Document:

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                                                                     EXHIBIT 4.1

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.,

                                    AS ISSUER

                       11% SENIOR DISCOUNT NOTES DUE 2014

                                 ---------------

                                    INDENTURE

                          DATED AS OF FEBRUARY 4, 2004

                                 ---------------

                              THE BANK OF NEW YORK,
                                   AS TRUSTEE

<PAGE>

                             CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>
Trust Indenture Act Section                                                         Indenture Section
---------------------------                                                         -----------------
<S>                                                                                 <C>
 310(a)(1)......................................................................    7.10
    (a)(2)......................................................................    7.10
    (a)(3)......................................................................    N.A.
    (a)(4)......................................................................    N.A.
    (a)(5)......................................................................    7.10
    (b).........................................................................    7.3, 7.8, 7.10
    (c).........................................................................    N.A.
 311(a).........................................................................    7.11
    (b).........................................................................    7.11
    (c).........................................................................    N.A.
 312(a).........................................................................    2.5
    (b).........................................................................    12.3
    (c).........................................................................    12.3
 313(a).........................................................................    7.6
    (b)(1)......................................................................    N.A.
    (b)(2)......................................................................    7.6
    (c).........................................................................    7.6, 12.2
 314(a).........................................................................    4.3, 4.4
    (b).........................................................................    N.A.
    (c)(1)......................................................................    12.4
    (c)(2)......................................................................    12.4
    (c)(3)......................................................................    12.4
    (d).........................................................................    N.A.
    (e).........................................................................    12.5
    (f).........................................................................    N.A.
 315(a).........................................................................    7.2
    (b).........................................................................    7.5, 12.2
    (c).........................................................................    7.1
    (d).........................................................................    7.1
    (e).........................................................................    6.12
 316(a)(last sentence)..........................................................    2.9
    (a)(1)(A)...................................................................    6.5
    (a)(1)(B)...................................................................    6.4
    (a)(2)......................................................................    N.A.
    (b).........................................................................    6.7
    (c).........................................................................    N.A.
 317(a)(1)......................................................................    6.8
    (a)(2)......................................................................    6.10
    (b).........................................................................    2.4
 318(a).........................................................................    12.1
    (b).........................................................................    N.A.
    (c).........................................................................    12.1
</TABLE>

N.A. MEANS NOT APPLICABLE.

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

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                                TABLE OF CONTENTS

<TABLE>
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<S>                                                                                                           <C>
                                   ARTICLE I.

                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1.     Definitions.............................................................................       1
Section 1.2.     Other Definitions.......................................................................      26
Section 1.3.     Incorporation by Reference of Trust Indenture Act.......................................      27
Section 1.4.     Rules of Construction...................................................................      27
Section 1.5.     Acts of Holders.........................................................................      28

                                   ARTICLE II.

                                    THE NOTES

Section 2.1.     Form and Dating.........................................................................      29
Section 2.2.     Execution and Authentication............................................................      30
Section 2.3.     Registrar and Paying Agent..............................................................      31
Section 2.4.     Paying Agents to Hold Money in Trust....................................................      31
Section 2.5.     Holder Lists............................................................................      32
Section 2.6.     Transfer and Exchange...................................................................      32
Section 2.7.     Replacement Notes.......................................................................      41
Section 2.8.     Outstanding Notes.......................................................................      41
Section 2.9.     Treasury Notes..........................................................................      42
Section 2.10.    Temporary Notes.........................................................................      42
Section 2.11.    Cancellation............................................................................      42
Section 2.12.    Defaulted Interest......................................................................      43
Section 2.13.    Persons Deemed Owners...................................................................      43
Section 2.14.    CUSIP Numbers...........................................................................      43

                                  ARTICLE III.

                            REDEMPTION AND REPURCHASE

Section 3.1.     Notices to Trustee......................................................................      44
Section 3.2.     Selection of Notes......................................................................      44
Section 3.3.     Notice of Optional Redemption...........................................................      45
Section 3.4.     Effect of Notice of Redemption..........................................................      46
Section 3.5.     Deposit of Redemption Price or Purchase Price...........................................      46
Section 3.6.     Notes Redeemed or Repurchased in Part...................................................      46
Section 3.7.     Optional Redemption.....................................................................      47
Section 3.8.     Optional Redemption upon Equity Offerings...............................................      47
</TABLE>

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<S>                                                                                                           <C>
Section 3.9.     Repurchase upon Change of Control Offer.................................................      47
Section 3.10.    Repurchase upon Application of Excess Proceeds..........................................      49

                                   ARTICLE IV.

                                    COVENANTS

Section 4.1.     Payment of Principal and Interest.......................................................      51
Section 4.2.     Maintenance of Office or Agency.........................................................      51
Section 4.3.     Reports to Holders......................................................................      52
Section 4.4.     Compliance Certificate..................................................................      53
Section 4.5.     Taxes...................................................................................      54
Section 4.6.     Stay, Extension and Usury Laws..........................................................      54
Section 4.7.     Limitation on Restricted Payments.......................................................      54
Section 4.8.     Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries............      57
Section 4.9.     Limitation on Incurrence of Additional Indebtedness.....................................      59
Section 4.10.    Limitation on Asset Sales...............................................................      59
Section 4.11.    Limitations on Transactions with Affiliates.............................................      62
Section 4.12.    Limitation on Liens.....................................................................      63
Section 4.13.    Continued Existence.....................................................................      64
Section 4.14.    Insurance Matters.......................................................................      64
Section 4.15.    Offer to Repurchase upon Change of Control..............................................      65
Section 4.16.    Limitation of Guarantees by Restricted Subsidiaries.....................................      65
Section 4.17.    Payments for Consent....................................................................      66
Section 4.18.    Limitation on Preferred Stock of Restricted Subsidiaries................................      66
Section 4.19.    Limitation on Designation of Unrestricted Subsidiaries..................................      66

                                   ARTICLE V.

