dispute shall be resolved by
   arbitration in accordance with (iii) and (iv) below.

     (iii)  Within seven (7) days after the exchange of estimates, the parties
   shall select as an arbitrator an independent MAI appraiser with at least five
   (5) years of experience in appraising office space in the Canyon Park, North
   Creek, Redmond and surrounding area (a "Qualified Appraiser").  If the
   parties cannot agree on a Qualified Appraiser, then within a second period of
   seven (7) days, each shall select a Qualified Appraiser and within ten (10)
   days thereafter the two appointed Qualified Appraisers shall select a third
   Qualified Appraiser and the third Qualified Appraiser shall be the sole
   arbitrator.  If one party shall fail to select a Qualified Appraiser within
   the second seven (7) day period, then the Qualified Appraiser chosen by the
   other party shall be the sole arbitrator.

     (iv) Within twenty-one (21) days after submission of the matter to the
   arbitrator, the arbitrator shall determine the Market Rate by choosing
   whichever of the estimates submitted by Landlord and Tenant the arbitrator
   judges to be more accurate.  The arbitrator shall notify Landlord and Tenant
   of its decision, which shall be final and binding.  If the arbitrator
   believes that expert advice would materially assist him, the arbitrator may
   retain one or more qualified persons to provide expert advice.  The fees of
   the arbitrator and the expenses of the arbitration proceeding, including the
   fees of any expert witnesses retained by the arbitrator, shall be paid by the
   party whose estimate is not selected.  Each party shall pay the fees of its
   respective counsel and the fees of any witness called by that party.

   D.  Tenant's option to extend this Lease is subject to the conditions that:
(i) on the date that Tenant delivers its binding notice exercising an option to
extend, Tenant is not in default under this Lease after the expiration of any
applicable notice and cure periods, and (ii) except in the case of a Permitted
Transfer, Tenant shall not have assigned the Lease, or sublet any portion of the
Premises under a sublease which is effective at any time during the final twelve
(12) months of the initial Term.<PAGE>

                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                        UNIVERSAL HEALTH SERVICES, INC.

                             Convertible Debentures
                                    due 2020
           __________________________________________________________

                                   INDENTURE

                           Dated as of June 23, 2000
           __________________________________________________________

                          BANK ONE TRUST COMPANY, N.A.

                                    TRUSTEE
           __________________________________________________________
<PAGE>

                             CROSS REFERENCE TABLE*

<TABLE>
<S>                                                       <C>
TIA Section..........................................     Indenture Section
310(a)(1)............................................           7.09
   (a)(2)............................................           7.09
   (a)(3)............................................           N.A.
   (a)(4)............................................           N.A.
   (b)...............................................        7.08; 7.10
   (c)...............................................           N.A.
311(a)...............................................           7.13
   (b)...............................................           7.13
   (c)...............................................           N.A.
312(a)...............................................           2.05
   (b)...............................................           12.03
   (c)...............................................           12.03
313(a)...............................................           7.14
   (b)(1)............................................           N.A.
   (b)(2)............................................           7.14
   (c)...............................................           12.02
   (d)...............................................           7.14
314(a)...............................................    4.02; 4.03; 12.02
   (b)...............................................           N.A.
   (c)(1)............................................           12.04
   (c)(2)............................................           12.04
   (c)(3)............................................           N.A.
   (d)...............................................           N.A.
   (e)...............................................           12.05
   (f)...............................................           N.A.
315(a)...............................................           7.01
   (b)...............................................        7.15; 12.02
   (c)...............................................           7.01
   (d)...............................................           7.01
   (e)...............................................           6.11
316(a) (last sentence)...............................           2.08
   (a)(1)(A).........................................           6.05
   (a)(1)(B).........................................           6.04
   (a)(2)............................................           N.A.
   (b)...............................................           6.07
317(a)(1)............................................           6.08
   (a)(2)............................................           6.09
   (b)...............................................           2.04
318(a)...............................................           12.01
</TABLE>

                           N.A. means Not Applicable.

-----------------------
*  Note:  This Cross Reference Table shall not, for any purpose, be deemed to be
   part of the Indenture.

                                 1
<PAGE>

                                TABLE OF CONTENTS*

<TABLE>
                                                                                    Page
                ARTICLE 1 DEFIITIONS AND INCORPORATION BY REFERENCE

<S>             <C>                                                                  <C>
SECTION 1.01    Definitions..........................................................  1
SECTION 1.02    Other Definitions....................................................  6
SECTION 1.03    Incorporation by Reference of Trust Indenture Act....................  7
SECTION 1.04    Rules of Construction................................................  8
SECTION 1.05    Acts of Holders......................................................  8

                            ARTICLE 2 THE SECURITIES

SECTION 2.01    Form and Dating......................................................  9
SECTION 2.02    Execution and Authentication......................................... 11
SECTION 2.03    Registrar, Paying Agent and Conversion Agent......................... 11
SECTION 2.04    Paying Agent to Hold Money and Securities in Trust................... 12
SECTION 2.05    Securityholder Lists................................................. 12
SECTION 2.06    Transfer and Exchange................................................ 12
SECTION 2.07    Replacement Securities............................................... 14
SECTION 2.08    Outstanding Securities; Determinations of Holders' Action............ 14
SECTION 2.09    Temporary Securities................................................. 15
SECTION 2.10    Cancellation......................................................... 15
SECTION 2.11    Persons Deemed Owners................................................ 16
SECTION 2.12    Global Securities.................................................... 16
SECTION 2.13    CUSIP Numbers........................................................ 20

                       ARTICLE 3 REDEMPTION AND PURCHASES

SECTION 3.01    Right to Redeem; Notices to Trustee.................................. 21
SECTION 3.02    Selection of Securities to Be Redeemed............................... 21
SECTION 3.03    Notice of Redemption................................................. 21
SECTION 3.04    Effect of Notice of Redemption....................................... 22
SECTION 3.05    Deposit of Redemption Price.......................................... 22
SECTION 3.06    Securities Redeemed in Part.......................................... 22
SECTION 3.07    Conversion Arrangement on Call for Redemption........................ 22
SECTION 3.08    Purchase of Securities at Option of the Holder....................... 23
SECTION 3.09    Purchase of Securities at Option of the Holder upon Change
                in Control........................................................... 29
SECTION 3.10    Effect of Purchase Notice or Change in Control Purchase Notice....... 32
SECTION 3.11    Deposit of Purchase Price or Change in Control Purchase Price........ 33
SECTION 3.12    Securities Purchased in Part......................................... 34
SECTION 3.13    Covenant to Comply With Securities Laws Upon Purchase of Securities.. 34
SECTION 3.14    Repayment to the Company............................................. 34
</TABLE>

----------------------
  *  Note:  This Table of Contents shall not, for any purpose, be deemed to be
     part of the Indenture.

                                       i
<PAGE>

<TABLE>
                              ARTICLE 4 COVENANTS

<S>             <C>                                                                  <C>
SECTION 4.01    Payment of Securities................................................ 35
SECTION 4.02    SEC and Other Reports................................................ 35
SECTION 4.03    Compliance Certificate............................................... 35
SECTION 4.04    Further Instruments and Acts......................................... 35
SECTION 4.05    Maintenance of Office or Agency...................................... 36
SECTION 4.06    Delivery of Certain Information...................................... 36
SECTION 4.07    Calculation of Original Issue Discount............................... 36

                        ARTICLE 5 SUCCESSOR CORPORATION

SECTION 5.01    When Company May Merge or Transfer Assets............................ 36

                        ARTICLE 6 DEFAULTS AND REMEDIES

SECTION 6.01    Events of Default.................................................... 37
SECTION 6.02    Acceleration......................................................... 40
SECTION 6.03    Other Remedies....................................................... 40
SECTION 6.04    Waiver of Past Defaults.............................................. 41
SECTION 6.05    Control by Majority.................................................. 41
SECTION 6.06    Limitation on Suits.................................................. 41
SECTION 6.07    Rights of Holders to Receive Payment................................. 41
SECTION 6.08    Collection Suit by Trustee........................................... 42
SECTION 6.09    Trustee May File Proofs of Claim..................................... 42
SECTION 6.10    Priorities........................................................... 43
SECTION 6.11    Undertaking for Costs................................................ 43
SECTION 6.12    Waiver of Stay, Extension or Usury Laws.............................. 43

                               ARTICLE 7 TRUSTEE

SECTION 7.01    Duties and Responsibilities of the Trustee; During Default;
                Prior to Default..................................................... 44
SECTION 7.02    Certain Rights of the Trustee........................................ 45
SECTION 7.03    Trustee Not Responsible for Recitals, Disposition of Securities
                or Application of Proceeds Thereof................................... 46
SECTION 7.04    Trustee and Agents May Hold Securities; Collections, etc............. 46
SECTION 7.05    Moneys Held by Trustee............................................... 46
SECTION 7.06    Compensation and Indemnification of Trustee and Its Prior Claim...... 46
SECTION 7.07    Right of Trustee to Rely on Officers' Certificate, etc............... 47
SECTION 7.08    Conflicting Interests................................................ 47
SECTION 7.09    Persons Eligible for Appointment as Trustee.......................... 47
SECTION 7.10    Resignation and Removal; Appointment of Successor Trustee............ 47
SECTION 7.11    Acceptance of Appointment by Successor Trustee....................... 49
SECTION 7.12    Merger, Conversion, Consolidation or Succession to Business of
                Trustee.............................................................. 49
SECTION 7.13    Preferential Collection of Claims Against the Company................ 50
SECTION 7.14    Reports by the Trustee............................................... 50
SECTION 7.15    Trustee to Give Notice of Default, But May Withhold in Certain
                Circumstances........................................................ 50
</TABLE>

                                       ii
<PAGE>

<TABLE>
                        ARTICLE 8 DISCHARGE OF INDENTURE

<S>             <C>                                                                  <C>
SECTION 8.01    Discharge of Liability on Securities................................. 50
SECTION 8.02    Repayment to the Company............................................. 50

                             ARTICLE 9 AMENDMENTS

SECTION 9.01    Without Consent of Holders........................................... 51
SECTION 9.02    With Consent of Holders.............................................. 51
SECTION 9.03    Compliance with Trust Indenture Act.................................. 52
SECTION 9.04    Revocation and Effect of Consents, Waivers and Actions............... 52
SECTION 9.05    Notation on or Exchange of Securities................................ 52
SECTION 9.06    Trustee to Sign Supplemental Indentures.............................. 53
SECTION 9.07    Effect of Supplemental Indentures.................................... 53

                    ARTICLE 10 SPECIAL TAX EVENT CONVERSION

SECTION 10.01   Optional Conversion to Semiannual Coupon Debenture Upon Tax
                Event................................................................ 53
SECTION 10.02   Payment of Cash Interest; Interest Rights Preserved.................. 53

                             ARTICLE 11 CONVERSION

SECTION 11.01   Conversion Privilege................................................. 55
SECTION 11.02   Conversion Procedure................................................. 56
SECTION 11.03   Fractional Shares.................................................... 57
SECTION 11.04   Taxes on Conversion.................................................. 57
SECTION 11.05   Company to Provide Stock............................................. 57
SECTION 11.06   Adjustment for Change In Capital Stock............................... 58
SECTION 11.07   Adjustment for Rights Issue.......................................... 58
SECTION 11.08   Adjustment for Other Distributions................................... 60
SECTION 11.09   When Adjustment May Be Deferred...................................... 62
SECTION 11.10   When No Adjustment Required.......................................... 62
SECTION 11.11   Notice of Adjustment................................................. 62
SECTION 11.12   Voluntary Increase................................................... 62
SECTION 11.13   Notice of Certain Transactions....................................... 63
SECTION 11.14   Reorganization of Company; Special Distributions..................... 63
SECTION 11.15   Company Determination Final.......................................... 64
SECTION 11.16   Trustee's Adjustment Disclaimer...................................... 64
SECTION 11.17   Simultaneous Adjustments............................................. 64
SECTION 11.18   Successive Adjustments............................................... 64
SECTION 11.19   Rights Issued in Respect of Class B Common Stock Issued Upon
                Conversion........................................................... 64

                            ARTICLE 12 MISCELLANEOUS

SECTION 12.01   Trust Indenture Act Controls......................................... 65
SECTION 12.02   Notices.............................................................. 65
SECTION 12.03   Communication by Holders with Other Holders.......................... 66
SECTION 12.04   Certificate and Opinion as to Conditions Precedent................... 66
SECTION 12.05   Statements Required in Certificate or Opinion........................ 66
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>             <C>                                                                  <C>
SECTION 12.06   Separability Clause.................................................. 66
SECTION 12.07   Rules by Trustee, Paying Agent, Conversion Agent and Registrar....... 66
SECTION 12.08   Legal Holidays....................................................... 67
SECTION 12.09   GOVERNING LAW........................................................ 67
SECTION 12.10   No Recourse Against Others........................................... 67
SECTION 12.11   Successors........................................................... 67
SECTION 12.12   Multiple Originals................................................... 67
 </TABLE>

EXHIBITS
--------

Exhibit A-1  Form of Face of Global Security
Exhibit A-2  Form of Certificated Security
Exhibit B-1  Transfer Certificate
Exhibit B-2  Form of Letter to be Delivered by Accredited Investors

                                       iv
<PAGE>

          INDENTURE dated as of June 23, 2000 between UNIVERSAL HEALTH SERVICES,
INC., a Delaware corporation (the "Company"), and BANK ONE TRUST COMPANY, N.A.,
a national banking association (the "Trustee").

          Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Convertible
Debentures due 2020 (the "Securities"):

                                   ARTICLE 1

                   DEFINITIONS AND INCORPORATION BY REFERENCE

          SECTION 1.01  Definitions

          "144A Global Security" means a permanent Global Security in the form
of the Security attached hereto as Exhibit A-1, and that is deposited with and
registered in the name of the Depositary, representing Securities sold in
reliance on Rule 144A under the Securities Act.

          "Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
when used with respect to any specified person means the power to direct or
cause the direction of 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.

          "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, in each case to the
extent applicable to such transaction and as in effect from time to time.

          "Board of Directors" means either the board of directors of the
Company or any duly authorized committee of such board.

          "Business Day" means each day of the year other than a Saturday or a
Sunday on which banking institutions are not required or authorized to close in
the City of New York.

          "Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.

          "Capital Stock" for any corporation means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) stock issued by that
corporation.

                                       1
<PAGE>

          "Certificated Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-2.

          "Class B Common Stock" means shares of class B common stock, $0.01 par
value, of the Company as it exists on the date of this Indenture or any other
shares of Capital Stock of the Company into which the Class B Common Stock shall
be reclassified or changed.

          "Common Stock" means any stock of any class of the Company which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.

          "Company" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.

          "Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any two Officers.

          "Corporate Trust Office" means the principal office of the Trustee at
which at any time its corporate trust business shall be administered, which
office at the date hereof is located at One Bank One Plaza, Suite 0126, Chicago,
Illinois 60670-0126, Attention: Corporate Trust Administration, or such other
address as the Trustee may designate from time to time by notice to the Holders
and the Company, or the principal corporate trust office of any successor
Trustee (or such other address as a successor Trustee may designate from time to
time by notice to the Holders and the Company).

          "Debt" means with respect to the Company at any date, without
duplication, obligations (other than nonrecourse obligations) for borrowed money
or evidenced by bonds, debentures, notes or similar instruments.

          "Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.

          "GAAP" means United States generally accepted accounting principles as
in effect from time to time.

          "Global Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A-1, and to the extent that such
Securities are required to bear the Legend required by Section 2.06(f), such
Securities will be in the form of a 144A Global Security.

          "Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.

                                       2
<PAGE>

          "Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts or currency swap agreements and (iii) other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency values.

          "Holder" or "Securityholder" means a person in whose name a Security
is registered on the Registrar's books.

          "Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.

          "Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.

          "Institutional Accredited Investor" means an institutional "accredited
investor" as described in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.

          "Institutional Accredited Investor Security" means a Security in the
form of the Security attached hereto as Exhibit A-2, representing Securities
sold to institutional "accredited investors" (as defined in Rule 501(a)(1), (2),
(3) and (7) under the Securities Act).

          "Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.

          "Issue Date" of any Security means the date on which the Security was
originally issued or deemed issued as set forth on the face of the Security.

          "Issue Price" of any Security means, in connection with the original
issuance of such Security, the initial issue price at which the Security is sold
as set forth on the face of the Security.

          "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
given to secure Indebtedness, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement

                                       3
<PAGE>

to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction with respect to any such lien, pledge, charge or
security interest).

          "Officer" means the Chairman of the Board, the Vice Chairman, the
Chief Executive Officer, the President, any Executive Vice President, any Senior
Vice President, any Vice President, the Treasurer or the Secretary or any
Assistant Treasurer or Assistant Secretary of the Company.

          "Officers' Certificate" means a written certificate containing the
information specified in Sections 12.04 and 12.05, signed in the name of the
Company by any two Officers, and delivered to the Trustee. An Officers'
Certificate given pursuant to Section 4.03 shall be signed by an authorized
financial or accounting Officer of the Company but need not contain the
information specified in Sections 12.04 and 12.05.

          "Opinion of Counsel" means a written opinion containing the
information specified in Sections 12.04 and 12.05, from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to, the
Company or the Trustee.

          "Original Issue Discount" of any Security means the difference between
the Issue Price and the Principal Amount at Maturity of the Security as set
forth on the face of the Security.

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

          "Principal Amount at Maturity" of a Security means the Principal
Amount at Maturity as set forth on the face of the Security.

          "Redemption Date" or "redemption date" means the date specified for
redemption of the Securities in accordance with the terms of the Securities and
this Indenture.

          "Redemption Price" or "redemption price" shall have the meaning set
forth in paragraph 5 of the Securities.

          "Regular Record Date" means, with respect to the interest payable on
any Interest Payment Date, the close of business on June 8 or December 8
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.

          "Responsible Officer" means, when used with respect to the Trustee,
any officer within the corporate trust department of the Trustee, including any
vice president, assistant vice president, assistant secretary, assistant
treasurer, trust officer or any other officer of the Trustee who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person's knowledge of and familiarity with the
particular subject.

          "Restricted Security" means a Security required to bear the
restrictive legend set forth in the form of Security set forth in Exhibits A-1
and A-2 of this Indenture.

                                       4
<PAGE>

          "Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.

          "SEC" means the Securities and Exchange Commission.

          "Securities" means any of the Company's Convertible Debentures due
2020, as amended or supplemented from time to time, issued under this Indenture.

          "Securityholder" or "Holder" means a person in whose name a Security
is registered on the Registrar's books.

          "Significant Subsidiary" means a Subsidiary of the Company, including
its Subsidiaries, which meets any of the following conditions:

          (a)  the Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10 percent of the total assets of the Company
and its Subsidiaries consolidated as of the end of any two of the three most
recently completed fiscal years; or

          (b)  the Company's and its other Subsidiaries' proportionate share of
the total assets of the Subsidiary exceeds 10 percent of the total assets of the
Company and its Subsidiaries consolidated as of the end of any two of the three
most recently completed fiscal years; or

          (c)  the Company's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary exceeds
10 percent of such income of the Company and its Subsidiaries consolidated as of
the end of any two of the three most recently completed fiscal years.

          "Special Record Date" means for the payment of any Defaulted Interest,
the date fixed by the Trustee pursuant to Section 10.02(b).

          "Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which an amount equal to the Principal Amount at Maturity of
such Security or such installment of interest is due and payable.

          "Subsidiary" means (i) a corporation, a majority of whose Capital
Stock with voting power, under ordinary circumstances, to elect directors is, at
the date of determination, directly or indirectly owned by the Company, by one
or more Subsidiaries of the Company or by the Company and one or more
Subsidiaries of the Company, (ii) a partnership in which the Company or a
Subsidiary of the Company holds a majority interest in the equity capital or
profits of such partnership, or (iii) any other person (other than a
corporation) in which the Company, a Subsidiary of the Company or the Company
and one or more Subsidiaries of the Company, directly or indirectly, at the date
of determination, has (x) at least a majority ownership interest or (y) the
power to elect or direct the election of a majority of the directors or other
governing body of such person.

                                       5
<PAGE>

          "Tax Event" means that the Company shall have received an opinion from
independent tax counsel experienced in such matters to the effect that, on or
after June 19, 2000, as a result of (a) any amendment to, or change (including
any announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or application
of such laws or regulations by any legislative body, court, governmental agency
or regulatory authority, in each case which amendment or change is enacted,
promulgated, issued or announced or which interpretation is issued or announced
or which action is taken, on or after June 19, 2000, there is more than an
insubstantial risk that interest (including Original Issue Discount) payable on
the Securities either (i) would not be deductible on a current accrual basis or
(ii) would not be deductible under any other method, in either case in whole or
in part, by the Company (by reason of deferral, disallowance, or otherwise) for
United States Federal income tax purposes.

          "TIA" means the Trust Indenture Act of 1939 as in effect on the date
of this Indenture, provided, however, that in the event the TIA is amended after
such date, TIA means, to the extent required by any such amendment, the TIA as
so amended.

          "trading day" means a day during which trading in securities generally
occurs on the New York Stock Exchange or, if the Class B Common Stock is not
listed on the New York Stock Exchange, on the principal other national or
regional securities exchange on which the Class B Common Stock is then listed
or, if the Class B Common Stock is not listed on a national or regional
securities exchange, on the National Association of Securities Dealers Automated
Quotation System or, if the Class B Common Stock is not quoted on the National
Association of Securities Dealers Automated Quotation System, on the principal
other market on which the Class B Common Stock is then traded.

          "Trustee" means the party named as the "Trustee" in the first
paragraph of this Indenture until a successor replaces it pursuant to the
applicable provisions of this Indenture and, thereafter, shall mean such
successor. The foregoing sentence shall likewise apply to any subsequent such
successor or successors.