                                   SUCCESSORS

Section 5.1.     Merger, Consolidation and Sale of Assets................................................      68
Section 5.2.     Successor Corporation Substituted.......................................................      70

                                   ARTICLE VI.

                              DEFAULTS AND REMEDIES

Section 6.1.     Events of Default.......................................................................      70
Section 6.2.     Acceleration............................................................................      72
Section 6.3.     Other Remedies..........................................................................      72
Section 6.4.     Waiver of Existing Defaults.............................................................      73
Section 6.5.     Control by Majority.....................................................................      73
</TABLE>

                                      -ii-

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<TABLE>
<CAPTION>
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<S>                                                                                                           <C>
Section 6.6.     Limitation on Suits.....................................................................      73
Section 6.7.     Rights of Holders of Notes to Receive Payment...........................................      74
Section 6.8.     Collection Suit by Trustee..............................................................      74
Section 6.9.     Notice..................................................................................      74
Section 6.10.    Trustee May File Proofs of Claim........................................................      75
Section 6.11.    Priorities..............................................................................      75
Section 6.12.    Undertaking for Costs...................................................................      76

                                  ARTICLE VII.

                                     TRUSTEE

Section 7.1.     Duties of Trustee.......................................................................      76
Section 7.2.     Rights of Trustee.......................................................................      77
Section 7.3.     Individual Rights of Trustee............................................................      78
Section 7.4.     Trustee's Disclaimer....................................................................      78
Section 7.5.     Notice of Defaults......................................................................      79
Section 7.6.     Reports by Trustee to Holder of the Notes...............................................      79
Section 7.7.     Compensation, Reimbursement and Indemnity...............................................      79
Section 7.8.     Replacement of Trustee..................................................................      81
Section 7.9.     Successor Trustee by Merger, Etc........................................................      82
Section 7.10.    Eligibility; Disqualification...........................................................      82
Section 7.11.    Preferential Collection of Claims Against Company.......................................      82

                                  ARTICLE VIII.

                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.1.     Option to Effect Legal Defeasance or Covenant Defeasance................................      82
Section 8.2.     Legal Defeasance and Discharge..........................................................      83
Section 8.3.     Covenant Defeasance.....................................................................      83
Section 8.4.     Conditions to Legal or Covenant Defeasance..............................................      84
Section 8.5.     Deposited Money and U.S. Government Obligations to Be Held in Trust; Other
                 Miscellaneous Provisions. ..............................................................      86
Section 8.6.     Repayment to the Company................................................................      86
Section 8.7.     Reinstatement...........................................................................      87

                                   ARTICLE IX.

                        AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.1.     Without Consent of Holders of Notes.....................................................      87
Section 9.2.     With Consent of Holders of Notes........................................................      88
Section 9.3.     Compliance with Trust Indenture Act.....................................................      89
</TABLE>

                                      -iii-

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<TABLE>
<CAPTION>
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<S>                                                                                                           <C>
Section 9.4.     Revocation and Effect of Consents.......................................................      90
Section 9.5.     Notation on or Exchange of Notes........................................................      90
Section 9.6.     Trustee to Sign Amendment, Etc..........................................................      90

                                   ARTICLE X.

                                    GUARANTEE

Section 10.1.    Unconditional Guarantee.................................................................      90
Section 10.2.    Severability............................................................................      91
Section 10.3.    Limitation of Guarantor's Liability.....................................................      92
Section 10.4.    Release of Guarantor....................................................................      92
Section 10.5.    Contribution............................................................................      92
Section 10.6.    Waiver of Subrogation...................................................................      93
Section 10.7.    Execution of Guarantee..................................................................      93
Section 10.8.    Waiver of Stay, Extension or Usury Laws.................................................      94

                                   ARTICLE XI.

                           SATISFACTION AND DISCHARGE

Section 11.1.    Satisfaction and Discharge..............................................................      94
Section 11.2.    Application of Trust....................................................................      95

                                  ARTICLE XII.

                                  MISCELLANEOUS

Section 12.1.    Trust Indenture Act Controls............................................................      95
Section 12.2.    Notices.................................................................................      96
Section 12.3.    Communication by Holders of Notes with Other Holders of Notes...........................      97
Section 12.4.    Certificate and Opinion as to Conditions Precedent......................................      97
Section 12.5.    Statements Required in Certificate or Opinion...........................................      97
Section 12.6.    Rules by Trustee and Agents.............................................................      98
Section 12.7.    No Personal Liability of Directors, Officers, Employees and Stockholders................      98
Section 12.8.    Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.........................      99
Section 12.9.    No Adverse Interpretation of Other Agreements...........................................      99
Section 12.10.   Successors..............................................................................      99
Section 12.11.   Severability............................................................................      99
Section 12.12.   Counterpart Originals...................................................................      99
Section 12.13.   Table of Contents, Headings, Etc........................................................      99
Section 12.14.   Qualification of Indenture..............................................................     100
</TABLE>

                                      -iv-

<PAGE>

                                    EXHIBITS

Exhibit A         Form of Series A Note

Exhibit B         Form of Series B Note

Exhibit C         Form of Guarantee

Exhibit D(1)      Form of Regulation S Certification

Exhibit D(2)      Form of Certificate to Be Delivered upon Exchange or
                  Registration of Transfer of Notes

Exhibit E         Form of Certificate to Be Delivered in Connection with
                  Transfers to Non-QIB Accredited Investors

Exhibit F         Form of Certificate to Be Delivered in Connection with
                  Transfers Pursuant to Regulation S

                                       -v-

<PAGE>

                                    INDENTURE

                  INDENTURE dated as of February 4, 2004 between Town Sports
International Holdings, Inc., a Delaware corporation (the "Company"), and The
Bank of New York, a New York banking corporation, as trustee (the "Trustee").

                  Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders (as defined below)
of the Company's 11% Senior Discount Notes due 2014:

                                   ARTICLE I.

                   DEFINITIONS AND INCORPORATION BY REFERENCE

                  Section 1.1. Definitions.

                  "Accreted Value" means, as of any date (the "Specified Date"),
the amount provided below for each $1,000 principal amount at maturity of Notes:

                  (1)      if the Specified Date occurs on one of the following
         dates (each, a "Semi-Annual Accrual Date"), the Accreted Value will
         equal the amount set forth below for such Semi-Annual Accrual Date:

<TABLE>
<CAPTION>
SEMI-ANNUAL ACCRUAL DATE                        ACCRETED VALUE
------------------------                        --------------
<S>                                             <C>
August 1, 2004                                  $       617.63
February 1, 2005                                $       651.60
August 1, 2005                                  $       687.44
February 1, 2006                                $       725.25
August 1, 2006                                  $       765.13
February 1, 2007                                $       807.22
August 1, 2007                                  $       851.61
February 1, 2008                                $       898.45
August 1, 2008                                  $       947.87
February 1, 2009                                $     1,000.00
</TABLE>

                  (2)      if the Specified Date occurs before the first
         Semi-Annual Accrual Date, the Accreted Value will equal the sum of (A)
         the original issue price of a Note and (B) an amount equal to the
         product of (x) the Accreted Value for the first Semi-Annual Accrual
         Date less such original issue price multiplied by (y) a fraction, the
         numerator of which is the number of days from the Issue Date to the
         Specified Date, using a 360-day year of twelve 30-day months, and the
         denominator of which is the number of

<PAGE>

                                       -2-

         days elapsed from the Issue Date to the first Semi-Annual Accrual Date,
         using a 360-day year of twelve 30-day months;

                  (3)      if the Specified Date occurs between two Semi-Annual
         Accrual Dates, the Accreted Value will equal the sum of (A) the
         Accreted Value for the Semi-Annual Accrual Date immediately preceding
         such Specified Date and (B) an amount equal to the product of (x) the
         Accreted Value for the immediately following Semi-Annual Accrual Date
         less the Accreted Value for the immediately preceding Semi-Annual
         Accrual Date multiplied by (y) a fraction, the numerator of which is
         the number of days from the immediately preceding Semi-Annual Accrual
         Date to the Specified Date, using a 360-day year of twelve 30-day
         months, and the denominator of which is 180; or

                  (4)      if the Specified Date occurs after the last
         Semi-Annual Accrual Date, the Accreted Value will equal $1,000.

                  "Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary or at the time it merges or consolidates with the Company or any of
its Restricted Subsidiaries or assumed in connection with the acquisition of
assets from such Person and in each case not incurred by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary or such acquisition, merger or consolidation.

                  "Additional Interest" means all additional interest then owing
pursuant to Section 4 of the Registration Rights Agreement.

                  "Additional Notes" means 11% Senior Discount Notes due 2014
issued after the Issue Date pursuant to Article II and in compliance with
Section 4.9.

                  "Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.

                  "Affiliate Transaction" has the meaning set forth in Section
4.11.

                  "Agent" means any Registrar, Paying Agent or co-registrar.

                  "Asset Acquisition" means (1) an Investment by the Company or
any Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged with or into the Company
or any Restricted Subsidiary,

<PAGE>

                                      -3-

or (2) the acquisition by the Company or any Restricted Subsidiary of the assets
of any Person (other than a Restricted Subsidiary) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.

                  "Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of:
(1) any Capital Stock of any Restricted Subsidiary; or (2) any other property or
assets of the Company or any Restricted Subsidiary other than in the ordinary
course of business; provided, however, that Asset Sales shall not include: (a) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $2.5
million; (b) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of the Company as permitted under Article V;
(c) disposals or replacements of obsolete equipment in the ordinary course of
business; (d) the sale, lease, conveyance, disposition or other transfer by the
Company or any Restricted Subsidiary of assets or property to the Company or one
or more Restricted Subsidiaries; and (e) any Restricted Payment permitted by
Section 4.7 or any Permitted Investment.

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

                  "Board of Directors" means, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.

                  "Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and to
be in full force and effect on the date of such certification, and delivered to
the Trustee.

                  "BRS Group" means Bruckmann, Rosser, Sherrill & Co., Inc. and
its Affiliates.

                  "Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banking institutions (including, without
limitation, the Federal Reserve System) or the Corporate Trust Office of the
Trustee are authorized or required by law to close in New York City.

                  "Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations

<PAGE>

                                       -4-

at any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.

                  "Capital Stock" means:

                  (1)      with respect to any Person that is a corporation, any
         and all shares, interests, participations or other equivalents (however
         designated and whether or not voting) of corporate stock, including
         each class of Common Stock and Preferred Stock of such Person; and

                  (2)      with respect to any Person that is not a corporation,
         any and all partnership, membership or other equity interests of such
         Person.