          SECTION 1.02  Other Definitions

<TABLE>
<CAPTION>

<S>                                       <C>

                                          Defined in
Term                                      Section
----                                      ----------

"Act"...................................  1.05(a)
"Agent Members".........................  2.12(e)
"Associate".............................  3.09(a)
"Average Quoted Price"..................  11.01
"Bankruptcy Law"........................  6.01
"beneficial owner"......................  3.09(a)
"cash"..................................  3.08(b)
"Change in Control".....................  3.09(a)
"Change in Control Purchase Date".......  3.09(a)
"Change in Control Purchase Notice".....  3.09(c)
</TABLE>

                                       6
<PAGE>

<TABLE>
<S>                                       <C>
"Change in Control Purchase Price"......  3.09(a)
"Company Notice"........................  3.08(e)
"Company Notice Date"...................  3.08(c)
"Conversion Agent"......................  2.03
"Conversion Date".......................  11.02
"Conversion Rate".......................  11.01
"Custodian".............................  6.01
"Defaulted Interest"....................  10.02(b)
"Depositary"............................  2.01(a)
"DTC"...................................  2.01(a)
"Event of Default"......................  6.01
"Exchange Act"..........................  3.08(d)
"Ex-Dividend Time"......................  11.01
"Extraordinary Cash Dividend"...........  11.08
"Institutional Accredited Investors"....  2.01(b)
"Legal Holiday".........................  13.08
"Legend"................................  2.06(f)
"Market Price"..........................  3.08(d)
"Notice of Default".....................  6.01
"Paying Agent"..........................  2.03
"Permitted Holder"......................  3.09(a)
"Purchase Date".........................  3.08(a)
"Purchase Notice".......................  3.08(a)
"Purchase Price"........................  3.08(a)
"QIB"...................................  2.01(a)
"Registrar".............................  2.03
"Restated Principal Amount".............  10.01
"Rights"................................  11.19
"Rights Agreement"......................  11.19
"Rule 144A Information".................  4.06
"Sale Price"............................  3.08(d)
"Securities Act"........................  3.08(d)
"Tax Event Date"........................  10.01
"Time of Determination".................  11.01
</TABLE>

          SECTION 1.03  Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

          "Commission" means the SEC.

          "indenture securities" means the Securities.

          "indenture security holder" means a Securityholder.

          "indenture to be qualified" means this Indenture.

                                       7
<PAGE>

          "indenture trustee" or "institutional trustee" means the Trustee.

          "obligor" on the indenture securities means the Company.

          All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.

          SECTION 1.04 Rules of Construction. Unless the context otherwise
requires:

          (a) a term has the meaning assigned to it;

          (b) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with generally accepted accounting principles as in
     effect from time to time;

          (c) "or" is not exclusive;

          (d) "including" means including, without limitation; and

          (e) words in the singular include the plural, and words in the plural
     include the singular.

     SECTION 1.05  Acts of Holders.  (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 their agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of 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 conclusive in favor of the
Trustee and the Company, 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 such officer the execution thereof.
Where such execution is by a signer acting in a capacity other than such
signer's individual capacity, such certificate or affidavit shall also
constitute sufficient proof of such signer's 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
deems sufficient .

          (c) The ownership of Securities shall be proved by the register for
the Securities or by a certificate of the Registrar.

                                       8
<PAGE>

          (d) 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 the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.

          (e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a resolution of the Board of Directors, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for purposes of determining whether Holders of the requisite proportion
of outstanding Securities have authorized or agreed or consented to such
request, demand, authorization, direction, notice, consent, waiver or other Act,
and for that purpose the outstanding Securities shall be computed as of such
record date; provided that no such authorization, agreement or consent by the
Holders on such record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.

                                   ARTICLE 2

                                 THE SECURITIES

          SECTION 2.01  Form and Dating. The Securities and the Trustee's
certificate of authentication shall be substantially in the form of Exhibits A-1
and A-2, which are a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage (provided
that any such notation, legend or endorsement required by usage is in a form
acceptable to the Company). The Company shall provide any such notations,
legends or endorsements to the Trustee in writing. Each Security shall be dated
the date of its authentication.

          (a)  144A Global Securities. Securities offered and sold within the
United States to qualified institutional investors as defined in Rule 144A
("QIBs") in reliance on Rule 144A shall be issued, initially in the form of a
144A Global Security, which shall be deposited with the Trustee at its Corporate
Trust Office, as custodian for the Depositary and registered in the name of The
Depository Trust Company ("DTC") or the nominee thereof (such depositary, or any
successor thereto, and any such nominee being hereinafter referred to as the
"Depositary"), duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate Principal Amount at Maturity of the 144A
Global Securities may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depositary as hereinafter provided.

          (b) Institutional Accredited Investor Securities. Except as provided
in this Section 2.01, 2.06 or 2.12, owners of beneficial interests in Global
Securities will not be entitled

                                       9
<PAGE>

to receive physical delivery of Certificated Securities. Securities offered and
sold within the United States to institutional accredited investors as defined
in Rule 501(a)(1), (2) (3) and (7) under the Securities Act ("Institutional
Accredited Investors") shall be issued, initially in the form of an
Institutional Accredited Investor Security, duly executed by the Company and
authenticated by the Trustee as hereinafter provided.

          (c)  Global Securities in General. Each Global Security shall
represent such of the outstanding Securities as shall be specified therein and
each shall provide that it shall represent the aggregate amount of outstanding
Securities from time to time endorsed thereon and that the aggregate amount of
outstanding Securities represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges, redemptions and conversions.

          Any adjustment of the aggregate Principal Amount at Maturity of a
Global Security to reflect the amount of any increase or decrease in the amount
of outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.12 hereof and shall be made on the records of the Trustee and the Depositary.

          (d)  Book-Entry Provisions. This Section 2.01(d) shall apply only to
Global Securities deposited with or on behalf of the Depositary.

          The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(d), authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depositary, (b) shall
be delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions and (c) shall bear legends substantially to the following effect:

     "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
     THE DEPOSITORY TRUST COMPANY 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
     HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
     AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
     PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
     WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
     HEREIN.

     TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
     BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
     SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
     THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE

                                       10
<PAGE>

     IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE
     INDENTURE REFERRED TO ON THE REVERSE HEREOF."

          (e)  Certificated Securities. Securities not issued as interests in
the Global Securities will be issued in certificated form substantially in the
form of Exhibit A-2 attached hereto.

          SECTION 2.02  Execution and Authentication. The Securities shall be
executed on behalf of the Company by any Officer, under its corporate seal
reproduced thereon. The signature of the Officer on the Securities may be manual
or facsimile.

          Securities bearing the manual or facsimile signatures of individuals
who were at the time of the execution of the Securities the proper Officers of
the Company shall bind the Company, 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
authentication of such Securities.

          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 duly
executed by the Trustee by manual signature of an authorized officer, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.

          The Trustee shall authenticate and deliver Securities for original
issue in an aggregate Principal Amount at Maturity of up to $586,992,000 upon a
Company Order without any further action by the Company. The aggregate Principal
Amount at Maturity of Securities outstanding at any time may not exceed the
amount set forth in the foregoing sentence, except as provided in Section 2.07.

          The Securities shall be issued only in registered form without coupons
and only in denominations of $1,000 of Principal Amount at Maturity and any
integral multiple thereof.

          SECTION 2.03 Registrar, Paying Agent and Conversion Agent. The Company
shall maintain an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), an office or agency
where Securities may be presented for purchase or payment ("Paying Agent") and
an office or agency where Securities may be presented for conversion
("Conversion Agent"). The Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have one or more co-registrars,
one or more additional paying agents and one or more additional conversion
agents. The term Paying Agent includes any additional paying agent, including
any named pursuant to Section 4.05. The term Conversion Agent includes any
additional conversion agent, including any named pursuant to Section 4.05.

          The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent, Conversion Agent or co-registrar (other than the
Trustee). The agreement shall implement the provisions of this Indenture that
relate to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such

                                       11
<PAGE>

and shall be entitled to appropriate compensation therefor pursuant to Section
7.06. The Company or any Subsidiary or an Affiliate of either of them may act as
Paying Agent, Registrar, Conversion Agent or co-registrar.

          The Company initially appoints the Trustee as Registrar, Conversion
Agent and Paying Agent in connection with the Securities.

          SECTION 2.04  Paying Agent to Hold Money and Securities in Trust.
Except as otherwise provided herein, on or prior to each due date of payments in
respect of any Security, the Company shall deposit with the Paying Agent a sum
of money (in immediately available funds if deposited on the due date) or Class
B Common Stock sufficient to make such payments when so becoming due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money and Class B Common Stock held by the
Paying Agent for the making of payments in respect of the Securities and shall
notify the Trustee of any default by the Company in making any such payment. At
any time during the continuance of any such default, the Paying Agent shall,
upon the written request of the Trustee, forthwith pay to the Trustee all money
and Class B Common Stock so held in trust. If the Company, a Subsidiary or an
Affiliate of either of them acts as Paying Agent, it shall segregate the money
and Class B Common Stock held by it as Paying Agent and hold it as a separate
trust fund. The Company at any time may require a Paying Agent to pay all money
and Class B Common Stock held by it to the Trustee and to account for any funds
and Class B Common Stock disbursed by it. Upon doing so, the Paying Agent shall
have no further liability for the money or Class B Common Stock.

          SECTION 2.05  Securityholder Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall cause to be furnished to the Trustee at least
semiannually on May 1 and November 1 a listing of Securityholders dated within
15 days of the date on which the list is furnished and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders.

          SECTION 2.06 Transfer and Exchange. Subject to Section 2.12 hereof,
(a) upon surrender for registration of transfer of any Security, together with a
written instrument of transfer satisfactory to the Registrar duly executed by
the Securityholder or such Securityholder's attorney duly authorized in writing,
at the office or agency of the Company designated as Registrar or co-registrar
pursuant to Section 2.03, the Company 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 denomination or
denominations, of a like aggregate Principal Amount at Maturity. The Company
shall not charge a service charge for any registration of transfer or exchange,
but the Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection with
the transfer or exchange of the Securities from the Securityholder requesting
such transfer or exchange.

                                       12
<PAGE>

          At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
Principal Amount at Maturity, upon surrender of the Securities to be exchanged,
together with a written instrument of transfer satisfactory to the Registrar
duly executed by the Securityholder or such Securityholder's attorney duly
authorized in writing, at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.

          The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of Securities selected for redemption (except,
in the case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or any Securities in respect of which a Purchase Notice or Change in
Control Purchase Notice has been given and not withdrawn by the Holder thereof
in accordance with the terms of this Indenture (except, in the case of
Securities to be purchased in part, the portion thereof not to be purchased) or
any Securities for a period of 15 days before the mailing of a notice of
redemption of Securities to be redeemed.

          (b) Notwithstanding any provision to the contrary herein, so long as a
Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, shall be made
only in accordance with Section 2.12 and this Section 2.06(b). Transfers of a
Global Security shall be limited to transfers of such Global Security in whole,
or in part, to nominees of the Depositary or to a successor of the Depositary or
such successor's nominee.

          (c) Successive registrations and registrations of transfers and
exchanges as aforesaid may be made from time to time as desired, and each such
registration shall be noted on the register for the Securities.

          (d) Any Registrar appointed pursuant to Section 2.03 hereof shall
provide to the Trustee such information as the Trustee may reasonably require in
connection with the delivery by such Registrar of Securities upon transfer or
exchange of Securities.

          (e) No Registrar shall be required to make registrations of transfer
or exchange of Securities during any periods designated in the text of the
Securities or in this Indenture as periods during which such registration of
transfers and exchanges need not be made.

          (f) If Securities are issued upon the transfer, exchange or
replacement of Securities subject to restrictions on transfer and bearing the
legends set forth on the form of Security attached hereto as Exhibits A-1 and A-
2 setting forth such restrictions (collectively, the "Legend"), or if a request
is made to remove the Legend on a Security, the Securities so issued shall bear
the Legend, or the Legend shall not be removed, as the case may be, unless there
is delivered to the Company and the Registrar such satisfactory evidence, which
shall include an Opinion of Counsel, as may be reasonably required by the
Company and the Registrar, that neither the Legend nor the restrictions on
transfer set forth therein are required to ensure that transfers thereof comply
with the provisions of Rule 144A or Rule 144 under the Securities Act or that
such Securities are not "restricted" within the meaning of Rule 144 under the
Securities Act. Upon (i) provision of such satisfactory evidence, or (ii)
notification by the Company to the

                                       13
<PAGE>

Trustee and Registrar of the sale of such Security pursuant to a registration
statement that is effective at the time of such sale, the Trustee, at the
written direction of the Company, shall authenticate and deliver a Security that
does not bear the Legend. If the Legend is removed from the face of a Security
and the Security is subsequently held by an Affiliate of the Company, the Legend
shall be reinstated.

          SECTION 2.07  Replacement Securities. If (a) any mutilated Security is
surrendered to the Trustee, or (b) the Company and the Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, and
there is delivered to the Company and the Trustee such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of
notice to the Company or the Trustee that such Security has been acquired by a
bona fide purchaser, the Company shall execute and upon its written request the
Trustee shall authenticate and deliver, in exchange for any such mutilated
Security or in lieu of any such destroyed, lost or stolen Security, a new
Security of like tenor and Principal Amount at Maturity, 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, or is about to be purchased by the
Company pursuant to Article 3 hereof, the Company in its discretion may, instead
of issuing a new Security, pay or purchase such Security, as the case may be.

          Upon the issuance of any new Securities under this Section, the
Company 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
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all 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 2.08 Outstanding Securities; Determinations of Holders'
Action. Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those cancelled by it or delivered to it for
cancellation, those paid pursuant to Section 2.07 and those described in this
Section 2.08 as not outstanding. A Security does not cease to be outstanding
because the Company or an Affiliate thereof holds the Security; provided,
however, that in determining whether the Holders of the requisite Principal
Amount at Maturity of Securities have given or concurred in any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or 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

                                       14
<PAGE>

Securities which a Responsible Officer of the Trustee knows to be so owned shall
be so disregarded. Subject to the foregoing, only Securities outstanding at the
time of such determination shall be considered in any such determination
(including, without limitation, determinations pursuant to Articles 6 and 9).

          If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.

          If the Paying Agent holds, in accordance with this Indenture, on a
Redemption Date, or on the Business Day following the Purchase Date or a Change
in Control Purchase Date, or on Stated Maturity, money or securities, if
permitted hereunder, sufficient to pay Securities payable on that date, then
immediately after such Redemption Date, Purchase Date, Change in Control
Purchase Date or Stated Maturity, as the case may be, such Securities shall
cease to be outstanding and Original Issue Discount and interest on such
Securities shall cease to accrue; 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.

          If a Security is converted in accordance with Article 11, then from
and after the time of conversion on the Conversion Date, such Security shall
cease to be outstanding and Original Issue Discount and interest shall cease to
accrue on such Security.

          SECTION 2.09  Temporary Securities.  Pending the preparation of
definitive Securities, the Company may execute, and upon Company 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 conclusively evidenced by their execution of such Securities.

          If temporary Securities are issued, the Company 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 the office
or agency of the Company designated for such purpose pursuant to Section 2.03,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Company shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like Principal Amount at
Maturity 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 2.10  Cancellation. All Securities surrendered for payment,
purchase by the Company pursuant to Article 3, conversion, redemption or
registration of transfer or exchange shall, if surrendered to any person other
than the Trustee, be delivered to the Trustee and shall be promptly cancelled by
it. The Company may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Securities so delivered
shall be promptly cancelled by the Trustee. The Company may not issue new
Securities to replace

                                       15
<PAGE>

Securities it has paid or delivered to the Trustee for cancellation or that any
Holder has converted pursuant to Article 11. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be destroyed by the Trustee and the Trustee
shall deliver a certificate of destruction to the Company.

          SECTION 2.11  Persons Deemed Owners. Prior to due presentment of a
Security for registration of transfer, the Company, the Trustee and any agent of
the Company 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 the Security or the payment of any Redemption Price, Purchase Price
or Change in Control Purchase Price in respect thereof, and interest thereon,
for the purpose of conversion and for all other purposes whatsoever, whether or
not such Security be overdue, and neither the Company, the Trustee nor any agent
of the Company or the Trustee shall be affected by notice to the contrary.

          SECTION 2.12  Global Securities. (a) Notwithstanding any other
provisions of this Indenture or the Securities, (A) transfers of a Global
Security, in whole or in part, shall be made only in accordance with Section
2.06 and Section 2.12(a)(i), (B) transfer of a beneficial interest in a Global
Security for a Certificated Security shall comply with Section 2.06 and Section
2.12(a)(ii) below, and (C) transfers of a Certificated Security shall comply
with Section 2.06 and Section 2.12(a)(iii) and (iv) below.

          (i) Transfer of Global Security.  A Global Security may not be
     transferred, in whole or in part, to any Person other than the Depositary
     or a nominee or any successor thereof, and no such transfer to any such
     other Person may be registered; provided that this clause (i) shall not
     prohibit any transfer of a Security that is issued in exchange for a Global
     Security but is not itself a Global Security.  No  transfer of a Security
     to any Person shall be effective under this Indenture or the Securities
     unless and until such Security has been registered in the name of such
     Person.  Nothing in this Section 2.12(a)(i) shall prohibit or render
     ineffective any transfer of a beneficial interest in a Global Security
     effected in accordance with the other provisions of this Section 2.12(a).

          (ii) Restrictions on Transfer of a Beneficial Interest in a Global
     Security for a Certificated Security.  A beneficial interest in a Global
     Security may not be exchanged for a Certificated Security except upon
     satisfaction of the requirements set forth below. Upon receipt by the
     Trustee of a transfer of a beneficial interest in a Global Security in
     accordance with Applicable Procedures for a Certificated Security in the
     form satisfactory to the Trustee, together with:

               (a)  so long as the Securities are Restricted Securities,
          certification, in the form set forth in Exhibit B-1, and, if requested
          by the Company or the Registrar, certification in the form set forth
          in Exhibit B-2, that such beneficial interest in the Global Security
          is being transferred to an Institutional Accredited Investor;

               (b)  written instructions to the Trustee to make, or direct the
          Registrar to make, an adjustment on its books and records with respect
          to such Global

                                       16
<PAGE>

          Security to reflect a decrease in the aggregate Principal Amount at
          Maturity of the Securities represented by the Global Security, such
          instructions to contain information regarding the Depositary account
          to be credited with such decrease; and

               (c)  if the Company or Registrar so requests, an opinion of
          counsel or other evidence reasonably satisfactory to them as to the
          compliance with the restrictions set forth in the Legend,

     then the Trustee shall cause, or direct the Registrar to cause, in
     accordance with the standing instructions and procedures existing between
     the Depositary and the Registrar, the aggregate Principal Amount at
     Maturity of Securities represented by the Global Security to be decreased
     by the aggregate Principal Amount at Maturity of the Certificated Security
     to be issued, shall issue such Certificated Security and shall debit or
     cause to be debited to the account of the Person specified in such
     instructions a beneficial interest in the Global Security equal to the
     Principal Amount at Maturity of the Certificated Security so issued.

          (iii)  Transfer and Exchange of Certificated Securities. When
     Certificated Securities are presented to the Registrar with a request:

               (x) to register the transfer of such Certificated Securities; or

               (y) to exchange such Certificated Securities for an equal
          Principal Amount at Maturity of Certificated Securities of other
          authorized denominations,

     the Registrar shall register the transfer or make the exchange as requested
     if its reasonable requirements for such transaction are met; provided,
     however, that the Certificated Securities surrendered for transfer or
     exchange:

               (a) shall be duly endorsed or accompanied by a written instrument
          of transfer in form reasonably satisfactory to the Company and the
          Registrar, duly executed by the Holder thereof or his attorney duly
          authorized in writing; and

               (b) so long as such Securities are Restricted Securities, such
          Securities are being transferred or exchanged pursuant to an effective
          registration statement under the Securities Act or pursuant to clause
          (A), (B) or (C) below, and are accompanied by the following additional
          information and documents, as applicable:

                         (A) if such Certificated Securities are being delivered
               to the Registrar by a Holder for registration in the name of such
               Holder, without transfer, a certification from such Holder to
               that effect; or

                         (B) if such Certificated Securities are being
               transferred to the Company, a certification to that effect; or

                                       17
<PAGE>

                         (C) if such Certificated Securities are being
               transferred pursuant to an exemption from registration, (i) a
               certification to that effect (in the form set forth in Exhibit B-
               1 and B-2, if applicable) and (ii) if the Company or Registrar so
               requests, an opinion of counsel or other evidence reasonably
               satisfactory to them as to the compliance with the restrictions
               set forth in the Legend.

          (iv) Restrictions on Transfer of a Certificated Security for a
     Beneficial Interest in a Global Security. A Certificated Security may not
     be exchanged for a beneficial interest in a Global Security except upon
     satisfaction of the requirements set forth below.

     Upon receipt by the Trustee of a Certificated Security, duly endorsed or
     accompanied by appropriate instruments of transfer, in form satisfactory to
     the Trustee, together with:

               (a) so long as the Securities are Restricted Securities,
          certification, in the form set forth in Exhibit B-1, that such
          Certificated Security is being transferred to a Qualified
          Institutional Buyer in accordance with Rule 144A; and

               (b) written instructions directing the Trustee to make, or to
          direct the Registrar to make, an adjustment on its books and records
          with respect to such Global Security to reflect an increase in the
          aggregate Principal Amount at Maturity of the Securities represented
          by the Global Security, such instructions to contain information
          regarding the Depositary account to be credited with such increase,

     then the Trustee shall cancel such Certificated Security and cause, or
     direct the Registrar to cause, in accordance with the standing instructions
     and procedures existing between the Depositary and the Registrar, the
     aggregate Principal Amount at Maturity of Securities represented by the
     Global Security to be increased by the aggregate Principal Amount at
     Maturity of the Certificated Security to be exchanged, and shall credit or
     cause to be credited to the account of the Person specified in such
     instructions a beneficial interest in the Global Security equal to the
     Principal Amount at Maturity of the Certificated Security so cancelled. If
     no Global Securities are then outstanding, the Company shall issue and the
     Trustee shall authenticate, upon written order of the Company in the form
     of an Officers' Certificate, a new Global Security in the appropriate
     Principal Amount at Maturity.

          (b) Subject to the succeeding paragraph, every Security shall be
subject to the restrictions on transfer provided in the Legend including the
delivery of an opinion of counsel, if so provided. Whenever any Restricted
Security is presented or surrendered for registration of transfer or for
exchange for a Security registered in a name other than that of the Holder, such
Security must be accompanied by a certificate in substantially the form set
forth in Exhibit B-1, dated the date of such surrender and signed by the Holder
of such Security, as to compliance with such restrictions on transfer. The
Registrar shall not be required to accept for such registration of transfer or
exchange any Security not so accompanied by a properly completed certificate.

                                       18
<PAGE>

          (c) The restrictions imposed by the Legend upon the transferability of
any Security shall cease and terminate when such Security has been sold pursuant
to an effective registration statement under the Securities Act or transferred
in compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or, if earlier, upon the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any successor
provision). Any Security as to which such  restrictions on transfer shall have
expired in accordance with their terms or shall have terminated may, upon a
surrender of such Security for exchange to the Registrar in accordance with the
provisions of this Section 2.12 (accompanied, in the event that such
restrictions on transfer have terminated by reason of a transfer in compliance
with Rule 144 or any successor provision, by an opinion of counsel having
substantial experience in practice under the Securities Act and otherwise
reasonably acceptable to the Company, addressed to the Company and in form
acceptable to the Company, to the effect that the transfer of such Security has
been made in compliance with Rule 144 or such successor provision), be exchanged
for a new Security, of like tenor and aggregate Principal Amount at Maturity,
which shall not bear the restrictive Legend. The Company shall inform the
Trustee of the effective date of any registration statement registering the
Securities under the Securities Act. The Trustee shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
aforementioned opinion of counsel or registration statement.