                  "Cash Equivalents" means:

                  (1)      marketable direct obligations issued by, or
         unconditionally guaranteed by, the United States Government or issued
         by any agency thereof and backed by the full faith and credit of the
         United States, in each case maturing within one year from the date of
         acquisition thereof;

                  (2)      marketable direct obligations issued by any state of
         the United States of America or any political subdivision of any such
         state or any public instrumentality thereof maturing within one year
         from the date of acquisition thereof and, at the time of acquisition,
         having one of the two highest ratings obtainable from either S&P or
         Moody's;

                  (3)      commercial paper maturing no more than one year from
         the date of creation thereof and, at the time of acquisition, having a
         rating of at least A-1 from S&P or at least P-1 from Moody's;

                  (4)      certificates of deposit or bankers' acceptances
         maturing within one year from the date of acquisition thereof issued by
         any bank organized under the laws of the United States of America or
         any state thereof or the District of Columbia or any U.S. branch of a
         foreign bank having at the date of acquisition thereof combined capital
         and surplus of not less than $250.0 million;

                  (5)      repurchase obligations with a term of not more than
         seven days for underlying securities of the types described in clause
         (1) above entered into with any bank meeting the qualifications
         specified in clause (4) above; and

                  (6)      investments in money market funds that invest
         substantially all their assets in securities of the types described in
         clauses (1) through (5) above.

<PAGE>

                                       -5-

                  "Certificated Notes" means, collectively, the U.S.
Certificated Notes and the Offshore Certificated Notes.

                  "Change of Control" means the occurrence of one or more of the
following events:

                  (1)      any sale, lease, exchange or other transfer (in one
         transaction or a series of related transactions) of all or
         substantially all of the assets of the Company to any Person or group
         of related Persons for purposes of Section 13(d) of the Exchange Act (a
         "Group"), together with any Affiliates thereof (whether or not
         otherwise in compliance with the provisions of this Indenture), other
         than to a Permitted Holder;

                  (2)      the approval by the holders of Capital Stock of the
         Company of any plan or proposal for the liquidation or dissolution of
         the Company (whether or not otherwise in compliance with the provisions
         of this Indenture);

                  (3)      any Person or Group, other than a Permitted Holder,
         shall become the owner, directly or indirectly, beneficially or of
         record, of shares representing more than 50% of the aggregate ordinary
         voting power represented by the issued and outstanding Capital Stock of
         the Company;

                  (4)      the replacement of a majority of the Board of
         Directors of the Company over a two-year period from the directors who
         constituted the Board of Directors of the Company at the beginning of
         such period, and such replacement shall not have been approved by a
         vote of at least a majority of the Board of Directors of the Company
         then still in office who either were members of such Board of Directors
         at the beginning of such period or whose election as a member of any
         such Board of Directors was previously so approved; or

                  (5)      the failure at any time by the Company to
         beneficially own (as defined in Rule 13d-3 and 13d-5 under the Exchange
         Act) directly or indirectly, 100% of the Common Stock of TSI.

                  "Change of Control Offer" has the meaning set forth in Section
4.15.

                  "Change of Control Payment Date" has the meaning set forth in
Section 3.9.

                  "Clearstream" shall mean Clearstream Banking, Societe Anonyme,
Luxembourg.

                  "Commission" means the Securities and Exchange Commission.

<PAGE>

                                       -6-

                  "Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.

                  "Company" means Town Sports International Holdings, Inc., a
Delaware corporation, until a successor Person shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter means such
successor Person.

                  "Consolidated EBITDA" means, with respect to any Person for
any period, the sum (without duplication) of:

                  (1)      Consolidated Net Income; and

                  (2)      to the extent Consolidated Net Income has been
         reduced thereby,

                           (a)      all income taxes of such Person and its
                  Restricted Subsidiaries paid or accrued in accordance with
                  GAAP for such period (other than income taxes attributable to
                  extraordinary, unusual or nonrecurring gains or losses or
                  taxes attributable to sales or dispositions outside the
                  ordinary course of business);

                           (b)      Consolidated Interest Expense; and

                           (c)      Consolidated Non-cash Charges less any
                  non-cash items increasing Consolidated Net Income for such
                  period,

all as determined on a consolidated basis for such Person and its Restricted
Subsidiaries in accordance with GAAP.

                  "Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person during the four
full fiscal quarters (the "Four Quarter Period") ending on or prior to the date
of the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
such Person for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma (including any pro forma expense and cost reductions calculated on a basis
consistent with Regulation S-X under the Securities Act) basis for the period of
such calculation to:

                  (1)      the incurrence or repayment of any Indebtedness of
         such Person or any of its Restricted Subsidiaries (and the application
         of the proceeds thereof) giving rise

<PAGE>

                                       -7-

         to the need to make such calculation and any incurrence or repayment of
         other Indebtedness (and the application of the proceeds thereof), other
         than the incurrence or repayment of Indebtedness in the ordinary course
         of business for working capital purposes pursuant to working capital
         facilities, occurring during the Four Quarter Period or at any time
         subsequent to the last day of the Four Quarter Period and on or prior
         to the Transaction Date, as if such incurrence or repayment, as the
         case may be (and the application of the proceeds thereof), occurred on
         the first day of the Four Quarter Period; and

                  (2)      any asset sales or Asset Acquisitions (including,
         without limitation, any Asset Acquisition giving rise to the need to
         make such calculation as a result of such Person or one of its
         Restricted Subsidiaries (including any Person who becomes a Restricted
         Subsidiary as a result of the Asset Acquisition) incurring, assuming or
         otherwise being liable for Acquired Indebtedness and also including any
         Consolidated EBITDA attributable to the assets that are the subject of
         the Asset Acquisition or asset sale during the Four Quarter Period)
         occurring during the Four Quarter Period or at any time subsequent to
         the last day of the Four Quarter Period and on or prior to the
         Transaction Date, as if such asset sale or Asset Acquisition (including
         the incurrence, assumption or liability for any such Acquired
         Indebtedness) occurred on the first day of the Four Quarter Period. If
         such Person or any of its Restricted Subsidiaries directly or
         indirectly guarantees Indebtedness of a third Person, the preceding
         sentence shall give effect to the incurrence of such guaranteed
         Indebtedness as if such Person or any such Restricted Subsidiary of
         such Person had directly incurred or otherwise assumed such guaranteed
         Indebtedness.

                  Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio":

                  (1)      interest on outstanding Indebtedness determined on a
         fluctuating basis as of the Transaction Date and that will continue to
         be so determined thereafter shall be deemed to have accrued at a fixed
         rate per annum equal to the rate of interest on such Indebtedness in
         effect on the Transaction Date;

                  (2)      if interest on any Indebtedness actually incurred on
         the Transaction Date may optionally be determined at an interest rate
         based upon a factor of a prime or similar rate, a eurocurrency
         interbank offered rate, or other rates, then the interest rate in
         effect on the Transaction Date will be deemed to have been in effect
         during the Four Quarter Period; and

                  (3)      notwithstanding clause (1) above, interest on
         Indebtedness determined on a fluctuating basis, to the extent such
         interest is covered by agreements relating to

<PAGE>

                                       -8-

         Interest Swap Obligations, shall be deemed to accrue at the rate per
         annum resulting after giving effect to the operation of such
         agreements.

                  "Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of:

                  (1)      Consolidated Interest Expense; plus

                  (2)      the product of

                           (a)      the amount of all dividend payments on any
                  series of Preferred Stock of such Person (other than dividends
                  paid or to be paid in such period in Qualified Capital Stock)
                  paid or required to be paid during such period, and

                           (b)      a fraction, the numerator of which is one
                  and the denominator of which is one minus the then current
                  effective consolidated federal, state and local income tax
                  rate of such Person, expressed as a decimal.

                  "Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication:

                  (1)      the aggregate of the interest expense of such Person
         and its Restricted Subsidiaries for such period determined on a
         consolidated basis in accordance with GAAP, including without
         limitation,

                           (a)      any amortization of debt discount;

                           (b)      the net costs under Interest Swap
                  Obligations;

                           (c)      all capitalized interest; and

                           (d)      the interest portion of any deferred payment
                  obligation; and

                  (2)      the interest component of Capitalized Lease
         Obligations paid, accrued and/or scheduled to be paid or accrued by
         such Person and its Restricted Subsidiaries during such period as
         determined on a consolidated basis in accordance with GAAP.

                  "Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom:

<PAGE>

                                       -9-

                  (1)      after-tax gains or losses from Asset Sales (without
         regard to the $2.5 million limitation set forth in the definition
         thereof) or abandonments or reserves relating thereto;

                  (2)      after-tax items classified as extraordinary or
         nonrecurring gains or losses;

                  (3)      the net income (or loss) of any Person acquired in a
         "pooling of interests" transaction accrued prior to the date it becomes
         a Restricted Subsidiary or is merged or consolidated with the Company
         or with any Restricted Subsidiary;

                  (4)      the net income (but not loss) of any Restricted
         Subsidiary to the extent that the declaration of dividends or similar
         distributions by that Restricted Subsidiary of that income is
         restricted by a contract, operation of law or otherwise (other than
         restrictions permitted by Section 4.8);

                  (5)      the net income of any Person, other than the Company
         or a Restricted Subsidiary, except to the extent of cash dividends or
         distributions paid to the Company or to a Restricted Subsidiary by such
         Person;

                  (6)      income or loss attributable to discontinued
         operations (including, without limitation, operations disposed of
         during such period whether or not such operations were classified as
         discontinued); and

                  (7)      in the case of a successor to the Company by
         consolidation or merger or as a transferee of the Company's assets, any
         net income of the successor corporation prior to such consolidation,
         merger or transfer of assets.

                  "Consolidated Non-cash Charges" means, with respect to any
Person for any period, the aggregate depreciation, amortization and other
non-cash expenses of such Person (including, without limitation, charges related
to the impairment of intangibles) and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person for such period, determined on a
consolidated basis in accordance with GAAP (including deferred rent but
excluding any such charge which requires an accrual of or a reserve for cash
charges for any future period).

                  "Corporate Trust Office of the Trustee" means the principal
office of the Trustee at which at any time its corporate trust business shall be
administered, which office at the date hereto is located at 101 Barclay Street,
Floor 8 West, New York, New York 10286, Attention: Corporate Trust Trustee
Department, 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 such successor Trustee
may designate from time to time by notice to the Holders and the Company).

<PAGE>

                                      -10-

                  "Covenant Defeasance" has the meaning set forth in Section
8.3.

                  "Credit Agreement" means the Credit Agreement dated as of
April 16, 2003, by and among TSI, the lenders from time to time party thereto in
their capacities as lenders thereunder and Deutsche Bank Trust Company Americas,
as agent, together with the related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder or adding the Company or Subsidiaries of the Company or TSI as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.

                  "Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.

                  "Default" means an event or condition the occurrence of which
is, or with the lapse of time or the giving of notice or both would be, an Event
of Default.