          (d) As used in the preceding two paragraphs of this Section 2.12, the
term "transfer" encompasses any sale, pledge, transfer, hypothecation or other
disposition of any Security.

          (e) The provisions of clauses (1), (2), (3) and (4) below shall apply
only to Global Securities:

          (1) Notwithstanding any other provisions of this Indenture or the
     Securities, except as provided in Section 2.12(a)(ii), a Global Security
     shall not be exchanged in whole or in part for a Security registered in the
     name of any Person other than the Depositary or one or more nominees
     thereof, provided that a Global Security may be exchanged for Securities
     registered in the names of any person designated by the  Depositary in the
     event that (i) the Depositary has notified the Company that it is unwilling
     or unable to continue as Depositary for such Global Security or such
     Depositary has ceased to be a "clearing agency" registered under the
     Exchange Act, and a successor Depositary is not appointed by the Company
     within 90 days or (ii) an Event of Default has occurred and is continuing
     with respect to the Securities. Any Global Security exchanged pursuant to
     clause (i) above shall be so exchanged in whole and not in part, and any
     Global Security exchanged pursuant to clause (ii) above may be exchanged in
     whole or from time to time in part as directed by the Depositary. Any
     Security issued in exchange for a Global Security or any portion thereof
     shall be a Global Security; provided that any such Security so issued that
     is registered in the name of a Person other than the Depositary or a
     nominee thereof shall not be a Global Security.

          (2) Securities issued in exchange for a Global Security or any portion
     thereof shall be issued in definitive, fully registered form, without
     interest coupons, shall have an aggregate Principal Amount at Maturity
     equal to that of such Global Security or portion thereof to be so
     exchanged, shall be registered in such names and be in such authorized

                                       19
<PAGE>

     denominations as the Depositary shall designate and shall bear the
     applicable legends provided for herein. Any Global Security to be exchanged
     in whole shall be surrendered by the Depositary to the Trustee, as
     Registrar. With regard to any Global Security to be exchanged in part,
     either such Global Security shall be so surrendered for exchange or, if the
     Trustee is acting as custodian for the Depositary or its nominee with
     respect to such Global Security, the Principal Amount at Maturity thereof
     shall be reduced, by an amount equal to the portion thereof to be so
     exchanged, by means of an appropriate adjustment made on the records of the
     Trustee. Upon any such surrender or adjustment, the Trustee shall
     authenticate and deliver the Security issuable on such exchange to or upon
     the order of the Depositary or an authorized representative thereof.

          (3) Subject to the provisions of clause (5) below, the registered
     Holder may grant proxies and otherwise authorize any Person, including
     Agent Members (as defined below) and persons that may hold interests
     through Agent Members, to take any action which a holder is entitled to
     take under this Indenture or the Securities.

          (4) In the event of the occurrence of any of the events specified in
     clause (1) above, the Company will promptly make available to the Trustee a
     reasonable supply of Certificated Securities in definitive, fully
     registered form, without interest coupons.

          (5) Neither any members of, or participants in, the Depositary
     (collectively, the "Agent Members") nor any other Persons on whose behalf
     Agent Members may act shall have any rights under this Indenture with
     respect to any Global Security registered in the name of the Depositary or
     any nominee thereof, or under any such Global Security, and the Depositary
     or such nominee, as the case may be, may be treated by the Company, the
     Trustee and any agent of the Company or the Trustee as the absolute owner
     and holder of such Global Security for all purposes whatsoever.
     Notwithstanding the foregoing, nothing herein shall prevent the Company,
     the Trustee or any agent of the Company or the Trustee from giving effect
     to any written certification, proxy or other authorization furnished by the
     Depositary or such nominee, as the case may be, or impair, as between the
     Depositary, its Agent Members and any other person on whose behalf an Agent
     Member may act, the operation of customary practices of such Persons
     governing the exercise of the rights of a holder of any Security.

          SECTION 2.13  CUSIP Numbers. The Company in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP numbers.

                                   ARTICLE 3

                            REDEMPTION AND PURCHASES

                                       20
<PAGE>

          SECTION 3.01  Right to Redeem; Notices to Trustee. The Company, at its
option, may redeem the Securities in accordance with the provisions of
paragraphs 5 and 7 of the Securities. If the Company elects to redeem Securities
pursuant to paragraph 5 of the Securities, it shall notify the Trustee in
writing of the Redemption Date, the Principal Amount at Maturity of Securities
to be redeemed and the Redemption Price.

          The Company shall give the notice to the Trustee provided for in this
Section 3.01 by a Company Order, at least 45 days before the Redemption Date
(unless a shorter notice shall be satisfactory to the Trustee).

          SECTION 3.02  Selection of Securities to Be Redeemed. If less than all
the Securities are to be redeemed, the Trustee shall select the Securities to be
redeemed pro rata or by lot or by any other method the Trustee considers fair
and appropriate (so long as such method is not prohibited by the rules of any
stock exchange on which the Securities are then listed). The Trustee shall make
the selection at least 15 days but not more than 60 days before the Redemption
Date from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the Principal Amount at Maturity
of Securities that have denominations larger than $1,000.

          Securities and portions of them the Trustee selects shall be in
Principal Amounts at Maturity of $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee shall notify
the Company promptly of the Securities or portions of Securities to be redeemed.

          If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as outstanding for the purpose of such selection.

          SECTION 3.03  Notice of Redemption. At least 30 days but not more than
60 days before a Redemption Date, the Company shall mail a notice of redemption
by first-class mail, postage prepaid, to each Holder of Securities to be
redeemed.

          The notice shall identify the Securities to be redeemed and shall
state:

          (1)  the Redemption Date;

          (2)  the Redemption Price;

          (3)  Conversion Rate;

          (4)  the name and address of the Paying Agent and Conversion Agent;

          (5)  that Securities called for redemption may be converted at any
     time before the close of business on the Redemption Date;

                                       21
<PAGE>

          (6)  that Holders who want to convert Securities must satisfy the
     requirements set forth in paragraph 8 of the Securities;

          (7)  that Securities called for redemption must be surrendered to the
     Paying Agent to collect the Redemption Price;

          (8)  if fewer than all the outstanding Securities are to be redeemed,
     the certificate number and Principal Amounts at Maturity of the particular
     Securities to be redeemed;

          (9)  that, unless the Company defaults in making payment of such
     Redemption Price, Original Issue Discount and any interest on Securities
     called for redemption will cease to accrue on and after the Redemption
     Date; and

          (10) the CUSIP number of the Securities.

          At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense, provided that the
Company makes such request at least three Business Days prior to such notice of
redemption.

          SECTION 3.04  Effect of Notice of Redemption. Once notice of
redemption is given, Securities called for redemption become due and payable on
the Redemption Date and at the Redemption Price stated in the notice, except for
Securities which are converted in accordance with the terms of this Indenture.
Upon surrender to the Paying Agent, such Securities shall be paid at the
Redemption Price stated in the notice.

          SECTION 3.05  Deposit of Redemption Price. Prior to 10:00 a.m. (New
York City time) on the Redemption Date, the Company shall deposit with the
Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of
them is the Paying Agent, shall segregate and hold in trust) money sufficient to
pay the Redemption Price of all Securities to be redeemed on that date other
than Securities or portions of Securities called for redemption which on or
prior thereto have been delivered by the Company to the Trustee for cancellation
or have been converted. The Paying Agent shall as promptly as practicable return
to the Company any money, with interest, if any, thereon, not required for that
purpose because of conversion of Securities pursuant to Article 11. If such
money is then held by the Company in trust and is not required for such purpose,
it shall be discharged from such trust.

          SECTION 3.06  Securities Redeemed in Part. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate and deliver to the Holder a new Security in an authorized
denomination equal in Principal Amount at Maturity to the unredeemed portion of
the Security surrendered.

          SECTION 3.07  Conversion Arrangement on Call for Redemption. In
connection with any redemption of Securities, the Company may arrange for the
purchase and conversion of any Securities called for redemption by an agreement
with one or more investment banks or other purchasers to purchase such
Securities by paying to the Trustee in trust for the Securityholders, on or
prior to 10:00 a.m. New York City time on the Redemption Date, an amount that,
together with any amounts deposited with the Trustee by the Company for the

                                       22
<PAGE>

redemption of such Securities, is not less than the Redemption Price of such
Securities. Notwithstanding anything to the contrary contained in this Article
3, the obligation of the Company to pay the Redemption Price of such Securities
shall be deemed to be satisfied and discharged to the extent such amount is so
paid by such purchasers. If such an agreement is entered into, any Securities
not duly surrendered for conversion by the Holders thereof may, at the option of
the Company, be deemed, to the fullest extent permitted by law, acquired by such
purchasers from such Holders and (notwithstanding anything to the contrary
contained in Article 11) surrendered by such purchasers for conversion, all as
of immediately prior to the close of business on the Redemption Date, subject to
payment of the above amount as aforesaid. The Trustee shall hold and pay to the
Holders whose Securities are selected for redemption any such amount paid to it
for purchase and conversion in the same manner as it would moneys deposited with
it by the Company for the redemption of Securities. Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Securities shall increase or otherwise affect any
of the powers, duties, responsibilities or obligations of the Trustee as set
forth in this Indenture, and the Company agrees to indemnify the Trustee from,
and hold it harmless against, any loss, liability or expense arising out of or
in connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such purchasers, including the costs and
expenses incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture.

          SECTION 3.08 Purchase of Securities at Option of the Holder. (a)
General. Securities shall be purchased by the Company pursuant to paragraph 6 of
the Securities as of June 23, 2006, June 23, 2010 and June 23, 2015 (each, a
"Purchase Date"), at the purchase price of $543.41 per $1,000 of Principal
Amount at Maturity as of June 23, 2006, $643.48 per $1,000 of Principal Amount
at Maturity as of June 23, 2010 and of $799.84 per $1,000 of Principal Amount at
Maturity as of June 23, 2015 (each, a "Purchase Price", as applicable), at the
option of the Holder thereof, upon:

          (1) delivery to the Paying Agent, by the Holder of a written notice of
     purchase (a "Purchase Notice") at any time from the opening of business on
     the date that is at least 20 Business Days prior to a Purchase Date until
     the close of business on such Purchase Date stating:

               (A) the certificate number of the Security which the Holder will
          deliver to be purchased,

               (B) the portion of the Principal Amount at Maturity of the
          Security which the Holder will deliver to be purchased, which portion
          must be $1,000 or an integral multiple thereof,

               (C) that such Security shall be purchased as of the Purchase
          Date pursuant to the terms and conditions specified in paragraph 6 of
          the Securities and in this Indenture, and

                                       23
<PAGE>

               (D) in the event the Company elects, pursuant to Section 3.08(b),
          to pay the Purchase Price to be paid as of such Purchase Date, in
          whole or in part, in shares of Class B Common Stock but such portion
          of the Purchase Price shall ultimately be payable to such Holder
          entirely in cash because any of the conditions to payment of the
          Purchase Price in Class B Common Stock is not satisfied prior to the
          close of business on such Purchase Date, as set forth in Section
          3.08(d), whether such Holder elects (i) to withdraw such Purchase
          Notice as to some or all of the Securities to which such Purchase
          Notice relates (stating the Principal Amount at Maturity and
          certificate numbers of the Securities as to which such withdrawal
          shall relate), or (ii) to receive cash in respect of the entire
          Purchase Price for all Securities (or portions thereof) to which such
          Purchase Notice relates; and

          (2) delivery of such Security to the Paying Agent prior to, on or
     after the Purchase Date (together with all necessary endorsements) at the
     offices of the Paying Agent, such delivery being a condition to receipt by
     the Holder of the Purchase Price therefor; provided, however, that such
     Purchase Price shall be so paid pursuant to this Section 3.08 only if the
     Security so delivered to the Paying Agent shall conform in all respects to
     the description thereof in the related Purchase Notice, as determined by
     the Company.

          If a Holder, in such Holder's Purchase Notice and in any written
notice of withdrawal delivered by such Holder pursuant to the terms of Section
3.10, fails to indicate such Holder's choice with respect to the election set
forth in clause (D) of Section 3.08(a)(1), such Holder shall be deemed to have
elected to receive cash in respect of the Purchase Price for all Securities
subject to such Purchase Notice in the circumstances set forth in such clause
(D).

          The Company shall purchase from the Holder thereof, pursuant to this
Section 3.08, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.

          Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.08 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Purchase Date and
the time of delivery of the Security.

          Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Purchase Notice contemplated by this Section 3.08(a)
shall have the right to withdraw such Purchase Notice at any time prior to the
close of business on the Purchase Date by delivery of a written notice of
withdrawal to the Paying Agent in accordance with Section 3.10.

          The Paying Agent shall promptly notify the Company of the receipt by
it of any Purchase Notice or written notice of withdrawal thereof.

                                       24
<PAGE>

          (b) Company's Right to Elect Manner of Payment of Purchase Price.  The
Securities to be purchased pursuant to Section 3.08(a) may be paid for, at the
election of the Company, in U.S. legal tender ("cash") or Class B Common Stock,
or in any combination of cash and Class B Common Stock, subject to the
conditions set forth in Sections 3.08(c) and (d). The Company shall designate,
in the Company Notice delivered pursuant to Section 3.08(e), whether the Company
will purchase the Securities for cash or Class B Common Stock, or, if a
combination thereof, the percentages of the Purchase Price of Securities in
respect of which it will pay in cash or Class B Common Stock; provided that the
Company will pay cash for fractional interests in Class B Common Stock. For
purposes of determining the existence of potential fractional interests, all
Securities subject to purchase by the Company held by a Holder shall be
considered together (no matter how many separate certificates are to be
presented). Each Holder whose Securities are purchased pursuant to this Section
3.08 shall receive the same percentage of cash or Class B Common Stock in
payment of the Purchase Price for such Securities, except (i) as provided in
Section 3.08(d) with regard to the payment of cash in lieu of fractional shares
of Class B Common Stock and (ii) in the event that the Company is unable to
purchase the Securities of a Holder or Holders for Class B Common Stock because
any necessary qualifications or registrations of the Class B Common Stock under
applicable state securities laws cannot be obtained, the Company may purchase
the Securities of such Holder or Holders for cash. The Company may not change
its election with respect to the consideration (or components or percentages of
components thereof) to be paid once the Company has given its Company Notice to
Securityholders except pursuant to this Section 3.08(b) or pursuant to Section
3.08(d) in the event of a failure to satisfy, prior to the close of business on
the Purchase Date, any condition to the payment of the Purchase Price, in whole
or in part, in Class B Common Stock.

          At least three Business Days before the Company Notice Date, the
Company shall deliver an Officers' Certificate to the Trustee specifying:

          (i)    the manner of payment selected by the Company,

          (ii)   the information required by Section 3.08(e),

          (iii)  if the Company elects to pay the Purchase Price, or a specified
     percentage thereof, in Class B Common Stock, that the conditions to such
     manner of payment set forth in Section 3.08(d) have been or will be
     complied with, and

          (iv)   whether the Company desires the Trustee to give the Company
     Notice required by Section 3.08(e).

          (c) Purchase with Cash. On each Purchase Date, at the option of the
Company, the Purchase Price of Securities in respect of which a Purchase Notice
pursuant to Section 3.08(a) has been given, or a specified percentage thereof,
may be paid by the Company with cash equal to the aggregate Purchase Price of
such Securities. If the Company elects to purchase Securities with cash, the
Company Notice, as provided in Section 3.08(e), shall be sent to Holders (and to
beneficial owners as required by applicable law) not less than 20 Business Days
prior to such Purchase Date (the "Company Notice Date").

                                       25
<PAGE>

          (d) Payment by Issuance of Class B Common Stock. On each Purchase
Date, at the option of the Company, the Purchase Price of Securities in respect
of which a Purchase Notice pursuant to Section 3.08(a) has been given, or a
specified percentage thereof, may be paid by the Company by the issuance of a
number of shares of Class B Common Stock equal to the quotient obtained by
dividing (i) the amount of cash to which the Securityholders would have been
entitled had the Company elected to pay all or such specified percentage, as the
case may be, of the Purchase Price of such Securities in cash by (ii) the Market
Price of a share of Class B Common Stock, subject to the next succeeding
paragraph.

          The Company will not issue a fractional share of Class B Common Stock
in payment of the Purchase Price. Instead the Company will pay cash for the
current market value of the fractional share. The current market value of a
fraction of a share shall be determined by multiplying the Market Price by such
fraction and rounding the product to the nearest whole cent. It is understood
that if a Holder elects to have more than one Security purchased, the number of
shares of Class B Common Stock shall be based on the aggregate amount of
Securities to be purchased.

          If the Company elects to purchase the Securities by the issuance of
shares of Class B Common Stock, the Company Notice, as provided in Section
3.08(e), shall be sent to the Holders (and to beneficial owners as required by
applicable law) not later than the Company Notice Date.

          The Company's right to exercise its election to purchase the
Securities pursuant to Section 3.08 through the issuance of shares of Class B
Common Stock shall be conditioned upon:

          (i)    the Company's not having given its Company Notice of an
     election to pay entirely in cash and its giving of timely Company Notice of
     election to purchase all or a specified percentage of the Securities with
     Class B Common Stock as provided herein;

          (ii)   the registration of the shares of Class B Common Stock to be
     issued in respect of the payment of the Purchase Price under the Securities
     Act of 1933, as amended (the "Securities Act"), or the Securities Exchange
     Act of 1934, as amended (the "Exchange Act"), in each case, if required;

          (iii)  any necessary qualification or registration under applicable
     state securities laws or the availability of an exemption from such
     qualification and registration; and

          (iv)   the receipt by the Trustee of an Officers' Certificate and an
     Opinion of Counsel each stating that (A) the terms of the issuance of the
     Class B Common Stock are in conformity with this Indenture and (B) the
     shares of Class B Common Stock to be issued by the Company in payment of
     the Purchase Price in respect of Securities have been duly authorized and,
     when issued and delivered pursuant to the terms of this Indenture in
     payment of the Purchase Price in respect of the Securities, will be validly
     issued, fully paid and non-assessable and, to the best of such counsel's
     knowledge, free from preemptive rights, and, in the case of such Officers'
     Certificate, stating that conditions (i), (ii) and (iii) above and the
     condition set forth in the second succeeding

                                       26
<PAGE>

     sentence have been satisfied and, in the case of such Opinion of Counsel,
     stating that conditions (ii) and (iii) above has been satisfied.

          Such Officers' Certificate shall also set forth the number of shares
of Class B Common Stock to be issued for each $1,000 Principal Amount at
Maturity of Securities and the Sale Price of a share of Class B Common Stock on
each trading day during the period commencing on the first trading day of the
period during which the Market Price is calculated and ending on the applicable
Purchase Date. The Company may pay the Purchase Price (or any portion thereof)
in Class B Common Stock only if the information necessary to calculate the
Market Price is published in The Wall Street Journal or another daily newspaper
of national circulation. If the foregoing conditions are not satisfied with
respect to a Holder or Holders prior to the close of business on the Purchase
Date and the Company has elected to purchase the Securities pursuant to this
Section 3.08 through the issuance of shares of Class B Common Stock, the Company
shall pay the entire Purchase Price of the Securities of such Holder or Holders
in cash.

          The "Market Price" means the average of the Sale Prices of the Class B
Common Stock for the five trading day period ending on (if the third Business
Day prior to the applicable Purchase Date is a trading day, or if not, then on
the last trading day prior to) the third Business Day prior to the applicable
Purchase Date, appropriately adjusted to take into account the occurrence,
during the period commencing on the first of such trading days during such five
trading day period and ending on such Purchase Date (or other date in question,
for the purpose of adjusting the Conversion Rate), of any event described in
Section 11.06, 11.07 or 11.08; subject, however, to the conditions set forth in
Sections 11.09 and 11.10.

          The "Sale Price" of the Class B Common Stock on any date means the
closing per share sale price (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and average ask prices) on such date as reported in
the composite transactions for the principal United States securities exchange
on which the Class B Common Stock is traded or, if the Class B Common Stock is
not listed on a United States national or regional securities exchange, as
reported by the National Association of Securities Dealers Automated Quotation
System.  In the absence of such quotations, the Company shall be entitled to
determine the Sale Price on the basis of such quotations as it considers
appropriate.

          (e) Notice of Election. The Company's notice of election to purchase
with cash or Class B Common Stock or any combination thereof shall be sent to
the Holders (and to beneficial owners as required by applicable law) in the
manner provided in Section 12.02 at the time specified in Section 3.08(c) or
(d), as applicable (the "Company Notice"). Such Company Notice shall state the
manner of payment elected and shall contain the following information:

          In the event the Company has elected to pay the Purchase Price (or a
specified percentage thereof) with Class B Common Stock, the Company Notice
shall:

          (1)    state that each Holder will receive Class B Common Stock with a
     Market Price determined as of a specified date prior to the Purchase Date
     equal to such specified

                                       27
<PAGE>

     percentage of the Purchase Price of the Securities held by such Holder
     (except any cash amount to be paid in lieu of fractional shares);

          (2)    set forth the method of calculating the Market Price of the
     Class B Common Stock; and

          (3)    state that because the Market Price of Class B Common Stock
     will be determined prior to the Purchase Date, Holders will bear the market
     risk with respect to the value of the Class B Common Stock to be received
     from the date such Market Price is determined to the Purchase Date.

          In any case, each Company Notice shall include a form of Purchase
Notice to be completed by a Securityholder and shall state:

          (i)    the Purchase Price and the Conversion Rate;

          (ii)   the name and address of the Paying Agent and the Conversion
     Agent;

          (iii)  that Securities as to which a Purchase Notice has been given
     may be converted pursuant to Article 11 hereof only if the applicable
     Purchase Notice has been withdrawn in accordance with the terms of this
     Indenture;

          (iv)   that Securities must be surrendered to the Paying Agent to
     collect payment;

          (v)    that the Purchase Price for any security as to which a Purchase
     Notice has been given and not withdrawn will be paid promptly following the
     later of the Purchase Date and the time of surrender of such Security as
     described in (iv);

          (vi)   the procedures the Holder must follow to exercise rights under
     Section 3.08 and a brief description of those rights;

          (vii)  briefly, the conversion rights of the Securities;

          (viii) the procedures for withdrawing a Purchase Notice (including,
     without limitation, for a conditional withdrawal pursuant to the terms of
     Section 3.08(a)(1)(D) or Section 3.10);

          (ix)   that, unless the Company defaults in making payment of such
     Redemption Price, Original Issue Discount and interest on Securities called
     for redemption will cease to accrue on and after the Redemption Date; and

          (x)    the CUSIP number of the Securities.