                  "Depositary" means, with respect to the Notes issuable in
whole or in part in global form, the Person specified in Section 2.6 as the
Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.

                  "Designation" has the meaning set forth in Section 4.19.

                  "Designation Amount" has the meaning set forth in Section
4.19.

                  "Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the sole option of the holder
thereof on or prior to the final maturity date of the Notes.

                  "Domestic Restricted Subsidiary" means a Restricted Subsidiary
incorporated or otherwise organized or existing under the laws of the United
States or any state thereof.

                  "Equity Offering" means a public or private offering of
Qualified Capital Stock of the Company (other than to a Subsidiary of the
Company) that generates gross proceeds to the Company of at least $15.0 million.

<PAGE>

                                      -11-

                  "Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.

                  "Exchange Offer" means the offer that shall be made by the
Company pursuant to the Registration Rights Agreement to exchange Series A Notes
for Series B Notes.

                  "Existing TSI Indenture" means the indenture dated as of April
16, 2003 among TSI, the guarantors named therein and The Bank of New York, as
trustee, as amended or modified from time to time.

                  "Existing TSI Notes" means the 9 5/8% Senior Notes due 2011 of
TSI issued under the Existing TSI Indenture.

                  "fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution of the Board of Directors of the Company.

                  "Farallon" means Farallon Partners, L.L.C. and its Affiliates.

                  "Final Memorandum" shall mean the Company's final offering
memorandum dated January 28, 2004, whereby the Company offered $213.0 million
aggregate principal amount Series A Notes.

                  "Foreign Restricted Subsidiary" means any Restricted
Subsidiary that is not a Domestic Restricted Subsidiary.

                  "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are in effect as of April
16, 2003. All ratios and computations based on GAAP contained in this Indenture
shall be computed in conformity with GAAP applied on a consistent basis, except
that calculations made for purposes of determining compliance with the terms of
the covenants and with other provisions of this Indenture shall be made without
giving effect to (i) the deduction or amortization of any premiums, fees and
expenses incurred in connection with any financings or any other permitted
incurrence of Indebtedness and (ii) depreciation, amortization or other

<PAGE>

                                      -12-

expenses recorded as a result of the application of purchase accounting in
accordance with Accounting Principles Board Opinion Nos. 16 and 17 and FASB Nos.
141 and 142.

                  "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 or other obligations.

                  "Guarantee" means any guarantee of the obligation of the
Company under this Indenture and the Notes by a Guarantor in accordance with the
provisions of this Indenture. When used as a verb, "Guarantee" shall have a
corresponding meaning.

                  "Guarantor" means each of the Company's Restricted
Subsidiaries that in the future executes a supplemental indenture in which such
Restricted Subsidiary agrees to be bound by the terms of this Indenture as a
Guarantor; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Guarantee is released
in accordance with the terms of this Indenture.

                  "Holder" means a Person in whose name a Note is registered.

                  "incur" has the meaning set forth in Section 4.9.

                  "Indebtedness" means with respect to any Person, without
duplication:

                  (1)      all Obligations of such Person for borrowed money;

                  (2)      all Obligations of such Person evidenced by bonds,
         debentures, notes or other similar instruments;

                  (3)      all Capitalized Lease Obligations of such Person;

                  (4)      all Obligations of such Person issued or assumed as
         the deferred purchase price of property, all conditional sale
         obligations and all Obligations under any title retention agreement
         (but excluding trade accounts payable and other accrued liabilities
         arising in the ordinary course of business);

                  (5)      all Obligations for the reimbursement of any obligor
         on any letter of credit, banker's acceptance or similar credit
         transaction;

                  (6)      guarantees and other contingent obligations in
         respect of Indebtedness referred to in clauses (1) through (5) above
         and clause (8) below;

                  (7)      all Obligations of any other Person of the type
         referred to in clauses (1) through (6) which are secured by any Lien on
         any property or asset of such Person, the

<PAGE>

                                      -13-

         amount of such Obligation being deemed to be the lesser of the fair
         market value of such property or asset and the amount of the Obligation
         so secured;

                  (8)      all Obligations under currency agreements and
         interest swap agreements of such Person; and

                  (9)      all Disqualified Capital Stock issued by such Person
         with the amount of Indebtedness represented by such Disqualified
         Capital Stock being equal to the greater of its voluntary or
         involuntary liquidation preference and its maximum fixed repurchase
         price.

                  For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the Company. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance on such date of all unconditional Obligations as described above, and
the maximum liability upon the occurrence of the contingency giving rise to the
Obligation, on any contingent Obligations at such date; provided, however, that
the amount outstanding at any time of any Indebtedness incurred with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP.

                  "Indenture" means this Indenture, as amended or supplemented
from time to time.

                  "Independent Financial Advisor" means a firm: (1) that does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company; and (2) that, in the
judgment of the Board of Directors of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.

                  "Initial Purchaser" means Deutsche Bank Securities Inc.

                  "Institutional Accredited Investors" means institutional
accredited investors as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.

                  "Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made

<PAGE>

                                      -14-

by such other Person calculated by applying a fixed or a floating rate of
interest on the same notional amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and similar agreements.

                  "Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" shall exclude extensions of trade
credit by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. If the Company or any Restricted
Subsidiary sells or otherwise disposes of any Common Stock of any direct or
indirect Restricted Subsidiary such that, after giving effect to any such sale
or disposition, it ceases to be a Subsidiary of the Company, the Company shall
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.

                  "Issue Date" means February 4, 2004.

                  "Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).

                  "Management Agreement" means that certain Professional
Services Agreement dated as of December 10, 1996, by and between BRS Group and
TSI.