          At the Company's request, the Trustee shall give such Company Notice
in the Company's name and at the Company's expense; provided, however, that, in
all cases, the text of such Company Notice shall be prepared by the Company.

                                       28
<PAGE>

          Upon determination of the actual number of shares of Class B Common
Stock to be issued for each $1,000 Principal Amount at Maturity of Securities,
the Company will publish such determination in The Wall Street Journal or
another daily newspaper of national circulation.

          (f)    Covenants of the Company. All shares of Class B Common Stock
delivered upon purchase of the Securities shall be newly issued shares or
treasury shares, shall be duly authorized, validly issued, fully paid and
nonassessable and shall be free from preemptive rights and free of any lien or
adverse claim.

          The Company shall use its best efforts to list or cause to have quoted
any shares of Class B Common Stock to be issued to purchase Securities on each
national securities exchange or over-the-counter or other domestic market on
which the Class B Common Stock is then listed or quoted.

          (g)    Procedure upon Purchase. The Company shall deposit cash (in
respect of a cash purchase under Section 3.08(c) or for fractional interests, as
applicable) or shares of Class B Common Stock, or a combination thereof, as
applicable, at the time and in the manner as provided in Section 3.11,
sufficient to pay the aggregate Purchase Price of all Securities to be purchased
pursuant to this Section 3.08. As soon as practicable after the Purchase Date,
the Company shall deliver to each Holder entitled to receive Class B Common
Stock through the Paying Agent, a certificate for the number of full shares of
Class B Common Stock issuable in payment of the Purchase Price and cash in lieu
of any fractional interests. The person in whose name the certificate for Class
B Common Stock is registered shall be treated as a holder of record of shares of
Class B Common Stock on the Business Day following the Purchase Date. Subject to
Section 3.08(d), no payment or adjustment will be made for dividends on the
Class B Common Stock the record date for which occurred on or prior to the
Purchase Date.

          (h)    Taxes. If a Holder of a Security is paid in Class B Common
Stock, the Company shall pay any documentary, stamp or similar issue or transfer
tax due on such issue of shares of Class B Common Stock. However, the Holder
shall pay any such tax which is due because the Holder requests the shares of
Class B Common Stock to be issued in a name other than the Holder's name. The
Paying Agent may refuse to deliver the certificates representing the Class B
Common Stock being issued in a name other than the Holder's name until the
Paying Agent receives a sum sufficient to pay any tax which will be due because
the shares of Class B Common Stock are to be issued in a name other than the
Holder's name. Nothing herein shall preclude any income tax withholding required
by law or regulations.

          SECTION 3.09  Purchase of Securities at Option of the Holder upon
Change in Control. (a) If on or prior to June 23, 2006 there shall have occurred
a Change in Control, all or a portion of the Securities of any Holder shall be
purchased by the Company, at the option of such Holder, at a purchase price
specified in paragraph 6 of the Securities (the "Change in Control Purchase
Price"), as of the date that is 35 Business Days after the occurrence of the
Change in Control (the "Change in Control Purchase Date"), subject to
satisfaction by or on behalf of the Holder of the requirements set forth in
Section 3.09(c).

          A "Change in Control" shall be deemed to have occurred at such time as
either of the following events shall occur:

                                       29
<PAGE>

          (i)  any person, including its affiliates and associates, other than
     Permitted Holders, files a Schedule 13D or TO (or any successor schedule,
     form or report under the Exchange Act) disclosing that such person has
     become the beneficial owner of 50% or more of the total voting power in the
     aggregate of all classes of Capital Stock of the Company then outstanding
     normally entitled to vote in elections of directors, with certain
     exceptions, or any Permitted Holder files such as schedule, form or report
     in connection with a transaction or event, as a result of which the Class B
     Common Stock ceases (or, upon consummation of or immediately following such
     transaction or event, will cease) to be listed on a United States national
     securities exchange or approved for quotation on the Nasdaq National Market
     or any similar United States system for automated dissemination of
     quotations of securities prices; or

          (ii) there shall be consummated any consolidation or merger of the
     Company pursuant to which the Class B Common Stock would be converted into
     cash, securities or other property, in each case other than a consolidation
     or merger of the Company in which (1) the holders of all classes of Common
     Stock immediately prior to the consolidation or merger have, directly or
     indirectly, at least a majority of the total voting power in the aggregate
     of all classes of Capital Stock of the continuing or surviving corporation
     normally entitled to vote in elections of directors immediately after the
     consolidation or merger and (2) the shares of Class B Common Stock shall be
     converted into common stock which is (or, upon consummation of or
     immediately following such consolidation or merger, will be) listed on a
     United States national securities exchange or approved for quotation on the
     Nasdaq National Market or any similar United States system for automated
     dissemination of quotations of securities prices.

          "Permitted Holders" means (A) the Company, any subsidiary of the
Company or their employee benefit plans or Alan B. Miller and his spouse,
immediate family members, estate, lineal descendants, executors or
administrators, or (B) any trust, corporation or other entity, the
beneficiaries, stockholders or other persons beneficially holding an 80% or more
controlling interest of which consist of persons or entities referred to in
clause (A).

Notwithstanding the foregoing provisions of this Section 3.09, a Change in
Control shall not be deemed to have occurred by virtue of the Company, any
Subsidiary, any employee stock ownership plan or any other employee benefit plan
of the Company or any Subsidiary, or any person holding Common Stock for or
pursuant to the terms of any such employee benefit plan, filing or becoming
obligated to file a report under or in response to Schedule 13D or Schedule TO
(or any successor schedule, form or report) under the Exchange Act disclosing
beneficial ownership by it of shares of Common Stock, whether in excess of 50%
or otherwise.

          "Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.

          (b)    Within 15 Business Days after the occurrence of a Change in
Control, the Company shall mail a written notice of Change in Control by first-
class mail to the Trustee and to each Holder (and to beneficial owners as
required by applicable law).  In addition, the Company shall cause a copy of
such notice of Change in Control to be published in The Wall Street Journal or
another daily newspaper of national circulation.  The notice shall include a

                                       30
<PAGE>

form of Change in Control Purchase Notice to be completed by the Securityholder
and shall state:

          (1)  briefly, the events causing a Change in Control and the date of
     such Change in Control;

          (2)  the date by which the Change in Control Purchase Notice pursuant
     to this Section 3.09 must be given;

          (3)  the Change in Control Purchase Date;

          (4)  the Change in Control Purchase Price;

          (5)  the name and address of the Paying Agent and the Conversion
     Agent;

          (6)  the Conversion Rate and any adjustments thereto;

          (7)  that Securities as to which a Change in Control Purchase Notice
     has been given may be converted pursuant to Article 11 hereof only if the
     Change in Control Purchase Notice has been withdrawn in accordance with the
     terms of this Indenture;

          (8)  that Securities must be surrendered to the Paying Agent to
     collect payment;

          (9)  that the Change in Control Purchase Price for any Security as to
     which a Change in Control Purchase Notice has been duly given and not
     withdrawn will be paid promptly following the later of the Change in
     Control Purchase Date and the time of surrender of such Security as
     described in (8) above;

          (10) briefly, the procedures the Holder must follow to exercise rights
     under this Section 3.09;

          (11) briefly, the conversion rights of the Securities;

          (12) the procedures for withdrawing a Change in Control Purchase
     Notice;

          (13) that, unless the Company defaults in making payment of such
     Redemption Price, Original Issue Discount and interest on Securities called
     for redemption will cease to accrue on and after the Redemption Date; and

          (14) the CUSIP number of the Securities.

          (c)  A Holder may exercise its rights specified in Section 3.09(a)
hereof upon delivery of a written notice of purchase (a "Change in Control
Purchase Notice") to the Paying Agent at any time prior to the close of business
on the Change in Control Purchase Date, stating:

          (1)  the certificate number of the Security which the Holder will
     deliver to be purchased;

                                       31
<PAGE>

          (2)  the portion of the Principal Amount at Maturity of the Security
     which the Holder will deliver to be purchased, which portion must be $1,000
     or an integral multiple thereof; and

          (3)  that such Security shall be purchased pursuant to the terms and
     conditions specified in paragraph 6 of the Securities.

          The delivery of such Security to the Paying Agent prior to, on or
after the Change in Control Purchase Date (together with all necessary
endorsements) at the offices of the Paying Agent shall be a condition to the
receipt by the Holder of the Change in Control Purchase Price therefor;
provided, however, that such Change in Control Purchase Price shall be so paid
pursuant to this Section 3.09 only if the Security so delivered to the Paying
Agent shall conform in all respects to the description thereof set forth in the
related Change in Control Purchase Notice.

          The Company shall purchase from the Holder thereof, pursuant to this
Section 3.09, a portion of a Security if the Principal Amount at Maturity of
such portion is $1,000 or an integral multiple of $1,000. Provisions of this
Indenture that apply to the purchase of all of a Security also apply to the
purchase of such portion of such Security.

          Any purchase by the Company contemplated pursuant to the provisions of
this Section 3.09 shall be consummated by the delivery of the consideration to
be received by the Holder promptly following the later of the Change in Control
Purchase Date and the time of delivery of the Security to the Paying Agent in
accordance with this Section 3.09.

          Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Change in Control Purchase Notice contemplated by this
Section 3.09(c) shall have the right to withdraw such Change in Control Purchase
Notice at any time prior to the close of business on the Change in Control
Purchase Date by delivery of a written notice of withdrawal to the Paying Agent
in accordance with Section 3.10.

          The Paying Agent shall promptly notify the Company of the receipt by
it of any Change in Control Purchase Notice or written withdrawal thereof.

          SECTION 3.10 Effect of Purchase Notice or Change in Control Purchase
Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change in
Control Purchase Notice specified in Section 3.08(a) or Section 3.09(c), as
applicable, the Holder of the Security in respect of which such Purchase Notice
or Change in Control Purchase Notice, as the case may be, was given shall
(unless such Purchase Notice or Change in Control Purchase Notice is withdrawn
as specified in the following two paragraphs) thereafter be entitled to receive
solely the Purchase Price or Change in Control Purchase Price, as the case may
be, with respect to such Security. Such Purchase Price or Change in Control
Purchase Price shall be paid to such Holder, subject to receipts of funds and/or
securities by the Paying Agent, promptly following the later of (x) the Purchase
Date or the Change in Control Purchase Date, as the case may be, with respect to
such Security (provided the conditions in Section 3.08(a) or Section 3.09(c), as
applicable, have been satisfied) and (y) the time of delivery of such Security
to the Paying Agent by the Holder thereof in the manner required by Section
3.08(a) or Section 3.09(c), as applicable.

                                       32
<PAGE>

Securities in respect of which a Purchase Notice or Change in Control Purchase
Notice, as the case may be, has been given by the Holder thereof may not be
converted pursuant to Article 11 hereof on or after the date of the delivery of
such Purchase Notice or Change in Control Purchase Notice, as the case may be,
unless such Purchase Notice or Change in Control Purchase Notice, as the case
may be, has first been validly withdrawn as specified in the following two
paragraphs.

          A Purchase Notice or Change in Control Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent in accordance with the Purchase Notice or Change
in Control Purchase Notice, as the case may be, at any time prior to the close
of business on the Purchase Date or the Change in Control Purchase Date, as the
case may be, specifying:

          (1)  the certificate number of the Security in respect of which such
     notice of withdrawal is being submitted,

          (2)  the Principal Amount at Maturity of the Security with respect to
     which such notice of withdrawal is being submitted, and

          (3)  the Principal Amount at Maturity, if any, of such Security which
     remains subject to the original Purchase Notice or Change in Control
     Purchase Notice, as the case may be, and which has been or will be
     delivered for purchase by the Company.

          A written notice of withdrawal of a Purchase Notice may be in the form
set forth in the preceding paragraph or may be in the form of (i) a conditional
withdrawal contained in a Purchase Notice pursuant to the terms of Section
3.08(a)(1)(D) or (ii) a conditional withdrawal containing the information set
forth in Section 3.08(a)(1)(D) and the preceding paragraph and contained in a
written notice of withdrawal delivered to the Paying Agent as set forth in the
preceding paragraph.

          There shall be no purchase of any Securities pursuant to Section 3.08
(other than through the issuance of Class B Common Stock in payment of the
Purchase Price, including cash in lieu of fractional shares) or 3.09 if there
has occurred (prior to, on or after, as the case may be, the giving, by the
Holders of such Securities, of the required Purchase Notice or Change in Control
Purchase Notice, as the case may be) and is continuing an Event of Default
(other than a default in the payment of the Purchase Price or Change in Control
Purchase Price, as the case may be, with respect to such Securities). The Paying
Agent will promptly return to the respective Holders thereof any Securities (x)
with respect to which a Purchase Notice or Change in Control Purchase Notice, as
the case may be, has been withdrawn in compliance with this Indenture, or (y)
held by it during the continuance of an Event of Default (other than a default
in the payment of the Purchase Price or Change in Control Purchase Price, as the
case may be, with respect to such Securities) in which case, upon such return,
the Purchase Notice or Change in Control Purchase Notice with respect thereto
shall be deemed to have been withdrawn.

          SECTION 3.11 Deposit of Purchase Price or Change in Control Purchase
Price. Prior to 10:00 a.m. (New York City time) on the Business Day following
the Purchase Date or the Change in Control Purchase Date, as the case may be,
the Company shall deposit

                                       33
<PAGE>

with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or
an Affiliate of either of them is acting as the Paying Agent, shall segregate
and hold in trust as provided in Section 2.04) an amount of money (in
immediately available funds if deposited on such Business Day) or Class B Common
Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or
Change in Control Purchase Price, as the case may be, of all the Securities or
portions thereof which are to be purchased as of the Purchase Date or Change in
Control Purchase Date, as the case may be.

          SECTION 3.12 Securities Purchased in Part. Any Security which is to be
purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Company 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 at Maturity equal to, and in exchange
for, the portion of the Principal Amount at Maturity of the Security so
surrendered which is not purchased.

          SECTION 3.13  Covenant to Comply With Securities Laws Upon Purchase of
Securities. In connection with any offer to purchase or purchase of Securities
under Section 3.08 or 3.09 hereof (provided that such offer or purchase
constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as
used herein, includes any successor provision thereto) under the Exchange Act at
the time of such offer or purchase), the Company shall (i) comply with Rule 13e-
4 , Rule 14e-1 and any other tender offer rules under the Exchange Act which may
then be applicable, (ii) file the related Schedule TO (or any successor
schedule, form or report) or any other schedule required under the Exchange Act,
and (iii) otherwise comply with all Federal and state securities laws so as to
permit the rights and obligations under Sections 3.08 and 3.09 to be exercised
in the time and in the manner specified in Sections 3.08 and 3.09.

          SECTION 3.14 Repayment to the Company. The Trustee and the Paying
Agent shall return to the Company any cash or shares of Class B Common Stock
that remain unclaimed as provided in paragraph 13 of the Securities, together
with interest or dividends, if any, thereon, held by them for the payment of the
Purchase Price or Change in Control Purchase Price, as the case may be;
provided, however, that to the extent that the aggregate amount of cash or
shares of Class B Common Stock deposited by the Company pursuant to Section 3.11
exceeds the aggregate Purchase Price or Change in Control Purchase Price, as the
case may be, of the Securities or portions thereof which the Company is
obligated to purchase as of the Purchase Date or Change in Control Purchase
Date, as the case may be, then promptly after the Business Day following the
Purchase Date or Change in Control Purchase Date, as the case may be, the
Trustee shall return any such excess to the Company together with interest or
dividends, if any, thereon.

                                   ARTICLE 4

                                   COVENANTS

                                       34
<PAGE>

          SECTION 4.01 Payment of Securities. The Company shall promptly make
all payments in respect of the Securities on the dates and in the manner
provided in the Securities or pursuant to this Indenture. Any amounts to be
given to the Trustee or Paying Agent, shall be deposited with the Trustee or
Paying Agent by 10:00 a.m. New York City time by the Company. Principal Amount
at Maturity, Restated Principal Amount, Issue Price plus accrued Original Issue
Discount, Redemption Price, Purchase Price, Change in Control Purchase Price and
cash interest shall be considered paid on the applicable date due if on such
date (or, in the case of a Purchase Price or Change in Control Purchase Price,
on the Business Day following the applicable Purchase Date or Change in Control
Purchase Date, as the case may be) the Trustee or the Paying Agent holds, in
accordance with this Indenture, money or securities, if permitted hereunder,
sufficient to pay all such amounts then due.

          The Company shall, to the extent permitted by law, pay cash interest
on overdue amounts at the rate per annum set forth in paragraph 1 of the
Securities, compounded semiannually, which interest shall accrue from the date
such overdue amount was originally due to the date payment of such amount,
including interest thereon, has been made or duly provided for. All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall be in lieu of, and not in addition to, the continued accrual of
Original Issue Discount.

          SECTION 4.02 SEC and Other Reports. The Company shall file with the
Trustee, within 15 days after it files such annual and quarterly reports,
information, documents and other reports with the SEC, copies of its annual
report and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time
no longer subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it shall continue to provide the Trustee with reports containing
substantially the same information as would have been required to be filed with
the SEC had the Company continued to have been subject to such reporting
requirements. In such event, such reports shall be provided at the times the
Company would have been required to provide reports had it continued to have
been subject to such reporting requirements. The Company also shall comply with
the other provisions of TIA Section 314(a).

          SECTION 4.03 Compliance Certificate. The Company shall deliver to the
Trustee within 120 days after the end of each fiscal year of the Company
(beginning with the fiscal year ending on December 31, 2000) an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.

          SECTION 4.04 Further Instruments and Acts. Upon request of the
Trustee, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Indenture.

                                       35
<PAGE>

          SECTION 4.05 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, the City of New York, an office or agency
of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities
may be presented or surrendered for payment, where Securities may be surrendered
for registration of transfer, exchange, purchase, redemption or conversion and
where notices and demands to or upon the Company in respect of the Securities
and this Indenture may be served. The office of Bank One Trust Company, N.A.,
located at 153 W. 51st Street, New York, New York 10019 (Attention: Corporate
Trust Administration), shall initially be such office or agency for all of the
aforesaid purposes. The Company shall give prompt written notice to the Trustee
of the location, and of any change in the location, of any such office or agency
(other than a change in the location of the office of the Trustee). If at any
time the Company 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 address of the
Trustee set forth in Section 12.02.

          The Company may also from time to time designate one or more other
offices or agencies 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 Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes.

          SECTION 4.06 Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Exchange Act, upon the
request of a holder or any beneficial holder of Securities or shares of Class B
Common Stock issued upon conversion thereof, the Company will promptly furnish
or cause to be furnished Rule 144A Information (as defined below) to such Holder
or any beneficial holder of Securities or holder of shares of Class B Common
Stock issued upon conversion of Securities, or to a prospective purchaser of any
such security designated by any such holder, as the case may be, to the extent
required to permit compliance by such Holder or holder with Rule 144A under the
Securities Act in connection with the resale of any such security. "Rule 144A
Information" shall be such information as is specified pursuant to Rule
144A(d)(4) under the Securities Act.

          SECTION 4.07 Calculation of Original Issue Discount. The Company shall
file with the Trustee promptly at the end of each calendar year (i) a written
notice specifying the amount of original issue discount (including daily rates
and accrual periods) accrued on outstanding Securities as of the end of such
year and (ii) such other specific information relating to such original issue
discount as may then be relevant under the Internal Revenue Code of 1986, as
amended from time to time.

                                   ARTICLE 5

                             SUCCESSOR CORPORATION

          SECTION 5.01 When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into any other person or convey,
transfer or lease its properties and assets substantially as an entirety to any
person, unless:

                                       36
<PAGE>

          (a)  either (1) the Company shall be the continuing corporation or (2)
     the person (if other than the Company) formed by such consolidation or into
     which the Company is merged or the person which acquires by conveyance,
     transfer or lease the properties and assets of the Company substantially as
     an entirety (i) shall be organized and validly existing under the laws of
     the United States or any State thereof or the District of Columbia and (ii)
     shall expressly assume, by an indenture supplemental hereto, executed and
     delivered to the Trustee, in form satisfactory to the Trustee, all of the
     obligations of the Company under the Securities and this Indenture;

          (b)  immediately after giving effect to such transaction, no Default
     shall have occurred and be continuing; and

          (c)  the Company shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that such
     consolidation, merger, conveyance, transfer or lease and, if a supplemental
     indenture is required in connection with such transaction, such
     supplemental indenture, comply with this Article 5 and that all conditions
     precedent herein provided for relating to such transaction have been
     satisfied.

          For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise) of the properties and assets of one or more Subsidiaries
(other than to the Company or another Subsidiary), which, if such assets were
owned by the Company, would constitute all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.

          The successor person formed by such consolidation or into which the
Company is merged or the successor person to which such conveyance, transfer or
lease is made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company herein; and thereafter, except in
the case of a lease and obligations the Company may have under a supplemental
indenture pursuant to Section 11.14, the Company shall be discharged from all
obligations and covenants under this Indenture and the Securities. Subject to
Section 9.06, the Company, the Trustee and the successor person shall enter into
a supplemental indenture to evidence the succession and substitution of such
successor person and such discharge and release of the Company.

                                   ARTICLE 6

                             DEFAULTS AND REMEDIES

          SECTION 6.01  Events of Default.  An "Event of Default" occurs if:

          (1)  the Company defaults in the payment of any cash interest upon any
     Security when such interest becomes due and payable, and such default in
     payment of interest shall continue for 30 days;

          (2)  the Company defaults in the payment of the Principal Amount at
     Maturity (or, if the Securities have been converted to semiannual coupon
     debentures following a

                                       37
<PAGE>

     Tax Event pursuant to Article 10, the Restated Principal Amount), Issue
     Price plus accrued Original Issue Discount, Redemption Price, Purchase
     Price or Change in Control Purchase Price on any Security when the same
     becomes due and payable at its Stated Maturity, upon redemption, upon
     declaration, when due for purchase by the Company or otherwise;

          (3)  the Company fails to deliver shares of Class B Common Stock
     (together with cash in lieu of fractional shares) when such Class B Common
     Stock (or cash in lieu of fractional shares) is required to be delivered
     upon conversion of a Security and such failure continues for 10 days;

          (4)  the Company fails to comply with any of its agreements in the
     Securities or this Indenture (other than those referred to in clauses (1),
     (2) and (3) above) and such failure continues for 30 days after receipt by
     the Company of a Notice of Default;

          (5)  there shall be (i) a default under any bond, debenture, note or
     other evidence of indebtedness for money borrowed or under any mortgage,
     indenture or other instrument under which there may be issued or by which
     there may be secured or evidenced any Indebtedness by the Company or any
     Significant Subsidiary or by any Subsidiaries of the Company which in the
     aggregate would constitute a Significant Subsidiary or under any guarantee
     of payment of Indebtedness by the Company or any Significant Subsidiary or
     by any Subsidiaries of the Company which in the aggregate would constitute
     a Significant Subsidiary, whether such Indebtedness or guarantee now exists
     or shall hereafter be created, and the effect of such default is to cause
     such Indebtedness (or Indebtedness so guaranteed) to become due prior to
     its stated maturity or (ii) a failure to pay at the stated  maturity of any
     such Indebtedness (or Indebtedness so guaranteed) any amounts then due and
     owing thereunder; provided, however, that no Default under this clause (5)
     shall exist if all such defaults and failures to pay relate to Indebtedness
     (including Indebtedness so guaranteed) with an aggregate principal amount
     of not more than $5,000,000 at the time outstanding;

          (6)  final judgments for the payment of money which in the aggregate
     exceed $5,000,000 at the time outstanding shall be rendered against the
     Company or any Significant Subsidiary or any Subsidiaries of the Company
     which in the aggregate would constitute a Significant Subsidiary by a court
     of competent jurisdiction and shall remain undischarged for a period
     (during which execution shall not be effectively stayed) of 60 days after
     such judgment becomes final and nonappealable; or

          (7)  the Company or any Significant Subsidiary or any Subsidiaries of
     the Company which in the aggregate would constitute a Significant
     Subsidiary pursuant to or under or within the meaning of any Bankruptcy
     Law:

               (A) commences a voluntary case or proceeding;

               (B) consents to the entry of an order for relief against it in an
          involuntary case or proceeding or the commencement of any case against
          it;

                                       38
<PAGE>

               (C) consents to the appointment of a Custodian of it or for any
          substantial part of its property;

               (D) makes a general assignment for the benefit of its creditors;

               (E) files a petition in bankruptcy or answer or consent seeking
          reorganization or relief; or

               (F) consents to the filing of such a petition or the appointment
          of or taking possession by a Custodian; or

          (8)  a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that:

               (A) is for relief against the Company or any Significant
          Subsidiary or any Subsidiaries of the Company which in the aggregate
          would constitute a Significant Subsidiary in an involuntary case or
          proceeding, or adjudicates the Company or any Significant Subsidiary
          or any Subsidiaries of the Company which in the aggregate would
          constitute a Significant Subsidiary insolvent or bankrupt;

               (B) appoints a Custodian of the Company or any Significant
          Subsidiary or any Subsidiaries of the Company which in the aggregate
          would constitute a Significant Subsidiary or for any substantial part
          of its or their properties; or

               (C) orders the winding up or liquidation of the Company or any
          Significant Subsidiary or any Subsidiaries of the Company which in the
          aggregate would constitute a Significant Subsidiary;

     and the order or decree remains unstayed and in effect for 60 days.

          "Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.

          "Custodian" means any receiver, trustee, assignee, liquidator,
custodian or similar official under any Bankruptcy Law.

          A Default under clause (4) or clause (5) above is not an Event of
Default until the Trustee notifies the Company, or the Holders of at least 25%
in aggregate Principal Amount at Maturity of the Securities at the time
outstanding notify the Company and the Trustee, of the Default and the Company
does not cure such Default (and such Default is not waived) within the time
specified in clause (4) or clause (5) above after actual receipt of such notice.
Any such notice must specify the Default, demand that it be remedied and state
that such notice is a "Notice of Default".

          The Company will deliver to the Trustee, within five Business Days of
becoming aware of the occurrence of an Event of Default, written notice thereof.
In addition, the Company

                                       39
<PAGE>

shall deliver to the Trustee, within 30 days after it becomes aware of the
occurrence thereof, written notice of any event which with the giving of notice
or the lapse of time, or both, would become an Event of Default under clause (4)
or clause (5) above, its status and what action the Company is taking or
proposes to take with respect thereto.

          SECTION 6.02 Acceleration. If an Event of Default (other than an Event
of Default specified in Section 6.01(7) or (8)) occurs and is continuing, the
Trustee by Notice to the Company, or the Holders of at least 25% in aggregate
Principal Amount at Maturity of the Securities at the time outstanding by notice
to the Company and the Trustee, may declare the Issue Price plus accrued
Original Issue Discount and any accrued cash interest (or if the Securities have
been converted to semiannual coupon debentures following a Tax Event, the
Restated Principal Amount, plus accrued interest) through the date of
declaration (in the case of an Event of Default specified in Section 6.01(1)
through (6)) or through the date of the Default (in the case of an Event of
Default specified in Section 6.01(7) or (8)) on all the Securities to be
immediately due and payable. Upon such a declaration, such Issue Price plus
accrued Original Issue Discount and any accrued cash interest (or, if the
Securities have been converted to semiannual coupon debentures following a Tax
Event, the Restated Principal Amount, plus accrued interest) shall be due and
payable immediately. If an Event of Default specified in Section 6.01(7) or (8)
occurs and is continuing, the Issue Price plus accrued Original Issue Discount
and any accrued cash interest (or, if the Securities have been converted to
semiannual coupon debentures following a Tax Event, the Restated Principal
Amount, plus accrued interest) on all the Securities shall become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in aggregate
Principal Amount at Maturity of the Securities at the time outstanding, by
notice to the Trustee (and without notice to any other Securityholder) may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived except nonpayment of the Issue Price plus accrued Original
Issue Discount and any accrued cash interest (or, if the Securities have been
converted to semiannual coupon debentures following a Tax Event, the Restated
Principal Amount, plus accrued interest) that have become due solely as a result
of acceleration and if all amounts due to the Trustee under Section 7.06 have
been paid. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.

          SECTION 6.03 Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of the Issue Price plus accrued Original Issue Discount and any accrued cash
interest (or, if the Securities have been converted to semiannual coupon
debentures following a Tax Event, the Restated Principal Amount, plus accrued
interest) on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.

          The Trustee may maintain a proceeding even if the Trustee does not
possess any of the Securities or produce any of the Securities in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of, or acquiescence in, the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative.

                                       40
<PAGE>

          SECTION 6.04 Waiver of Past Defaults. The Holders of a majority in
aggregate Principal Amount at Maturity of the Securities at the time
outstanding, by notice to the Trustee (and without notice to any other
Securityholder), may waive an existing Default and its consequences except (1)
an Event of Default described in Section 6.01(1) or (2), (2) a Default in
respect of a provision that under Section 9.02 cannot be amended without the
consent of each Securityholder affected or (3) a Default which constitutes a
failure to convert any Security in accordance with the terms of Article 11. When
a Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right. This Section 6.04
shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is
hereby expressly excluded from this Indenture, as permitted by the TIA.

          SECTION 6.05 Control by Majority. The Holders of a majority in
aggregate Principal Amount at Maturity of the Securities at the time outstanding
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines in good
faith is unduly prejudicial to the rights of other Securityholders or would
involve the Trustee in personal liability unless the Trustee is offered
indemnity satisfactory to it against loss, liability or expense. This Section
6.05 shall be in lieu of Section 316(a)1(A) of the TIA and such Section
316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the
TIA.

          SECTION 6.06 Limitation on Suits. A Securityholder may not pursue any
remedy with respect to this Indenture or the Securities unless:

          (1)  the Holder gives to the Trustee written notice stating that an
     Event of Default is continuing;

          (2)  the Holders of at least 25% in aggregate Principal Amount at
     Maturity of the Securities at the time outstanding make a written request
     to the Trustee to pursue the remedy;

          (3)  such Holder or Holders offer to the Trustee reasonable security
     or indemnity satisfactory to the Trustee against any loss, liability or
     expense;

          (4)  the Trustee does not comply with the request within 60 days after
     receipt of such notice, request and offer of security or indemnity; and

          (5)  the Holders of a majority in aggregate Principal Amount at
     Maturity of the Securities at the time outstanding do not give the Trustee
     a direction inconsistent with the request during such 60-day period.

          A Securityholder may not use this Indenture to prejudice the rights of
any other Securityholder or to obtain a preference or priority over any other
Securityholder.

          SECTION 6.07 Rights of Holders to Receive Payment. Notwithstanding any
other provision of this Indenture, the right of any Holder to receive payment of
the Principal Amount at Maturity (or, if the Securities have been converted to
semiannual coupon debentures following a Tax Event pursuant to Article 10, the
Restated Principal Amount), Issue Price plus

                                       41
<PAGE>

accrued Original Issue Discount, Redemption Price, Purchase Price, Change in
Control Purchase Price or any accrued cash interest (or, if the Securities have
been converted to semiannual coupon debentures following a Tax Event, the
Restated Principal Amount, plus accrued interest) in respect of the Securities
held by such Holder, on or after the respective due dates expressed in the
Securities or any Redemption Date, and to convert the Securities in accordance
with Article 11, or to bring suit for the enforcement of any such payment on or
after such respective dates or the right to convert, shall not be impaired or
affected adversely without the consent of such Holder.

          SECTION 6.08 Collection Suit by Trustee. If an Event of Default
described in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount owing with respect to the Securities and the
amounts provided for in Section 7.06.

          SECTION 6.09 Trustee May File Proofs of Claim. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee (irrespective
of whether the Principal Amount at Maturity, Issue Price plus accrued Original
Issue Discount, Redemption Price, Purchase Price, Change in Control Purchase
Price or any accrued cash interest (or, if the Securities have been converted to
semiannual coupon debentures following a Tax Event, the Restated Principal
Amount, plus accrued interest) in respect of the Securities shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Company for the payment
of any such amount) shall be entitled and empowered, by intervention in such
proceeding or otherwise,

          (a)  to file and prove a claim for the whole amount of the Principal
     Amount at Maturity, Issue Price plus accrued Original Issue Discount,
     Redemption Price, Purchase Price, Change in Control Purchase Price, or any
     accrued cash interest (or, if the Securities have been converted to
     semiannual coupon debentures following a Tax Event, the Restated Principal
     Amount, plus accrued interest) and to file such other papers or documents
     as may be necessary or advisable in order to have the claims of the Trustee
     (including any claim for the reasonable compensation, expenses,
     disbursements and advances of the Trustee, its agents and counsel or any
     other amounts due the Trustee under Section 7.06) and of the Holders
     allowed in such judicial proceeding, and

          (b)  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
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 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 7.06.

                                       42
<PAGE>

          Nothing herein contained 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.

          SECTION 6.10 Priorities. If the Trustee collects any money pursuant to
this Article 6, it shall pay out the money in the following order:

          FIRST: to the Trustee for amounts due under Section 7.06;

          SECOND: to Securityholders for amounts due and unpaid on the
          Securities for the Principal Amount at Maturity, Issue Price plus
          accrued Original Issue Discount, Redemption Price, Purchase Price,
          Change in Control Purchase Price or any accrued cash interest (or, if
          the Securities have been converted to semiannual coupon debentures
          following a Tax Event, the Restated Principal Amount, plus accrued
          interest) as the case may be, ratably, without preference or priority
          of any kind, according to such amounts due and payable on the
          Securities; and

          THIRD: the balance, if any, to the Company.

          The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and the Company a
notice that states the record date, the payment date and the amount to be paid.

          SECTION 6.11 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 or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant (other than the Trustee) in the suit of
an undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 or a suit by Holders of more than 10% in aggregate Principal Amount at
Maturity of the Securities at the time outstanding. This Section 6.11 shall be
in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly
excluded from this Indenture, as permitted by the TIA.

          SECTION 6.12 Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it 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 or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit or
forgive the Company from paying all or any portion of the Principal Amount at
Maturity, Issue Price plus accrued Original Issue Discount, Redemption Price,
Purchase Price, Change in Control Purchase Price or any accrued cash interest
(or, if the Securities have been converted to semiannual coupon debentures
following a Tax Event, the Restated Principal Amount, plus accrued interest) in
respect of Securities, or any interest on such amounts, as contemplated herein,
or which may affect the covenants or the performance of this

                                       43
<PAGE>

Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
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 7

                                    TRUSTEE

          SECTION 7.01 Duties and Responsibilities of the Trustee; During
Default; Prior to Default. The Trustee, prior to the occurrence of an Event of
Default hereunder and after the curing or waiving of all such Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture. In case an Event of Default
hereunder has occurred (which has not been cured or waived), the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

          No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that

          (a)  prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all such Events of Default which may have
occurred:

               (i) the duties and obligations of the Trustee shall be determined
     solely by the express provisions of this Indenture, and the Trustee shall
     not be liable except for the performance of such duties and obligations as
     are specifically set forth in this Indenture, and no implied covenants or
     obligations shall be read into this Indenture against the Trustee; and

               (ii) in the absence of bad faith on the part of the Trustee, the
     Trustee may conclusively rely, as to the truth of the statements and the
     correctness of the opinions expressed therein, upon any statements,
     certificates or opinions furnished to the Trustee and conforming to the
     requirements of this Indenture; but in the case of any such statements,
     certificates or opinions which by any provision hereof are specifically
     required to be furnished to the Trustee, the Trustee shall be under a duty
     to examine the same to determine whether or not they conform to the
     requirements of this Indenture;

          (b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and

          (c) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction of
the Holders pursuant to Section 6.05 relating to the time, method and place of
conducting any proceeding for any remedy

                                       44
<PAGE>

available to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.

          None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.

          The provisions of this Section 7.01 are in furtherance of and subject
to Sections 315 and 316 of the TIA.

          SECTION 7.02   Certain Rights of the Trustee. In furtherance of and
subject to the TIA and subject to Section 7.01:

          (a)  the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security 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, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the secretary or an assistant secretary of the Company;

          (c)  the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be taken by it
hereunder in good faith and in accordance with such advice or Opinion of
Counsel;

          (d)  the Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture with the request, order or
direction of any of the Securityholders pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred therein or thereby;

          (e)  the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;

          (f)  prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all such Events of Default, 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, consent, order, approval, appraisal, bond, debenture, note, coupon,
security, or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in aggregate Principal Amount at Maturity of
the Securities then

                                       45
<PAGE>

outstanding; provided that, if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of this
Indenture, the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every such
investigation shall be paid by the Company or, if paid by the Trustee or any
predecessor trustee, shall be repaid by the Company upon demand; and

          (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 not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder.

          SECTION 7.03   Trustee Not Responsible for Recitals, Disposition of
Securities or Application of Proceeds Thereof. The recitals contained herein and
in the Securities, except the Trustee's certificates of authentication, shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation 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 Company of any of the Securities or of the proceeds thereof.

          SECTION 7.04   Trustee and Agents May Hold Securities; Collections,
etc. The Trustee or any agent of the Company or the Trustee, in its individual
or any other capacity, may become the owner or pledgee of Securities with the
same rights it would have if it were not the Trustee or such agent and, subject
to Sections 7.08 and 7.13, if operative, may otherwise deal with the Company and
receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee or such agent.

          SECTION 7.05   Moneys Held by Trustee. Subject to the provisions of
Section 8.02 hereof, all moneys received by the Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Company or the Trustee shall be under any liability for interest on any
moneys received by it hereunder.

          SECTION 7.06   Compensation and Indemnification of Trustee and Its
Prior Claim. The Company covenants and agrees to pay to the Trustee from time to
time, and the Trustee shall be entitled to, such compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) to be agreed to in writing by the Trustee and the Company, and
the Company covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including (i) the reasonable compensation and
the expenses and disbursements of its counsel and of all agents and other
persons not regularly in its employ and (ii) interest at the prime rate on any
disbursements and advances made by the Trustee and not paid by the Company
within 5 days after receipt of an invoice for such disbursement or advance)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The

                                       46
<PAGE>

Company also covenants to indemnify the Trustee and each predecessor Trustee
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of this Indenture or the trusts hereunder
and its duties hereunder, including the costs and expenses of defending itself
against or investigating any claim of liability in the premises. The obligations
of the Company under this Section to compensate and indemnify the Trustee and
each predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for expenses, disbursements and advances shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. Such additional indebtedness shall be a senior
claim to that of the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the benefit of the Holders
of particular Securities, and the Securities are hereby effectively subordinated
to such senior claim to such extent. The provisions of this Section shall
survive the termination of this Indenture.

          SECTION 7.07   Right of Trustee to Rely on Officers' Certificate, etc.
Subject to Sections 7.01 and 7.02, whenever in the administration of the trusts
of this Indenture the Trustee shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.

          SECTION 7.08   Conflicting Interests. If the Trustee has or shall
acquire a conflicting interest within the meaning of the TIA, 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 TIA.

          SECTION 7.09    Persons Eligible for Appointment as Trustee. The
Trustee shall at all times be a corporation or banking association having a
combined capital and surplus of at least $50,000,000. If such corporation or
banking association publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then, for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, the Trustee shall resign immediately in the manner
and with the effect specified in Section 7.10.

          SECTION 7.10   Resignation and Removal; Appointment of Successor
Trustee. (a) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign with respect to one or more or all series of Securities by
giving written notice of resignation to the Company and by mailing notice
thereof by first class mail to the Holders of Securities at their last addresses
as they shall appear on the Security register. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee or trustees
by written instrument in duplicate, executed by authority of the Board of
Directors, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee or trustees. If no successor
trustee shall have been so appointed and have accepted appointment

                                       47
<PAGE>

within 30 days after the mailing of such notice of resignation, the resigning
trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee, or any Securityholder who has been a bona fide Holder of a
Security for at least six months may, subject to the provisions of Section 7.11,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.

          (b)  In case at any time any of the following shall occur:

               (i)    the Trustee shall fail to comply with the provisions of
     Section 7.08 with respect to any Securities after written request therefor
     by the Company or by any Securityholder who has been a bona fide Holder of
     a Security for at least six months; or

               (ii)   the Trustee shall cease to be eligible in accordance with
     the provisions of Section 7.09 and shall fail to resign after written
     request therefor by the Company or by any Securityholder; or

               (iii)  the Trustee shall become incapable of acting or shall be
     adjudged a bankrupt or insolvent, or a receiver or liquidator 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; or

               (iv)   the Company shall determine that the Trustee has failed to
     perform its obligations under this Indenture in any material respect;

then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.11, any Securityholder 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.  Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.  If no successor
trustee shall have been appointed and have accepted appointment within 30 days
after a notice of removal has been given, the removed trustee may petition a
court of competent jurisdiction for the appointment of a successor trustee.

          (c)  The Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding may at any time remove the
Trustee and appoint a successor trustee by delivering to the Trustee so removed,
to the successor trustee so appointed and to the Company the evidence provided
for in Section 1.05 of the action in that regard taken by the Securityholders.

          (d)  Any resignation or removal of the Trustee and any appointment of
a successor trustee pursuant to any of the provisions of this Section 7.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 7.11.

                                       48
<PAGE>

          SECTION 7.11   Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 7.10 shall execute and
deliver to the Company and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee hereunder; but, nevertheless, on the written
request of the Company or of the successor trustee, upon payment of its charges
then unpaid, the trustee ceasing to act shall, subject to Section 10.4, pay over
to the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 7.06.

          No successor trustee shall accept appointment as provided in this
Section 7.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 7.08 and eligible under the
provisions of Section 7.09.

          Upon acceptance of appointment by any successor trustee as provided in
this Section 7.11, the Company shall mail notice thereof by first class mail to
the Holders of Securities at their last addresses as they shall appear in the
register.  If the acceptance of appointment is substantially contemporaneous
with the resignation, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 7.10.  If the Company fails to
mail such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed at
the expense of the Company.

          SECTION 7.12   Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any corporation or banking association into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation or banking association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation or
banking association succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation or banking association shall be qualified under
the provisions of Section 7.08 and eligible under the provisions of Section
7.09, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding. In case at the time such successor to the Trustee shall succeed
to the trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor Trustee; and in all such cases such certificate shall have the
full force and effect that this Indenture provides for the certificate of
authentication of the Trustee; provided, that the right to adopt the certificate
of authentication of any predecessor Trustee or to authenticate Securities in

                                       49
<PAGE>

the name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.

          SECTION 7.13   Preferential Collection of Claims Against the Company.
The Trustee shall comply with the provisions of Section 311 of the TIA.

          SECTION 7.14   Reports by the Trustee.  (a)  The Trustee shall
transmit to Holders and other persons such reports concerning the Trustee and
its actions under this Indenture as may be required pursuant to the TIA on or
before July 15 in each year that such report is required, such reports to be
dated as of the immediately preceding May 15.

          (b)  A copy of each such report shall, at the time of such
transmission to Securityholders, be furnished to the Company and be filed by the
Trustee with each stock exchange upon which the Securities are listed and also
with the SEC. The Company agrees to notify the Trustee when and as the
Securities become admitted to trading on any national securities exchange.

          SECTION 7.15   Trustee to Give Notice of Default, But May Withhold in
Certain Circumstances. The Trustee shall transmit to the Securityholders, as the
names and addresses of such Holders appear on the Security register, notice by
mail of all Defaults which have occurred, such notice to be transmitted within
90 days after the occurrence thereof, unless such defaults shall have been cured
before the giving of such; provided that, except in the case of Default in the
payment of the principal of, interest on, or other similar obligation with
respect to, any of the Securities, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee,
or a trust committee of directors or trustees and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Securityholders.

                                   ARTICLE 8

                            DISCHARGE OF INDENTURE

          SECTION 8.01   Discharge of Liability on Securities. When (i) the
Company delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable and the Company deposits with
the Trustee cash or, if expressly permitted by the terms of the Securities,
Class B Common Stock sufficient to pay all amounts due and owing on all
outstanding Securities (other than Securities replaced pursuant to Section
2.07), and if in either case the Company pays all other sums payable hereunder
by the Company, then this Indenture shall, subject to Section 7.06, cease to be
of further effect. The Trustee shall join in the execution of a document
prepared by the Company acknowledging satisfaction and discharge of this
Indenture on demand of the Company accompanied by an Officers' Certificate and
Opinion of Counsel and at the cost and expense of the Company.

          SECTION 8.02   Repayment to the Company. The Trustee and the Paying
Agent shall return to the Company upon written request any money or securities
held by them for the payment of any amount with respect to the Securities that
remains unclaimed for two years,

                                       50
<PAGE>

subject to applicable unclaimed property law. After return to the Company,
Holders entitled to the money or securities must look to the Company for payment
as general creditors unless an applicable abandoned property law designates
another person and the Trustee and the Paying Agent shall have no further
liability to the Securityholders with respect to such money or securities for
that period commencing after the return thereof.