                  "Moody's" means Moody's Investors Service, Inc.

                  "Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds in the form of cash or Cash Equivalents including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents (other than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted Subsidiaries from
such Asset Sale net of:

                  (1)      reasonable out-of-pocket expenses and fees relating
         to such Asset Sale (including, without limitation, legal, accounting
         and investment banking fees and sales commissions);

                  (2)      taxes paid or payable after taking into account any
         reduction in consolidated tax liability due to available tax credits or
         deductions and any tax sharing arrangements;

<PAGE>

                                      -15-

                  (3)      repayment of Indebtedness that is secured by the
         assets sold in the relevant Asset Sale or other Indebtedness that is
         required to be repaid in connection with such Asset Sale; and

                  (4)      appropriate amounts to be provided by the Company or
         any Restricted Subsidiary, as the case may be, as a reserve, in
         accordance with GAAP, against any liabilities associated with such
         Asset Sale and retained by the Company or any Restricted Subsidiary, as
         the case may be, after such Asset Sale, including, without limitation,
         pension and other post-employment benefit liabilities, liabilities
         related to environmental matters and liabilities under any
         indemnification obligations associated with such Asset Sale.

                  "Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.

                  "Notes" means the Series A Notes and the Series B Notes, if
any, that are issued under this Indenture, as amended or supplemented from time
to time.

                  "Obligations" means all obligations for principal, premium,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

                  "Officer" means (a) with respect to any Person that is a
corporation, the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, the Controller, the Secretary or any Vice-President of such Person
and (b) with respect to any other Person, the individuals selected by such
Person to perform functions similar to those of the officers listed in clause
(a).

                  "Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the Chief
Executive Officer, the Chief Financial Officer, the Treasurer or the principal
accounting officer of the Company, that meets the requirements of Sections 12.4
and 12.5.

                  "Offshore Certificated Notes" means permanent Certificated
Notes in registered form in substantially the form set forth in Exhibit A,
issued pursuant to Section 2.6 in exchange for interests in the Rule 144A Global
Note or the Regulation S Global Note.

                  "Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee that meets the requirements of Sections
12.4 and 12.5. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.

<PAGE>

                                      -16-

                  "Permitted Holder" means any of BRS Group, Farallon and their
respective Affiliates.

                  "Permitted Indebtedness" means, without duplication, each of
the following:

                  (1)      Indebtedness under (i) the Notes issued under this
         Indenture in an aggregate principal amount not to exceed $213.0 million
         and any Guarantees thereof and (ii) the Existing TSI Notes and
         guarantees thereof (including any guarantees thereof by the Company);

                  (2)      Indebtedness incurred pursuant to the Credit
         Agreement in an aggregate principal amount at any time outstanding not
         to exceed $50.0 million to the extent incurred under this clause (2),
         less the amount of all required principal payments actually made by the
         Company in respect of the loans thereunder that were incurred under
         this clause (2) in accordance with the provisions set forth under
         Section 4.10 (which, in the case of revolving loans, are accompanied by
         a corresponding permanent commitment reduction);

                  (3)      other Indebtedness (including Capitalized Lease
         Obligations) of the Company and its Restricted Subsidiaries outstanding
         on the Issue Date;

                  (4)      Purchase Money Indebtedness and Capitalized Lease
         Obligations of the Company and its Restricted Subsidiaries in an
         aggregate amount for all Indebtedness incurred pursuant to this clause
         (4) not to exceed $20.0 million outstanding at any one time;

                  (5)      Interest Swap Obligations covering Indebtedness of
         the Company or any of its Restricted Subsidiaries; provided, however,
         that such Interest Swap Obligations are entered into to protect the
         Company and its Restricted Subsidiaries from fluctuations in interest
         rates on Indebtedness incurred in accordance with this Indenture to the
         extent the notional principal amount of such Interest Swap Obligation
         does not exceed, at the time of incurrence thereof, the principal
         amount of the Indebtedness to which such Interest Swap Obligation
         relates;

                  (6)      Indebtedness under Currency Agreements; provided that
         in the case of Currency Agreements which relate to Indebtedness, such
         Currency Agreements do not increase the Indebtedness of the Company and
         its Restricted Subsidiaries outstanding other than as a result of
         fluctuations in foreign currency exchange rates or by reason of fees,
         indemnities and compensation payable thereunder;

                  (7)      Indebtedness of a Restricted Subsidiary to the
         Company or to another Restricted Subsidiary for so long as such
         Indebtedness is held by the Company, a Restricted Subsidiary or the
         holders of a Lien permitted under this Indenture, in each case

<PAGE>

                                      -17-

         subject to no Lien held by a Person other than the Company, a
         Restricted Subsidiary or the holders of a Lien permitted under this
         Indenture; provided that if as of any date any Person other than the
         Company, a Restricted Subsidiary or the holders of a Lien permitted
         under this Indenture owns or holds any such Indebtedness or holds a
         Lien in respect of such Indebtedness, such date shall be deemed the
         incurrence of Indebtedness not constituting Permitted Indebtedness by
         the issuer of such Indebtedness pursuant to this clause (7);

                  (8)      Indebtedness of the Company to a Restricted
         Subsidiary for so long as such Indebtedness is held by a Restricted
         Subsidiary or the holders of a Lien permitted under this Indenture, in
         each case subject to no Lien other than a Lien permitted under this
         Indenture; provided that (a) any Indebtedness of the Company to any
         Restricted Subsidiary that is not a Guarantor is unsecured and
         subordinated, pursuant to a written agreement, to the Company's
         obligations under this Indenture and the Notes and (b) if as of any
         date any Person other than a Restricted Subsidiary or the holders of a
         Lien permitted under this Indenture owns or holds any such Indebtedness
         or any Person holds a Lien in respect of such Indebtedness, such date
         shall be deemed the incurrence of Indebtedness not constituting
         Permitted Indebtedness by the Company under this clause (8);