                                   ARTICLE 9

                                  AMENDMENTS

          SECTION 9.01   Without Consent of Holders. The Company and the Trustee
may amend this Indenture or the Securities without the consent of any
Securityholder:

          (1)  to cure any ambiguity, omission, defect or inconsistency;
     provided, however, that such amendment does not materially adversely affect
     the rights of any Securityholder;

          (2)  to comply with Article 5 or Section 11.14;

          (3)  to provide for uncertificated Securities in addition to the
     Certificated Securities so long as such uncertificated Securities are in
     registered form for purposes of the Internal Revenue Code of 1986, as
     amended;

          (4)  to make any change that does not adversely affect the rights of
     any Securityholder;

          (5)  to make any change to comply with the TIA, or any amendment
     thereto, or to comply with any requirement of the SEC in connection with
     the qualification of the Indenture under the TIA; or

          (6)  add to the Company's covenants or obligations under this
     Indenture for the protection of the Holders or surrender any right, power
     or option conferred by this Indenture on the Company.

          SECTION 9.02   With Consent of Holders. With the written consent of
the Holders of at least a majority in aggregate Principal Amount at Maturity of
the Securities at the time outstanding, the Company and the Trustee may amend
this Indenture or the Securities. However, without the consent of each
Securityholder affected, an amendment to this Indenture or the Securities may
not:

          (1)  make any change to the Principal Amount at Maturity of Securities
     whose Holders must consent to an amendment;

          (2)  make any change in the manner or rate of accrual in connection
     with Original Issue Discount or cash interest, reduce the rate of cash
     interest referred to in paragraph 1 of the Securities, reduce the rate of
     interest referred to in Section 10.01 upon

                                       51
<PAGE>

     the occurrence of a Tax Event, or extend the time for payment of Original
     Issue Discount or cash interest on any Security;

          (3)  reduce the Principal Amount at Maturity, Restated Principal
     Amount or the Issue Price of or extend the Stated Maturity of any Security;

          (4)  reduce the Redemption Price, Purchase Price or Change in Control
     Purchase Price of any Security;

          (5)  make any Security payable in money or securities other than that
     stated in the Security;

          (6)  make any change in Section 6.04, Section 6.07 or this Section
     9.02, except to increase any percentage set forth therein;

          (7)  make any change that adversely affects the right to convert any
     Security;

          (8)  make any change that adversely affects the right to require the
     Company to purchase the Securities in accordance with the terms thereof and
     this Indenture; or

          (9)  impair the right to institute suit for the enforcement of any
     payment with respect to, or conversion of, the Securities.

          It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.

          After an amendment under this Section 9.02 becomes effective, the
Company shall mail to each Holder a notice briefly describing the amendment.

          SECTION 9.03   Compliance with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article shall comply with the TIA.

          SECTION 9.04   Revocation and Effect of Consents, Waivers and Actions.
Until an amendment, waiver or other action by Holders becomes effective, a
consent thereto by a Holder of a Security hereunder is a continuing consent by
the Holder and every subsequent Holder of that Security or portion of the
Security that evidences the same obligation as the consenting Holder's Security,
even if notation of the consent, waiver or action is not made on the Security.
However, any such Holder or subsequent Holder may revoke the consent, waiver or
action as to such Holder's Security or portion of the Security if the Trustee
receives the notice of revocation before the date the amendment, waiver or
action becomes effective. After an amendment, waiver or action becomes
effective, it shall bind every Securityholder.

          SECTION 9.05   Notation on or Exchange of Securities. Securities
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the Board of

                                       52
<PAGE>

Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
outstanding Securities.

          SECTION 9.06   Trustee to Sign Supplemental Indentures. The Trustee
shall sign any supplemental indenture authorized pursuant to this Article 9 if
the amendment contained therein does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may, but need
not, sign such supplemental indenture. In signing such supplemental indenture
the Trustee shall be entitled to receive, and (subject to the provisions of
Section 7.01) shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that such amendment is authorized or permitted
by this Indenture.

          SECTION 9.07   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.

                                  ARTICLE 10

                         SPECIAL TAX EVENT CONVERSION

          SECTION 10.01  Optional Conversion to Semiannual Coupon Debenture Upon
Tax Event. From and after (i) the date (the "Tax Event Date") of the occurrence
of a Tax Event and (ii) the date the Company exercises such option, whichever is
later (the "Option Exercise Date"), at the option of the Company, interest in
lieu of future Original Issue Discount and regular cash interest shall accrue at
the rate of 5.00% per annum on a restated principal amount per $1,000 original
Principal Amount at Maturity (the "Restated Principal Amount") equal to the
Issue Price plus Original Issue Discount accrued through the Option Exercise
Date and shall be payable on each Interest Payment Date to Holders of record at
the close of business on the Regular Record Date immediately preceding such
Interest Payment Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months and will accrue from the most recent date on
which interest has been paid or, if no interest has been paid, from the Option
Exercise Date. Within 15 days of the occurrence of a Tax Event, the Company
shall mail a written notice of such Tax Event by facsimile and first-class mail
to the Trustee and within 15 days of its exercise of such option the Company
shall mail a written notice of the Option Exercise Date by facsimile and first-
class mail to the Trustee and by first class mail to the Holders of the
Securities. From and after the Option Exercise Date, (i) the Company shall be
obligated to pay at Stated Maturity, in lieu of the Principal Amount at Maturity
of a Security, the Restated Principal Amount thereof and (ii) "Issue Price and
accrued Original Issue Discount," "Issue Price plus Original Issue Discount" or
similar words, as used herein, shall mean Restated Principal Amount plus accrued
and unpaid interest with respect to any Security. Securities authenticated and
delivered after the Option Exercise Date may, and shall if required by the
Trustee, bear a notation in a form approved by the Trustee as to the conversion
of the Securities to semiannual coupon debentures.

          SECTION 10.02  Payment of Cash Interest; Interest Rights Preserved.
(a)  Cash interest on any Security that is payable, and is punctually paid or
duly provided for, on any

                                       53
<PAGE>

Interest Payment Date shall be paid to the person in whose name that Security is
registered at the close of business on the Regular Record Date for such cash
interest at the office or agency of the Company maintained for such purpose.
Each installment of cash interest on any Security shall be paid in same-day
funds by transfer to an account maintained by the payee located inside the
United States. In the case of a permanent Global Security, any cash interest
payable on any Interest Payment Date will be paid to the Depositary, with
respect to that portion of such permanent Global Security held for its account
by Cede & Co. for the purpose of permitting such party to credit the cash
interest received by it in respect of such permanent Global Security to the
accounts of the beneficial owners thereof.

          (b)  Except as otherwise specified with respect to the Securities, any
cash interest on any Security that is payable, but is not punctually paid or
duly provided for within 30 days following, on any Interest Payment Date (herein
called "Defaulted Interest", which term shall include any accrued and unpaid
interest that has accrued on such defaulted amount in accordance with paragraph
1 of the Securities), shall forthwith cease to be payable to the registered
Holder thereof on the relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the Company, as its election
in each case, as provided in clause (1) or (2) below:

          (1)  The Company may elect to make payment of any Defaulted Interest
     to the persons in whose names the 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 Company 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 (which
     shall not be less than 20 days after such notice is received by the
     Trustee), and at the same time the Company 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 on or 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 Company of such Special
     Record Date and, in the name and at the expense of the Company, 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 of Securities at his address as it appears on the list of
     Securityholders maintained pursuant to Section 2.05 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 mailed
     as aforesaid, such Defaulted Interest shall be paid to the persons in whose
     names the 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 Company may make payment of any Defaulted Interest on the
     Securities in any other lawful manner not inconsistent with the
     requirements of any securities exchange on which such Securities may be
     listed, and upon such notice as may

                                       54
<PAGE>

     be required by such exchange, if, after notice given by the Company 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 and Section 2.06,
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.

                                  ARTICLE 11

                                  CONVERSION

          SECTION 11.01  Conversion Privilege. A Holder of a Security may
convert such Security into Class B Common Stock at any time during the period
stated in paragraph 8 of the Securities. The number of shares of Class B Common
Stock issuable upon conversion of a Security per $1,000 of Principal Amount at
Maturity thereof (the "Conversion Rate") shall be that set forth in paragraph 8
in the Securities, subject to adjustment as herein set forth.

          A Holder may convert a portion of the Principal Amount at Maturity of
a Security if the portion is $1,000 or an integral multiple of $1,000.
Provisions of this Indenture that apply to conversion of all of a Security also
apply to conversion of a portion of a Security.

          "Average Quoted Price" means the average of the Sale Prices of the
Class B Common Stock for the shorter of

          (i)     30 consecutive trading days ending on the last full trading
     day prior to the Time of Determination with respect to the rights, warrants
     or options or distribution in respect of which the Average Quoted Price is
     being calculated, or

          (ii)    the period (x) commencing on the date next succeeding the
     first public announcement of (a) the issuance of rights, warrants or
     options or (b) the distribution, in each case, in respect of which the
     Average Quoted Price is being calculated and (y) proceeding through the
     last full trading day prior to the Time of Determination with respect to
     the rights, warrants or options or distribution in respect of which the
     Average Quoted Price is being calculated (excluding days within such
     period, if any, which are not trading days), or

          (iii)   the period, if any, (x) commencing on the date next succeeding
     the Ex-Dividend Time with respect to the next preceding (a) issuance of
     rights, warrants or options or (b) distribution, in each case, for which an
     adjustment is required by the provisions of Section 11.06(4), 11.07 or
     11.08 and (y) proceeding through the last full trading day prior to the
     Time of Determination with respect to the rights, warrants or options or
     distribution in respect of which the Average Quoted Price is being
     calculated (excluding days within such period, if any, which are not
     trading days).

                                       55
<PAGE>

          In the event that the Ex-Dividend Time (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which Section 11.06(1), (2), (3) or (5) applies occurs
during the period applicable for calculating "Average Quoted Price" pursuant to
the definition in the preceding sentence, "Average Quoted Price" shall be
calculated for such period in a manner determined by the Board of Directors to
reflect the impact of such dividend, subdivision, combination or
reclassification on the Sale Price of the Common Stock during such period.

          "Time of Determination" means the time and date of the earlier of (i)
the determination of stockholders entitled to receive rights, warrants or
options or a distribution, in each case, to which Section 11.07 or 11.08 applies
and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of
"ex-dividend" trading for such rights, warrants or options or distribution on
the New York Stock Exchange or such other national or regional exchange or
market on which the Class B Common Stock is then listed or quoted.

          SECTION 11.02  Conversion Procedure. To convert a Security a Holder
must satisfy the requirements in paragraph 8 of the Securities. The date on
which the Holder satisfies all those requirements is the conversion date (the
"Conversion Date"). As soon as practicable after the Conversion Date but in any
event no later than the seventh Business Day following the Conversion Date, the
Company shall deliver to the Holder, through the Conversion Agent, a certificate
for the number of full shares of Class B Common Stock issuable upon the
conversion and cash in lieu of any fractional share determined pursuant to
Section 11.03. The person in whose name the certificate is registered shall be
treated as a stockholder of record on and after the Conversion Date; provided,
however, that no surrender of a Security on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
or persons entitled to receive the shares of Class B Common Stock upon such
conversion as the record holder or holders of such shares of Class B Common
Stock on such date, but such surrender shall be effective to constitute the
person or persons entitled to receive such shares of Class B Common Stock as the
record holder or holders thereof for all purposes at the close of business on
the next succeeding day on which such stock transfer books are open; such
conversion shall be at the Conversion Rate in effect on the date that such
Security shall have been surrendered for conversion, as if the stock transfer
books of the Company had not been closed. Upon conversion of a Security, such
person shall no longer be a Holder of such Security.

          No payment or adjustment will be made for dividends on, or other
distributions with respect to, any Class B Common Stock except as provided in
this Article 11. On conversion of a Security, that portion of accrued Original
Issue Discount (or interest, if the Company has exercised its option provided
for in Section 10.01) or (except as provided below) accrued cash interest
attributable to the period from the Issue Date (or, if the Company has exercised
the option provided for in Section 10.01, the later of (x) the date of such
exercise and (y) the date on which interest was last paid) of the Security or
the date on which interest was last paid through the Conversion Date with
respect to the converted Security shall not be cancelled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through delivery of the Class B Common Stock (together with the cash payment, if
any, in lieu of fractional shares) in exchange for the Security being converted
pursuant to the provisions hereof; and the fair market value of such shares of
Class B Common Stock (together with any such cash

                                       56
<PAGE>

payment in lieu of fractional shares) shall be treated as issued, to the extent
thereof, first in exchange for Original Issue Discount (or interest, if the
Company has exercised its option provided for in Section 10.01) and cash
interest accrued through the Conversion Date, and the balance, if any, of such
fair market value of such Class B Common Stock (and any such cash payment) shall
be treated as issued in exchange for the Issue Price of the Security being
converted pursuant to the provisions hereof. Notwithstanding the foregoing,
accrued but unpaid cash interest will be payable upon conversion of Securities
made concurrently with or after acceleration of Securities following an Event of
Default.

          If the Holder converts more than one Security at the same time, the
number of shares of Class B Common Stock issuable upon the conversion shall be
based on the total Principal Amount at Maturity of the Securities converted.

          If the last day on which a Security may be converted is a Legal
Holiday, the Security may be surrendered on the next succeeding day that is not
a Legal Holiday.

          Upon surrender of a Security that is converted in part, the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder, a
new Security in an authorized denomination equal in Principal Amount at Maturity
to the unconverted portion of the Security surrendered.

          SECTION 11.03  Fractional Shares. The Company will not issue a
fractional share of Class B Common Stock upon conversion of a Security. Instead,
the Company will deliver cash for the current market value of the fractional
share. The current market value of a fractional share shall be determined, to
the nearest 1/1,000th of a share, by multiplying the Sale Price, on the last
trading day prior to the Conversion Date, of a full share by the fractional
amount and rounding the product to the nearest whole cent.

          SECTION 11.04  Taxes on Conversion. If a Holder converts a Security,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Class B Common Stock upon the conversion. However,
the Holder shall pay any such tax which is due because the Holder requests the
shares to be issued in a name other than the Holder's name. The Conversion Agent
may refuse to deliver the certificates representing the Class B Common Stock
being issued in a name other than the Holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which will be due because the shares
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude any tax withholding required by law or regulations.

          SECTION 11.05  Company to Provide Stock. The Company shall, prior to
issuance of any Securities under this Article 11, and from time to time as may
be necessary, reserve out of its authorized but unissued Class B Common Stock a
sufficient number of shares of Common Stock to permit the conversion of the
Securities.

          All shares of Class B Common Stock delivered upon conversion of the
Securities shall be newly issued shares or treasury shares, shall be duly and
validly issued and fully paid and nonassessable and shall be free from
preemptive rights and free of any lien or adverse claim.

                                       57
<PAGE>

          The Company will endeavor promptly to comply with all federal and
state securities laws regulating the offer and delivery of shares of Class B
Common Stock upon conversion of Securities, if any, and will list or cause to
have quoted such shares of Class B Common Stock on each national securities
exchange or in the over-the-counter market or such other market on which the
Class B Common Stock is then listed or quoted.

          SECTION 11.06  Adjustment for Change In Capital Stock. If, after the
Issue Date of the Securities, the Company:

          (1)  pays a dividend or makes a distribution on its Class B Common
     Stock in shares of its Class B Common Stock;

          (2)  subdivides its outstanding shares of Class B Common Stock into a
     greater number of shares;

          (3)  combines its outstanding shares of Class B Common Stock into a
     smaller number of shares;

          (4)  pays a dividend or makes a distribution on its Class B Common
     Stock in shares of its Capital Stock (other than Class B Common Stock or
     rights, warrants or options for its Capital Stock); or

          (5)  issues by reclassification of its Class B Common Stock any shares
     of its Capital Stock (other than rights, warrants or options for its
     Capital Stock), then the conversion privilege and the Conversion Rate in
     effect immediately prior to such action shall be adjusted so that the
     Holder of a Security thereafter converted may receive the number of shares
     of Capital Stock of the Company which such Holder would have owned
     immediately following such action if such Holder had converted the Security
     immediately prior to such action.

          The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.

          If after an adjustment a Holder of a Security upon conversion of such
Security may receive shares of two or more classes of Capital Stock of the
Company, the Conversion Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article 11 with respect to the Class B Common Stock, on
terms comparable to those applicable to Class B Common Stock in this Article 11.

          SECTION 11.07  Adjustment for Rights Issue. If after the Issue Date of
the Securities, the Company distributes any rights, warrants or options to all
holders of its Class B Common Stock entitling them, for a period expiring within
45 days after the record date for such distribution, to purchase shares of Class
B Common Stock at a price per share less than the Market Price as of the Time of
Determination, the Conversion Rate shall be adjusted in accordance with the
formula:

                                       58
<PAGE>

                    R'  =  R  x        (O + N)
                                  -----------------
                                   (O + (N x P)/M)

     where:

     R' = the adjusted Conversion Rate.

     R  = the current Conversion Rate.

     O  = the number of shares of Class B Common Stock outstanding on the record
date for the distribution to which this Section 11.07 is being applied.

     N  = the number of additional shares of Class B Common Stock offered
pursuant to the distribution.

     P  = the offering price per share of the additional shares.

     M  = the Average Quoted Price, minus, in the case of (i) a distribution to
which Section 11.06(4) applies or (ii) a distribution to which Section 11.08
applies, for which, in each case, (x) the record date shall occur on or before
the record date for the distribution to which this Section 11.07 applies and (y)
the Ex-Dividend Time shall occur on or after the date of the Time of
Determination for the distribution to which this Section 11.07 applies, the fair
market value (on the record date for the distribution to which this Section
11.07 applies) of the

          (1)  Capital Stock of the Company distributed in respect of each share
     of Class B Common Stock in such Section 11.06(4) distribution and

          (2)  assets of the Company or debt securities or any rights, warrants
     or options to purchase securities of the Company distributed in respect of
     each share of Class B Common Stock in such Section 11.08 distribution.

The Board of Directors shall determine fair market values for purposes of this
Section 11.07.

          The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the rights,
warrants or options to which this Section 11.07 applies. If all of the shares of
Class B Common Stock subject to such rights, warrants or options have not been
issued when such rights, warrants or options expire, then the Conversion Rate
shall promptly be readjusted to the Conversion Rate which would then be in
effect had the adjustment upon the issuance of such rights, warrants or options
been made on the basis of the actual number of shares of Class B Common Stock
issued upon the exercise of such rights, warrants or options.

          No adjustment shall be made under this Section 11.07 if the
application of the formula stated above in this Section 11.07 would result in a
value of R' that is equal to or less than the value of R.

                                       59
<PAGE>

          SECTION 11.08  Adjustment for Other Distributions. If, after the Issue
Date of the Securities, the Company distributes to all holders of its Class B
Common Stock any of its assets, or evidences of indebtedness of the Company or
any rights, warrants or options to purchase securities of the Company (including
securities or cash, but excluding (x) distributions of Capital Stock referred to
in Section 11.06 and distributions of rights, warrants or options referred to in
Section 11.07 and (y) cash dividends or other cash distributions that are paid
out of consolidated current net earnings or earnings retained in the business as
shown on the books of the Company unless such cash dividends or other cash
distributions are Extraordinary Cash Dividends) the Conversion Rate shall be
adjusted, subject to the provisions of the last paragraph of this Section 11.08,
in accordance with the formula:

               R'  =  R x M
                      -----
                       M-F

where:

     R' = the adjusted Conversion Rate.

     R  = the current Conversion Rate.

     M  = the Average Quoted Price, minus, in the case of a distribution to
which Section 11.06(4) applies, for

     which (i) the record date shall occur on or before the record date for the
     distribution to which this Section 11.08 applies and (ii) the Ex-Dividend
     Time shall occur on or after the date of the Time of Determination for the
     distribution to which this Section 11.08 applies, the fair market value (on
     the record date for the distribution to which this Section 11.08 applies)
     of any Capital Stock of the Company distributed in respect of each share of
     Class B Common Stock in such Section 11.06(4) distribution.

     F  = the fair market value (on the record date for the distribution to
which this Section 11.08 applies) of the assets, securities, rights, warrants or
options to be distributed in respect of each share of Class B Common Stock in
the distribution to which this Section 11.08 is being applied (including, in the
case of cash dividends or other cash distributions giving rise to an adjustment,
all such cash distributed concurrently).

     The Board of Directors shall determine fair market values for purposes of
     this Section 11.08.

          The adjustment shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution
to which this Section 11.08 applies.

          For purposes of this Section 11.08, the term "Extraordinary Cash
     Dividend" shall mean any cash dividend with respect to the Class B Common
     Stock the amount of which, together with the aggregate amount of cash
     dividends on the Class B Common Stock to

                                       60
<PAGE>

     be aggregated with such cash dividend in accordance with the provisions of
     this paragraph, equals or exceeds the threshold percentages set forth
     below:

               If, upon the date prior to the Ex-Dividend Time with respect to a
     cash dividend on the Class B Common Stock, the aggregate amount of such
     cash dividend together with the amounts of all cash dividends on the Class
     B Common Stock with Ex-Dividend Times occurring in the 365 consecutive day
     period ending on the date prior to the Ex-Dividend Time with respect to the
     cash dividend to which this provision is being applied equals or exceeds on
     a per share basis 10% of the Market Price of the Class B  Common Stock on
     the trading day immediately preceding the date of declaration of such
     dividend with respect to the cash dividend to which this provision is being
     applied, such cash dividend together with each other cash dividend with an
     Ex-Dividend Time occurring in such 365 day period shall be deemed to be an
     Extraordinary Cash Dividend and for purposes of applying the formula set
     forth above in this Section 11.08, the value of "F" shall be equal to (y)
     the aggregate amount of such cash dividend together with the amounts of the
     other cash dividends with Ex-Dividend Times occurring in such period minus
     (z) the aggregate amount of such other cash dividends with Ex-Dividend
     Times occurring in such period for which a prior adjustment in the
     Conversion Rate was previously made under this Section 11.08.

     In making the determinations required by items (i) and (ii) above, the
     amount of cash dividends paid on a per share basis and the average of the
     Market Prices, in each case during the period specified in item (i) or (ii)
     above, as applicable, shall be appropriately adjusted to reflect the
     occurrence during such period of any event described in Section 11.06.

          In the event that, with respect to any distribution to which this
Section 11.08 would otherwise apply, the difference "M-F" as defined in the
above formula is less than $1.00 or "F" is equal to or greater than "M", then
the adjustment provided by this Section 11.08 shall not be made and in lieu
thereof the provisions of Section 11.14 shall apply to such distribution.

          In addition, in case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Company's Common Stock shall expire and such tender or exchange
offer shall involve the payment by the Company or such Subsidiary of
consideration per share of Class B Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds 110% of
the Market Price on the trading day next succeeding the Expiration Time, the
Conversion Rate shall be increased so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior to the
effectiveness of the Conversion Rate increase contemplated by this paragraph by
a fraction of which the numerator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
or exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the

                                       61
<PAGE>

number of shares of Class B Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the Market Price on the trading day next succeeding
the Expiration Time, and the denominator shall be the number of shares of Class
B Common Stock outstanding (including any tendered or exchanged shares) at the
Expiration Time multiplied by the Market Price on the trading day next
succeeding the Expiration Time, such increase to become effective immediately
prior to the opening of business on the day following the Expiration Time.

          SECTION 11.09  When Adjustment May Be Deferred. No adjustment in the
Conversion Rate need be made unless the adjustment would require an increase or
decrease of at least 1% in the Conversion Rate. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment.

          All calculations under this Article 11 shall be made to the nearest
cent or to the nearest 1/1,000th of a share, as the case may be.

          SECTION 11.10  When No Adjustment Required. No adjustment need be made
for a transaction referred to in Section 11.06, 11.07, 11.08 or 11.14 if
Securityholders are to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Class B Common Stock participate in the
transaction. Such participation by Securityholders may include participation
upon conversion provided that an adjustment shall be made at such time as the
Securityholders are no longer entitled to participate.

          No adjustment need be made for rights to purchase Class B Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.

          No adjustment need be made for a change in the par value or no par
value of the Common Stock.

          To the extent the Securities become convertible pursuant to this
Article 11 into cash, no adjustment need be made thereafter as to the cash.
Interest will not accrue on the cash.

          SECTION 11.11  Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Company shall promptly mail to Securityholders a notice of the
adjustment. The Company shall file with the Trustee and the Conversion Agent
such notice and a certificate from the Company's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it. The certificate shall be conclusive evidence that the adjustment is correct.
Neither the Trustee nor any Conversion Agent shall be under any duty or
responsibility with respect to any such certificate except to exhibit the same
to any Holder desiring inspection thereof.

          SECTION 11.12  Voluntary Increase. The Company from time to time may
increase the Conversion Rate by any amount for any period of time. Whenever the
Conversion Rate is increased, the Company shall mail to Securityholders and file
with the Trustee and the Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date the increased Conversion
Rate takes effect. The notice shall state the increased Conversion Rate and the
period it will be in effect.

                                       62
<PAGE>

          A voluntary increase of the Conversion Rate does not change or adjust
the Conversion Rate otherwise in effect for purposes of Section 11.06, 11.07 or
11.08.

          SECTION 11.13  Notice of Certain Transactions.  If:

          (1)  the Company takes any action that would require an adjustment in
     the Conversion Rate pursuant to Section 11.06, 11.07 or 11.08 (unless no
     adjustment is to occur pursuant to Section 11.10); or

          (2)  the Company takes any action that would require a supplemental
     indenture pursuant to Section 11.14; or

          (3)  there is a liquidation or dissolution of the Company;

then the Company shall mail to Securityholders and file with the Trustee and the
Conversion Agent a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, binding share exchange, transfer,
liquidation or dissolution.  The Company shall file and mail the notice at least
15 days before such date.  Failure to file or mail the notice or any defect in
it shall not affect the validity of the transaction.

          SECTION 11.14  Reorganization of Company; Special Distributions. If
the Company is a party to a transaction subject to Section 5.01 (other than a
sale of all or substantially all of the assets of the Company in a transaction
in which the holders of Class B Common Stock immediately prior to such
transaction do not receive securities, cash or other assets of the Company or
any other person) or a merger or binding share exchange which reclassifies or
changes its outstanding Class B Common Stock, the person obligated to deliver
securities, cash or other assets upon conversion of Securities shall enter into
a supplemental indenture. If the issuer of securities deliverable upon
conversion of Securities is an Affiliate of the successor Company, that issuer
shall join in the supplemental indenture.

          The supplemental indenture shall provide that the Holder of a Security
may convert it into the kind and amount of securities, cash or other assets
which such Holder would have received immediately after the consolidation,
merger, binding share exchange or transfer if such Holder had converted the
Security immediately before the effective date of the transaction, assuming (to
the extent applicable) that such Holder (i) was not a constituent person or an
Affiliate of a constituent person to such transaction; (ii) made no election
with respect thereto; and (iii) was treated alike with the plurality of non-
electing Holders. The supplemental indenture shall provide for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Article 11. The successor Company shall mail to Securityholders a
notice briefly describing the supplemental indenture.

          If this Section applies, neither Section 11.06 nor 11.07 applies.

          If the Company makes a distribution to all holders of its Class B
Common Stock of any of its assets, or debt securities or any rights, warrants or
options to purchase securities of the Company that, but for the provisions of
the last paragraph of Section 11.08, would otherwise result in an adjustment in
the Conversion Rate pursuant to the provisions of Section 11.08, then,

                                       63
<PAGE>

from and after the record date for determining the holders of Class B Common
Stock entitled to receive the distribution, a Holder of a Security that converts
such Security in accordance with the provisions of this Indenture shall upon
such conversion be entitled to receive, in addition to the shares of Class B
Common Stock into which the Security is convertible, the kind and amount of
securities, cash or other assets comprising the distribution that such Holder
would have received if such Holder had converted the Security immediately prior
to the record date for determining the holders of Class B Common Stock entitled
to receive the distribution.

          SECTION 11.15  Company Determination Final. Any determination that the
Company or the Board of Directors must make pursuant to Section 11.03, 11.06,
11.07, 11.08, 11.09, 11.10, 11.14 or 11.17 is conclusive.

          SECTION 11.16  Trustee's Adjustment Disclaimer. The Trustee has no
duty to determine when an adjustment under this Article 11 should be made, how
it should be made or what it should be. The Trustee has no duty to determine
whether a supplemental indenture under Section 11.14 need be entered into or
whether any provisions of any supplemental indenture are correct. The Trustee
shall not be accountable for and makes no representation as to the validity or
value of any securities or assets issued upon conversion of Securities. The
Trustee shall not be responsible for the Company's failure to comply with this
Article 11. Each Conversion Agent shall have the same protection under this
Section 11.16 as the Trustee.

          SECTION 11.17  Simultaneous Adjustments. In the event that this
Article 11 requires adjustments to the Conversion Rate under more than one of
Sections 11.06(4), 11.07 or 11.08, and the record dates for the distributions
giving rise to such adjustments shall occur on the same date, then such
adjustments shall be made by applying, first, the provisions of Section 11.06,
second, the provisions of Section 11.08 and, third, the provisions of Section
11.07.

          SECTION 11.18  Successive Adjustments. After an adjustment to the
Conversion Rate under this Article 11, any subsequent event requiring an
adjustment under this Article 11 shall cause an adjustment to the Conversion
Rate as so adjusted.

          SECTION 11.19  Rights Issued in Respect of Class B Common Stock Issued
Upon Conversion. Each share of Class B Common Stock issued upon conversion of
Securities pursuant to this Article 11 shall be entitled to receive the
appropriate number of Class B Common Stock or preferred stock purchase rights,
as the case may be (the "Rights"), if any, and the certificates representing the
Class B Common Stock issued upon such conversion shall bear such legends, if
any, in each case as may be provided by the terms of any shareholder rights
agreement adopted by the Company, as the same may be amended from time to time
(in each case, a "Rights Agreement"). Provided that such Rights Agreement
requires that each share of Class B Common Stock issued upon conversion of
Securities at any time prior to the distribution of separate certificates
representing the Rights be entitled to receive such Rights, then,
notwithstanding anything else to the contrary in this Article 11, there shall
not be any adjustment to the conversion privilege or Conversion Rate as a result
of the issuance of Rights, the distribution of separate certificates
representing the Rights, the exercise or redemption of such Rights in accordance
with any such Rights Agreement, or the termination or invalidation of such
Rights.

                                       64
<PAGE>

                                  ARTICLE 12

                                 MISCELLANEOUS

          SECTION 12.01     Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies, or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.

          SECTION 12.02     Notices.  Any request, demand, authorization,
notice, waiver, consent or communication shall be in writing and delivered in
person or mailed by first-class mail, postage prepaid, addressed as follows or
transmitted by facsimile transmission (confirmed by guaranteed overnight
courier) to the following facsimile numbers:

     if to the Company:

          Universal Health Services, Inc.
          Universal Corporate Center
          367 South Gulph Road, P.O. Box 61558
          King of Prussia, Pennsylvania  19406-0958

          Telephone No. (610) 768-3300
          Facsimile No. (610) 768-3318
          Attention:  Chief Financial Officer

     if to the Trustee:

          Bank One Trust Company, N.A.
          153 W. 51st Street
          New York, New York 10019

          Telephone No. (212) 373-1185
          Facsimile No. (212) 373-1384
          Attention:  Corporate Trust Administration

          The Company or the Trustee by notice given to the other in the manner
provided above may designate additional or different addresses for subsequent
notices or communications.

          Any notice or communication given to a Securityholder shall be mailed
to the Securityholder, by first-class mail, postage prepaid, at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.

          Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.

                                       65
<PAGE>

          If the Company mails a notice or communication to the Securityholders,
it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion
Agent or co-registrar.

          SECTION 12.03     Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar, the Paying Agent, the
Conversion Agent and anyone else shall have the protection of TIA Section
312(c).

          SECTION 12.04     Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:

          (1) an Officers' Certificate stating that, in the opinion of the
     signers, all conditions precedent, if any, provided for in this Indenture
     relating to the proposed action have been complied with; and

          (2) an Opinion of Counsel stating that, in the opinion of such
     counsel, all such conditions precedent have been complied with.

          SECTION 12.05     Statements Required in Certificate or Opinion. Each
Officers' Certificate or Opinion of Counsel with respect to compliance with
a covenant or condition provided for in this Indenture shall include:

          (1) a statement that each person making such Officers' Certificate or
     Opinion of Counsel has read such covenant or condition;

          (2) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions contained in such
     Officers' Certificate or Opinion of Counsel are based;

          (3) a statement that, in the opinion of each such person, he has made
     such examination or investigation as is necessary to enable such person to
     express an informed opinion as to whether or not such covenant or condition
     has been complied with; and

          (4) a statement that, in the opinion of such person, such covenant or
     condition has been complied with.

          SECTION 12.06     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 12.07     Rules by Trustee, Paying Agent, Conversion Agent and
Registrar. The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar, Conversion Agent and the Paying Agent may make
reasonable rules for their functions.

                                       66
<PAGE>

          SECTION 12.08     Legal Holidays. A "Legal Holiday" is any day other
than a Business Day. If any specified date (including a date for giving notice)
is a Legal Holiday, the action shall be taken on the next succeeding day that is
not a Legal Holiday, and, if the action to be taken on such date is a payment in
respect of the Securities, no Original Issue Discount or interest, if any, shall
accrue for the intervening period.

          SECTION 12.09     GOVERNING LAW. THIS INDENTURE AND THE
SECURITIES WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

          SECTION 12.10     No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.

          SECTION 12.11     Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successor. All agreements of
the Trustee in this Indenture shall bind its successor.

          SECTION 12.12     Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.

                                      67
<PAGE>

          IN WITNESS WHEREOF, the undersigned, being duly authorized, have
executed this Indenture on behalf of the respective parties hereto as of the
date first above written.

                                             UNIVERSAL HEALTH SERVICES, INC.

                                             By:
                                                ----------------------------
                                             Name:
                                             Title:

                                             BANK ONE TRUST COMPANY, N.A.

                                             By:
                                                ----------------------------
                                             Name:
                                             Title:
<PAGE>

                                  EXHIBIT A-1

                       [FORM OF FACE OF GLOBAL SECURITY]

FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT WITH RESPECT TO EACH $1,000 OF PRINCIPAL AMOUNT AT
MATURITY OF THIS SECURITY IS $574.10, THE ISSUE DATE IS JUNE 23, 2000, THE YIELD
TO MATURITY IS 5.00%.

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY 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 THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO  TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY, OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE  WITH THE RESTRICTIONS
SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

     THIS SECURITY AND THE SHARES OF CLASS B COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY, THE SHARES OF CLASS B COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

     THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH UNIVERSAL HEALTH SERVICES,
INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) FOR SO LONG AS THIS SECURITY AND THE SHARES OF
<PAGE>

CLASS B COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (E) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHTS PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE
OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.

     [THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.]
<PAGE>

                        UNIVERSAL HEALTH SERVICES, INC.
                        Convertible Debentures due 2020

No. R-1                                     CUSIP:  913903AJ9
Issue Date: June 23, 2000                   Original Issue Discount: $574.10
Issue Price:  $425.90                       (for each $1,000 Principal
(for each $1,000 Principal                  Amount at Maturity)
Amount at Maturity)

     UNIVERSAL HEALTH SERVICES, INC., a Delaware corporation, promises to pay to
Cede & Co. or registered assigns, the Principal Amount at Maturity of  FOUR
HUNDRED MILLION DOLLARS ($400,000,000) on June 23, 2020.

     This Security shall bear interest as specified on the other side of this
Security. Original Issue Discount will accrue as specified on the other side of
this Security. This Security is convertible as specified on the other side of
this Security.

     Additional provisions of this Security are set forth on the other side of
this Security.

Dated:                                       UNIVERSAL HEALTH SERVICES, INC.
       ----------------------

                                             By
                                               -----------------------------
                                             Title:

TRUSTEE'S CERTIFICATE OF
 AUTHENTICATION

BANK ONE TRUST COMPANY, N.A.,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture (as
defined on the other side of this Security).

By
  ------------------------------
     Authorized Signatory

Dated:
       -------------------------
<PAGE>

                        UNIVERSAL HEALTH SERVICES, INC.
                        Convertible Debentures due 2020

No. R-2                                     CUSIP:  913903AJ9
Issue Date: June 23, 2000                   Original Issue Discount: $574.10
Issue Price:  $425.90                       (for each $1,000 Principal
(for each $1,000 Principal                  Amount at Maturity)
Amount at Maturity)

     UNIVERSAL HEALTH SERVICES, INC., a Delaware corporation, promises to pay to
Cede & Co. or registered assigns, the Principal Amount at Maturity of ONE
HUNDRED EIGHTY SIX MILLION AND NINE HUNDRED NINETY TWO THOUSAND DOLLARS
($186,992,000) on June 23, 2020.

     This Security shall bear interest as specified on the other side of this
Security. Original Issue Discount will accrue as specified on the other side of
this Security. This Security is convertible as specified on the other side of
this Security.

     Additional provisions of this Security are set forth on the other side of
this Security.

Dated:                                       UNIVERSAL HEALTH SERVICES, INC.

                                             By
                                               -----------------------------
                                             Title:

TRUSTEE'S CERTIFICATE OF
 AUTHENTICATION

BANK ONE TRUST COMPANY, N.A.,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture (as
defined on the other side of this Security).

By
  ----------------------------
     Authorized Signatory

Dated:
       -----------------------
<PAGE>

                       [FORM OF REVERSE SIDE OF SECURITY]
                        Convertible Debentures Due 2020

1.   Cash Interest; Original Issue Discount.

     The Company promises to pay interest in cash on the Principal Amount at
Maturity of this Security at the rate per annum of 0.426%.  The Company will pay
cash interest semiannually in arrears on June 23 and December 23 of each year
(each an "Interest Payment Date") to Holders of record at the close of business
on each June 8 or December 8 (whether or not a business day) (each a "Regular
Record Date") immediately preceding such Interest Payment Date.  Cash interest
on the Securities will accrue from the most recent date to which interest has
been paid or duly provided or, if no interest has been paid, from the Issue
Date.  Cash interest will be computed on the basis of a 360-day year of twelve
30-day months.  The Company shall pay cash interest on overdue principal, or if
shares of Class B Common Stock (or cash in lieu of fractional shares) in respect
of a conversion of this Security in accordance with the terms of Article 11 of
the Indenture are not delivered when due, at the rate borne by the Securities
plus 1% per annum, and it shall pay interest in cash on overdue installments of
cash interest at the same rate to the extent lawful.  All such overdue cash
interest shall be payable on demand.

     Original Issue Discount (the difference between the Issue Price and the
Principal Amount at Maturity of the Security), in the period during which a
Security remains outstanding, together with regular cash interest, shall accrue
at 5.00% per annum, on a semiannual bond equivalent basis using a 360-day year
composed of twelve 30-day months, from the Issue Date of this Security.

2.   Method of Payment.

     Subject to the terms and conditions of the Indenture, the Company will make
payments in respect of the principal of, premium, if any, and cash interest on
this Security and in respect of Redemption Prices, Purchase Prices and Change in
Control Purchase Prices to Holders who surrender Securities to a Paying Agent to
collect such payments in respect of the Securities. The Company will pay cash
amounts in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may make
such cash payments by check payable in such money.  Any payment required to be
made on any day that is not a Business Day will be made on the next succeeding
Business Day.

3.   Paying Agent, Conversion Agent and Registrar.

     Initially, Bank One Trust Company, N.A., a national banking association
(the "Trustee"), will act as Paying Agent, Conversion Agent and Registrar. The
Company may appoint and change any Paying Agent, Conversion Agent, Registrar or
co-registrar without notice, other than
<PAGE>

notice to the Trustee except that the Company will maintain at least one Paying
Agent in the State of New York, City of New York, Borough of Manhattan, which
shall initially be an office or agency of the Trustee. The Company or any of its
Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion
Agent, Registrar or co-registrar.

4.   Indenture.

     The Company issued the Securities under an Indenture dated as of June 23,
2000 (the "Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as in effect from
time to time (the "TIA"). Capitalized terms used herein and not defined herein
have the meanings ascribed thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of those terms.

     The Securities are general unsecured obligations of the Company limited to
$586,992,000 aggregate Principal Amount at Maturity (subject to Section 2.07 of
the Indenture). The Indenture does not limit other indebtedness of the Company,
secured or unsecured.

5.   Redemption at the Option of the Company.

     No sinking fund is provided for the Securities. The Securities are
redeemable as a whole, or from time to time in part, at any time at the option
of the Company at the Redemption Prices set forth below, provided that the
Securities are not redeemable prior to June 23, 2006.

     The table below shows Redemption Prices of a Security per $1,000 Principal
Amount at Maturity on the dates shown below and at Stated Maturity, which prices
reflect accrued Original Issue Discount calculated to each such date. The
Redemption Price of a Security redeemed between such dates shall include an
additional amount reflecting the additional Original Issue Discount accrued
since the next preceding date in the table.

<TABLE>
<S>                                              <C>                    <C>                  <C>
                                                      (1)                  (2)                  (3)
                                                                         Accrued            Redemption
                                                                      Original Issue          Price
           Redemption Date                        Issue Price            Discount           (1) + (2)
           ---------------                        -----------         --------------        ----------

June 23, 2006........................               $425.90              $117.51            $  543.41
June 23, 2007........................               $425.90              $140.70            $  566.60
June 23, 2008........................               $425.90              $165.07            $  590.97
June 23, 2009........................               $425.90              $190.68            $  616.58
June 23, 2010........................               $425.90              $217.58            $  643.48
June 23, 2011........................               $425.90              $245.84            $  671.74
June 23, 2012........................               $425.90              $275.53            $  701.43
June 23, 2013........................               $425.90              $306.73            $  732.63
June 23, 2014........................               $425.90              $339.51            $  765.41
June 23, 2015........................               $425.90              $373.94            $  799.84
June 23, 2016........................               $425.90              $410.12            $  836.02
</TABLE>
<PAGE>

<TABLE>
<S>                                    <C>                    <C>                  <C>
June 23, 2017........................               $425.90              $448.13            $  874.03
June 23, 2018........................               $425.90              $488.06            $  913.96
June 23, 2019........................               $425.90              $530.02            $  955.92
At Stated Maturity...................               $425.90              $574.10            $1,000.00
</TABLE>

     If converted to a semiannual coupon debenture following the occurrence of a
Tax Event, this Security will be redeemable at the Restated Principal Amount
plus accrued and unpaid interest from the date of such conversion through the
Redemption Date; but in no event will this Security be redeemable before June
23, 2006.

6.   Purchase By the Company at the Option of the Holder.

     Subject to the terms and conditions of the Indenture, the Company shall
become obligated to purchase, at the option of the Holder, the Securities held
by such Holder on the following Purchase Dates and at the following Purchase
Prices per $1,000 Principal Amount at Maturity, upon delivery of a Purchase
Notice containing the information set forth in the Indenture, at any time from
the opening of business on the date that is 20 Business Days prior to such
Purchase Date until the close of business on such Purchase Date and upon
delivery of the Securities to the Paying Agent by the Holder as set forth in the
Indenture.

<TABLE>
<CAPTION>
     Purchase Date           Purchase Price
     -------------           --------------
     <S>                     <C>
     June 23, 2006           $543.41

     June 23, 2010           $643.48

     June 23, 2015           $799.84
</TABLE>

     The Purchase Price (equal to the Issue Price plus accrued Original Issue
Discount and accrued and unpaid cash interest to the Purchase Date) may be paid,
at the option of the Company, in cash or shares of Class B Common Stock or any
combination thereof.

     If prior to a Purchase Date this Security has been converted to a
semiannual coupon debenture following the occurrence of a Tax Event, the
Purchase Price will be equal to the Restated Principal Amount plus accrued and
unpaid interest from the date of conversion to, but excluding, the Purchase
Date.

     At the option of the Holder and subject to the terms and conditions of the
Indenture, the Company shall become obligated to purchase all or a portion of
the Securities held by such Holder 35 Business Days after the occurrence of a
Change in Control of the Company occurring on or prior to June 23, 2006 for a
Change in Control Purchase Price equal to the Issue Price plus accrued Original
Issue Discount and accrued and unpaid cash interest to the Change in Control
Purchase Date, which Change in Control Purchase Price shall be paid in cash. If
prior to a Change in Control Purchase Date this Security has been converted to a
semiannual coupon debenture following the occurrence of a Tax Event, the Change
in Control Purchase Price shall be equal to the Restated Principal Amount plus
accrued and unpaid interest from the date of conversion to the Change in Control
Purchase Date.
<PAGE>

     Holders have the right to withdraw any Purchase Notice or Change in Control
Purchase Notice, as the case may be, by delivering to the Paying Agent a written
notice of withdrawal in accordance with the provisions of the Indenture.

     If cash (and/or securities if permitted under the Indenture) sufficient to
pay the Purchase Price or Change in Control Purchase Price, as the case may be,
of all Securities or portions thereof to be purchased as of the Purchase Date or
the Change in Control Purchase Date, as the case may be, is deposited with the
Paying Agent on the Business Day following the Purchase Date or the Change in
Control Purchase Date, as the case may be, such Securities will cease to  be
outstanding and Original Issue Discount and cash interest shall cease to accrue
on such Securities (or portions thereof) and will be deemed paid immediately
after such Purchase Date or Change in Control Purchase Date, as the case may be,
whether or not such Securities have been delivered to the Paying Agent, and the
Holder thereof shall have no other rights as such (other than the right to
receive the Purchase Price or Change in Control Purchase Price, as the case may
be, upon surrender of such Security).

7.   Notice of Redemption.

     Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
the Holder's registered address. If money sufficient to pay the Redemption Price
of all Securities (or portions thereof) to be redeemed on the Redemption Date is
deposited with the Paying Agent prior to or on the Redemption Date, immediately
after such Redemption Date Original Issue Discount ceases to accrue on such
Securities or portions thereof. Securities in denominations larger than $1,000
of Principal Amount at Maturity may be redeemed in part but only in integral
multiples of $1,000 of Principal Amount at Maturity.

8.   Conversion.

     Subject to the next two succeeding sentences, a Holder of a Security may
convert it into Class B Common Stock of the Company at any time before the close
of business on June 23, 2020.  If the Security is called for redemption, the
Holder may convert it at any time before the close of business on the Redemption
Date. A Security in respect of which a Holder has delivered a Purchase Notice or
Change in Control Purchase Notice exercising the option of such Holder to
require the Company to purchase such Security may be converted only if such
notice of exercise is withdrawn in accordance with the terms of the Indenture.

     The initial Conversion Rate is 5.6024 shares of Class B Common Stock per
$1,000 Principal Amount at Maturity, subject to adjustment in certain events
described in the Indenture. The Company will deliver cash or a check in lieu of
any fractional share of Class B Common Stock.

     In the event the Company exercises its option pursuant to Section 10.01 of
the Indenture to have interest in lieu of Original Issue Discount accrue on the
Security following a Tax Event, the Holder will be entitled on conversion to
receive the same number of shares of Class B Common Stock such Holder would have
received if the Company had not exercised such option. If the Company exercises
such option, Securities surrendered for conversion during the period
<PAGE>

from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business of such Interest Payment Date
(except Securities to be redeemed on a date within such period or on the next
Interest Payment Date) must be accompanied by payment of an amount equal to the
interest thereon that the registered Holder is to receive. Except where
Securities surrendered for conversion must be accompanied by payment as
described above, no interest on converted Securities will be payable by the
Company on any Interest Payment Date subsequent to the date of conversion.

     To convert a Security, a Holder must (1) complete and manually sign the
conversion notice below (or complete and manually sign a facsimile of such
notice) and deliver such notice to the Conversion Agent, (2) surrender the
Security to the Conversion Agent, (3) furnish appropriate endorsements and
transfer documents if required by the Conversion Agent, the Company or the
Trustee and (4) pay any transfer or similar tax, if required.

     A Holder may convert a portion of a Security if the Principal Amount at
Maturity of such portion is $1,000 or an integral multiple of $1,000. No payment
or adjustment will be made for dividends on the Class B Common Stock except as
provided in the Indenture. On conversion of a Security, that portion of accrued
Original Issue Discount (or interest if the Company has exercised its option
provided for in paragraph 10 hereof) and (except as provided below) accrued cash
interest attributable to the period from the Issue Date (or, if the Company has
exercised the option referred to in paragraph 10 hereof, the later of (x) the
date of such exercise and (y) the date on which interest was last paid) or the
date on which interest was last paid through the Conversion Date with respect to
the converted Security shall not be cancelled, extinguished or forfeited, but
rather shall be deemed to be paid in full to the Holder thereof through the
delivery of the Class B Common Stock (together with the cash payment, if any, in
lieu of fractional shares) in exchange for the Security being converted pursuant
to the terms hereof; and the fair market value of such shares of Class B Common
Stock (together with any such cash payment in lieu of fractional shares) shall
be treated as issued, to the extent thereof, first in exchange for Original
Issue Discount (or interest, if the Company has exercised its option provided
for in paragraph 10 hereof) and cash interest accrued through the Conversion
Date, and the balance, if any, of such fair market value of such Common Stock
(and any such cash payment) shall be treated as issued in exchange for the Issue
Price of the Security being converted pursuant to the provisions hereof.
Notwithstanding the foregoing, accrued but unpaid interest will be payable upon
conversion of Securities made concurrently with or after acceleration of
Securities following an Event of Default.

     The Conversion Rate will be adjusted for dividends or distributions on
Class B Common Stock payable in Class B Common Stock or other Capital Stock;
subdivisions, combinations or certain reclassifications of Class B Common Stock;
distributions to all holders of Class B Common Stock of certain rights to
purchase Class B Common Stock for a period expiring within 45 days at less than
the Market Price at the Time of Determination; and distributions to such holders
of assets or debt securities of the Company or certain rights to purchase
securities of the Company (excluding certain cash dividends or distributions).
However, no adjustment need be made if Securityholders may participate in the
transaction or in certain other cases.  The Company from time to time may
voluntarily increase the Conversion Rate.
<PAGE>

     If the Company is a party to a consolidation, merger or binding share
exchange or a transfer of all or substantially all of its assets, or upon
certain distributions described in the Indenture, the right to convert a
Security into Class B Common Stock may be changed into a right to convert it
into securities, cash or other assets of the Company or another person.

9.   Conversion Arrangement on Call for Redemption.

     Any Securities called for redemption, unless surrendered for conversion
before the close of business on the Redemption Date, may be deemed to be
purchased from the Holders of such Securities at an amount not less than the
Redemption Price, by one or more investment bankers or other purchasers who may
agree with the Company to purchase such Securities from the Holders, to convert
them into Class B Common Stock of the Company and to make payment for such
Securities to the Trustee in trust for such Holders.

10.  Tax Event

     (a) From and after (i) the date (the "Tax Event Date") of the occurrence of
a Tax Event and (ii) the date the Company exercises such option, whichever is
later (the "Option Exercise Date"), at the option of the Company, interest in
lieu of future Original Issue Discount and regular cash interest shall accrue at
the rate of 5.00% per annum on a principal amount per Security (the "Restated
Principal Amount") equal to the Issue Price plus Original Issue Discount accrued
through the Option Exercise Date and shall be payable semiannually on June 23
and December 23 of each year (each an "Interest Payment Date") to Holders of
record at the close of business on June 8 or December 8 (each a "Regular Record
Date") immediately preceding such Interest Payment Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months and
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Option Exercise Date.

     (b) Cash interest on any Security that 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 is registered at the close of business on the
Regular Record Date for such cash interest at the office or agency of the
Company maintained for such purpose. Each installment of cash interest on any
Security shall be paid in same-day funds by transfer to an account maintained by
the payee located inside the United States.

     (c) Except as otherwise specified with respect to the Securities, any
Defaulted Interest on any Security shall forthwith cease to be payable to the
registered Holder thereof on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company
as provided for in Section 10.02(b) of the Indenture.

11.  Denominations; Transfer; Exchange.

     The Securities are in fully registered form, without coupons, in
denominations of $1,000 of Principal Amount at Maturity and integral multiples
of $1,000. A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not transfer
or exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed
<PAGE>

in part, the portion of the Security not to be redeemed) or any Securities in
respect of which a Purchase Notice or Change in Control Purchase Notice has been
given and not withdrawn (except, in the case of a Security to be purchased in
part, the portion of the Security not to be purchased) or any Securities for a
period of 15 days before the mailing of a notice of redemption of Securities to
be redeemed.

12.  Persons Deemed Owners.

     The registered Holder of this Security may be treated as the owner of this
Security for all purposes.

13.  Unclaimed Money or Securities.

     The Trustee and the Paying Agent shall return to the Company upon written
request any money or securities held by them for the payment of any amount with
respect to the Securities that remains unclaimed for two years, subject to
applicable unclaimed property law. After return to the Company, Holders entitled
to the money or securities must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another person.

14.  Amendment; Waiver.

     Subject to certain exceptions set forth in the Indenture, (i) the Indenture
or the Securities may be amended with the written consent of the Holders of at
least a majority in aggregate Principal Amount at Maturity of the Securities at
the time outstanding and (ii) certain Defaults may be waived with the written
consent of the Holders of a majority in aggregate Principal Amount at Maturity
of the Securities at the time outstanding. Subject to certain exceptions set
forth in the Indenture, without the consent of any Securityholder, the Company
and the Trustee may amend the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency, or to comply with Article 5 or Section 11.14
of the Indenture, to provide for uncertificated Securities in addition to or in
place of certificated Securities or to make any change that does not adversely
affect the rights of any Securityholder, or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the TIA.

15.  Defaults and Remedies.

     Under the Indenture, Events of Default include (i) default in the payment
of any cash interest upon any Security when such interest becomes due and
payable, and such default in payment of interest shall continue for 30 days;
(ii) default in the payment of the Principal Amount at Maturity (or, if the
Securities have been converted to semiannual coupon debentures following a Tax
Event pursuant to Article 10, the Restated Principal Amount), Issue Price plus
accrued Original Issue Discount, Redemption Price, Purchase Price or Change in
Control Purchase Price on any Security when the same becomes due and payable at
its Stated Maturity, upon redemption, upon declaration, when due for purchase by
the Company or otherwise; (iii) failure by the Company to deliver shares of
Class B Common Stock (together with cash in lieu of fractional shares) when such
Class B Common Stock (or cash in lieu of fractional shares) is required to be
delivered upon conversion of a Security and such failure continues for 10 days;
(iv) failure by the Company to comply with any of its agreements in the
Securities or the
<PAGE>

Indenture (other than those referred to in clauses (i), (ii) and (iii) above)
and such failure continues for 30 days after receipt by the Company of a Notice
of Default; (v) there shall be (a) a default under any bond, debenture, note or
other evidence of indebtedness for money borrowed or under any mortgage,
indenture or other instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness by the Company or any Significant
Subsidiary or by any Subsidiaries of the Company which in the aggregate would
constitute a Significant Subsidiary or under any guarantee of payment of
Indebtedness by the Company or any Significant Subsidiary or by any Subsidiaries
of the Company which in the aggregate would constitute a Significant Subsidiary,
whether such Indebtedness or guarantee now exists or shall hereafter be created,
and the effect of such default is to cause such Indebtedness (or Indebtedness so
guaranteed) to become due prior to its stated maturity or (b) a failure to pay
at the stated maturity of any such Indebtedness (or Indebtedness so guaranteed)
any amounts then due and owing thereunder; provided, however, that no Default
under this clause (v) shall exist if all such defaults and failures to pay
relate to Indebtedness (including Indebtedness so guaranteed) with an aggregate
principal amount of not more than $5,000,000 at the time outstanding; (vi) final
judgments for the payment of money which in the aggregate exceed $5,000,000 at
the time outstanding shall be rendered against the Company or any Significant
Subsidiary or any Subsidiaries of the Company which in the aggregate would
constitute a Significant Subsidiary by a court of competent jurisdiction and
shall remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days after such judgment becomes final and
nonappealable; or (vii) certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary or any
Subsidiaries of the Company which in the aggregate would constitute a
Significant Subsidiary. If an Event of Default occurs and is continuing, the
Trustee, or the Holders of at least 25% in aggregate Principal Amount at
Maturity of the Securities at the time outstanding, may declare all the
Securities to be due and payable immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Securities becoming
due and payable immediately upon the occurrence of such Events of Default.

     Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Securities unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in aggregate Principal Amount at
Maturity of the Securities at the time outstanding may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Securityholders
notice of any continuing Default (except a Default in payment of amounts
specified in clause (i) or (ii) above) if it determines that withholding notice
is in their interests.

16.  Trustee Dealings with the Company.

     Subject to certain limitations imposed by the TIA, the Trustee under the
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.

17.  No Recourse Against Others.
<PAGE>

     A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Securities
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.

18.  Authentication.

     This Security shall not be valid until an authorized signatory of the
Trustee manually signs the Trustee's Certificate of Authentication on the other
side of this Security.

19.  Abbreviations.

     Customary abbreviations may be used in the name of a Securityholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

20.  GOVERNING LAW.

     THE INDENTURE AND THIS SECURITY WILL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                             ----------------------

     The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture which has in it the text of this Security
in larger type. Requests may be made to:

          Universal Health Services, Inc.
          Universal Corporate Center
          P.O. Box 61558
          367 South Gulph Road
          King of Prussia, Pennsylvania 19406-0958
<PAGE>

<TABLE>
<S>                                               <C>
          ASSIGNMENT FORM                                   CONVERSION NOTICE

To assign this Security, fill in the form         To convert this Security into Class B
below:                                            Common Stock of the Company, check the
                                                  box:
I or we assign and transfer this
 Security to                                                      9

-----------------------------------------
(Insert assignee's soc. sec. or tax ID no.)       To convert only part of this
                                                  Security, state the Principal Amount
-----------------------------------------         at Maturity to be converted (which
-----------------------------------------         must be $1,000 or an integral
-----------------------------------------         multiple of $1,000):
(Print or type assignee's name, address
and zip code)                                     $
                                                   ------------------------------------
                                                  If you want the stock certificate
and irrevocably appoint                           made out in another person's name
                                                  fill in the form below
                        agent to transfer
-----------------------
this Security on the books  of the Company.       (Insert other person's soc. sec. or
The agent may substitute another to act for       tax ID no.)
him.                                              -------------------------------------
                                                  -------------------------------------
                                                  -------------------------------------
                                                  -------------------------------------
                                                 (Print or type other person's name,
                                                  address and zip code)
---------------------------------------------------------------------------------------

Date:                         Your Signature:
     -----------------------                   ----------------------------------------

---------------------------------------------------------------------------------------
        (Sign exactly as your name appears on the other side of this Security)
</TABLE>
<PAGE>

                                  EXHIBIT A-2

                        [Form of Certificated Security]

FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THE AMOUNT
OF ORIGINAL ISSUE DISCOUNT WITH RESPECT TO EACH $1,000 OF PRINCIPAL AMOUNT AT
MATURITY OF THIS SECURITY IS $574.10, THE ISSUE DATE IS JUNE 23, 2000, THE YIELD
TO MATURITY IS 5.00%.

     [INCLUDE IF SECURITY IS A CERTIFICATED SECURITY TO BE HELD BY AN
INSTITUTIONAL ACCREDITED INVESTOR--IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOLLOWING RESTRICTIONS.]

     THIS SECURITY AND THE SHARES OF CLASS B COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY, THE SHARES OF CLASS B COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

     THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE"), WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH UNIVERSAL HEALTH SERVICES,
INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) FOR SO LONG AS THIS SECURITY AND THE SHARES OF CLASS B
COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (C) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2),(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, (D) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED

                                     A-2-1
<PAGE>

EFFECTIVE UNDER THE SECURITIES ACT, (E) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHTS PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSE (C), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.

     [THE FOREGOING LEGEND MAY BE REMOVED FROM THIS SECURITY ON SATISFACTION OF
THE CONDITIONS SPECIFIED IN THE INDENTURE.]

                                     A-2-1
<PAGE>

                        UNIVERSAL HEALTH SERVICES, INC.
                        Convertible Debentures due 2020

No. R-3                            CUSIP:  913903AJ9
Issue Date: June 23, 2000          Original Issue Discount: $574.10
Issue Price:  $425.90              (for each $1,000 Principal
(for each $1,000 Principal         Amount at Maturity)
Amount at Maturity)

     UNIVERSAL HEALTH SERVICES, INC., a Delaware corporation, promises to pay to
Cede & Co. or registered assigns, the Principal Amount at Maturity of  DOLLARS
($) on June 23, 2020.

     This Security shall bear interest as specified on the other side of this
Security. Original Issue Discount will accrue as specified on the other side of
this Security. This Security is convertible as specified on the other side of
this Security.

     Additional provisions of this Security are set forth on the other side of
this Security.

Dated:                                       UNIVERSAL HEALTH SERVICES, INC.

                                             By
                                               -----------------------------
                                             Title:

TRUSTEE'S CERTIFICATE OF
 AUTHENTICATION

BANK ONE TRUST COMPANY, N.A.,
as Trustee, certifies that this
is one of the Securities referred
to in the within-mentioned Indenture (as
defined on the other side of this Security).

By
  ------------------------------
     Authorized Signatory

Dated:
      --------------------------

                                     A-2-1
<PAGE>

                                  EXHIBIT B-1

                              Transfer Certificate

     In connection with any transfer of any of the Securities within the period
prior to the expiration of the holding period applicable to the sales thereof
under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities
Act") (or any successor provision), the undersigned registered owner of this
Security hereby certifies with respect to $              Principal Amount at
                                            ------------
Maturity of the above-captioned securities presented or surrendered on the date
hereof (the "Surrendered Securities") for registration of transfer, or for
exchange or conversion where the securities issuable upon such exchange or
conversion are to be registered in a name other than that of the undersigned
registered owner (each such transaction being a "transfer"), that such transfer
complies with the restrictive legend set forth on the face of the Surrendered
Securities for the reason checked below:

     [_]  A transfer of the Surrendered Securities is made to the Company or any
          subsidiaries; or

     [_]  The transfer of the Surrendered Securities complies with Rule 144A
          under the U.S. Securities Act of 1933, as amended (the "Securities
          Act"); or

     [_]  The transfer of the Surrendered Securities is to an institutional
          accredited investor, as described in Rule 501(a)(1), (2), (3) or (7)
          of Regulation D under the Securities Act; or

     [_]  The transfer of the Surrendered Securities is pursuant to an effective
          registration statement under the Securities Act, or

     [_]  The transfer of the Surrendered Securities is pursuant to an offshore
          transaction in accordance with Rule 904 of Regulation S under the
          Securities Act; or

     [_]  The transfer of the Surrendered Securities is pursuant to another
          available exemption from the registration requirement of the
          Securities Act.

and unless the box below is checked, the undersigned confirms that, to the
undersigned's knowledge, such Securities are not being transferred to an
"affiliate" of the Company as defined in Rule 144 under the Securities Act (an
"Affiliate").

     [_]  The transferee is an Affiliate of the Company.

DATE:
      ----------------                     -----------------------------------
                                                      Signature(s)

           (If the registered owner is a corporation, partnership or
            fiduciary, the title of the Person signing on behalf of
                    such registered owner must be stated.)

                                     B-1-1
<PAGE>

                                  EXHIBIT B-2

             Form of Letter to be Delivered by Accredited Investors

Universal Health Services, Inc.
Universal Corporate Center
P.O. Box 61558
367 South Gulph Road
King of Prussia, Pennsylvania 19406-0958

Attention:  Chief Financial Officer

Bank One Trust Company, N.A.
One Bank One Plaza, Suite 0126
Chicago, Illinois 60670-0126

Attention:  Corporate Trust Administration

Dear Sirs:

     We are delivering this letter in connection with the proposed transfer of
$             Principal Amount at Maturity of the Convertible Debentures due
 ------------
2020 (the "Debentures") of Universal Health Services, Inc. (the "Company"),
which are convertible into shares of the Company's Class B Common Stock, $0.01
par value per share (the "Common Stock").

     We hereby confirm that:

          (i) we are an "accredited investor" within the meaning of Rule
     501(a)(1), (2) or (3) under the Securities Act of 1933, as amended (the
     "Securities Act"), or an entity in which all of the equity owners are
     accredited investors within the meaning of Rule 501(a)(1), (2) or (3) under
     the Securities Act (an "Institutional Accredited Investor");

          (ii) the purchase of Debentures by us is for our own account or for
     the account of one or more other Institutional Accredited Investors or as
     fiduciary for the account of one or more trusts, each of which is an
     "accredited investor" within the meaning of Rule 501(a)(7) under the
     Securities Act and for each of which we exercise sole investment discretion
     or (B) we are a "bank," within the meaning of Section 3(a)(2) of the
     Securities Act, or a "savings and loan association" or other institution
     described in Section 3(a)(5)(A) of the Securities Act that is acquiring
     Debentures as fiduciary for the account of one or more institutions for
     which we exercise sole investment discretion;

          (iii) we have such knowledge and experience in financial and business
     matters that we are capable of evaluating the merits and risks of
     purchasing Debentures; and

                                     B-2-1
<PAGE>

          (iv) we are not acquiring Debentures with a view to distribution
     thereof or with any present intention of offering or selling Debentures or
     the Common Stock issuable upon conversion thereof, except as permitted
     below; provided that the disposition of our property and property of any
     accounts for which we are acting as fiduciary shall remain at all times
     within our control.

     We understand that the Debentures were originally offered and sold in a
transaction not involving any public offering within the United States within
the meaning of the Securities Act and that the Debentures and the shares of
Common Stock (the "Securities") issuable upon conversion thereof have not been
registered under the Securities Act, and we agree, on our own behalf and on
behalf of each account for which we acquire any Debentures, that if in the
future we decide to resell or otherwise transfer such Securities prior to the
date (the "Resale Restriction Termination Date") which is two years after the
later of the original issuance of the Debentures and the last date on which the
Company or an affiliate of the Company was the owner of the Security, such
Securities may be resold or otherwise transferred only (i) to the Company or any
subsidiary thereof, or (ii) for as long as the Debentures are eligible for
resale pursuant to Rule 144A, to a person it reasonably believes is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) that
purchases for its own account or for the account of a qualified institutional
buyer to which notice is given that the transfer is being made in reliance on
Rule 144A, or (iii) to an Institutional Accredited Investor that is acquiring
the Security for its own account, or for the account of such Institutional
Accredited Investor for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act,
or (iv) pursuant to another available exemption from registration under the
Securities Act (if applicable), or (v) pursuant to a registration statement
which has been declared effective under the Securities Act and, in each case, in
accordance with any applicable securities laws of any State of the United States
or any other applicable jurisdiction and in accordance with the legends set
forth on the Securities. We further agree to provide any person purchasing any
of the Securities other than pursuant to clause (v) above from us a notice
advising such purchaser that resales of such securities are restricted as stated
herein. We understand that the trustee or the transfer agent, as the case may
be, for the Securities will not be required to accept for registration of
transfer any Securities pursuant to (iii) or (iv) above except upon presentation
of evidence satisfactory to the Company that the foregoing restrictions on
transfer have been complied with. We further understand that any Securities will
be in the form of definitive physical certificates and that such certificates
will bear a legend reflecting the substance of this paragraph other than
certificates representing Securities transferred pursuant to clause (v) above.

     We acknowledge that the Company, others and you will rely upon our
confirmations, acknowledgments and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.

                                     B-2-2
<PAGE>

     THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK.

                                             ---------------------------------
                                             (Name of Purchaser)

                                             By:
                                                ------------------------------
                                             Name:
                                             Title:
                                             Address:

                                     B-2-3

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