                  (9)      Indebtedness arising from the honoring by a bank or
         other financial institution of a check, draft or similar instrument
         inadvertently (except in the case of daylight overdrafts) drawn against
         insufficient funds in the ordinary course of business; provided,
         however, that such Indebtedness is extinguished within four Business
         Days of incurrence;

                  (10)     Indebtedness of the Company or any of its Restricted
         Subsidiaries represented by letters of credit for the account of the
         Company or such Restricted Subsidiary, as the case may be, in order to
         provide security for workers' compensation claims, payment obligations
         in connection with self-insurance or similar requirements in the
         ordinary course of business;

                  (11)     Refinancing Indebtedness;

                  (12)     Indebtedness represented by guarantees by the Company
         or its Restricted Subsidiaries of Indebtedness otherwise permitted to
         be incurred under this Indenture; provided that, in the case of a
         guarantee by a Restricted Subsidiary, such Restricted Subsidiary
         complies with Section 4.16 to the extent applicable;

                  (13)     Indebtedness of the Company or any of its Restricted
         Subsidiaries in respect of bid, payment and performance bonds, bankers'
         acceptances, workers' compensation claims, surety or appeal bonds,
         payment obligations in connection with self-

<PAGE>

                                      -18-

         insurance or similar obligations, and bank overdrafts (and letters of
         credit in respect thereof) in the ordinary course of business;

                  (14)     Indebtedness of the Company or any Restricted
         Subsidiary consisting of guarantees, indemnities or obligations in
         respect of purchase price adjustments in connection with the
         acquisition or disposition of assets; and

                  (15)     additional Indebtedness of the Company and its
         Restricted Subsidiaries in an aggregate principal amount not to exceed
         $10.0 million at any one time outstanding (which amount may, but need
         not, be incurred in whole or in part under the Credit Agreement).

                  For purposes of determining any particular amount of
Indebtedness under Section 4.9, guarantees, Liens or letter of credit
obligations supporting Indebtedness otherwise included in the determination of
such particular amount shall not be included. For purposes of determining
compliance with Section 4.9 in the event that an item of Indebtedness meets the
criteria of more than one of the categories of Permitted Indebtedness described
in clauses (1) through (15) above or is permitted to be incurred pursuant to the
Consolidated Fixed Charge Coverage Ratio provisions of such covenant, the
Company shall, in its sole discretion, classify (or later reclassify) such item
of Indebtedness in any manner that complies with Section 4.9. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, the payment of dividends on Disqualified Capital Stock in the form
of additional shares of the same class of Disqualified Capital Stock and change
in the amount outstanding due solely to the result of fluctuations in the
exchange rates of currencies will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Capital Stock for purposes of
Section 4.9.

                  "Permitted Investments" means:

                  (1)      Investments by the Company or any Restricted
         Subsidiary in any Person that is or will become immediately after such
         Investment a Restricted Subsidiary or that will merge or consolidate
         into the Company or a Restricted Subsidiary;

                  (2)      Investments in the Company by any Restricted
         Subsidiary; provided that any Indebtedness incurred by the Company
         evidencing such Investment by a Restricted Subsidiary that is not a
         Guarantor is unsecured and subordinated, pursuant to a written
         agreement, to the Company's obligations under the Notes and this
         Indenture;

                  (3)      Investments in cash and Cash Equivalents;

<PAGE>

                                      -19-

                  (4)      loans and advances to directors, employees and
         officers of the Company and its Restricted Subsidiaries in the ordinary
         course of business for bona fide business purposes not in excess of
         $5.0 million at any one time outstanding;

                  (5)      Currency Agreements and Interest Swap Obligations
         entered into in the ordinary course of the Company's or a Restricted
         Subsidiary's businesses and otherwise in compliance with this
         Indenture;

                  (6)      other Investments, including Investments in
         Unrestricted Subsidiaries, not to exceed $10.0 million at any one time
         outstanding;

                  (7)      Investments in securities of trade creditors or
         members received pursuant to any plan of reorganization or similar
         arrangement upon the bankruptcy or insolvency of such trade creditors
         or members or in good faith settlement of delinquent obligations of
         such trade creditors or members;

                  (8)      Investments represented by guarantees that are
         otherwise permitted under this Indenture;

                  (9)      Investments the payment for which is Qualified
         Capital Stock of the Company;

                  (10)     Investments made by the Company or its Restricted
         Subsidiaries as a result of consideration received in connection with
         an Asset Sale made in compliance with Section 4.10; and

                  (11)     the acquisition by the Company of obligations of one
         or more officers, directors or employees of the Company or any of its
         Subsidiaries in connection with such officers', directors' or
         employees' acquisition of shares of capital stock of the Company so
         long as no cash is paid by the Company or any of its Subsidiaries to
         such officers, directors or employees in connection with the
         acquisition of any such obligations.

                  "Permitted Liens" means the following types of Liens:

                  (1)      Liens for taxes, assessments or governmental charges
         or claims either

                           (a)      not delinquent or

                           (b)      contested in good faith by appropriate
                  proceedings and as to which the Company or its Restricted
                  Subsidiaries shall have set aside on its books such reserves
                  as may be required pursuant to GAAP;

<PAGE>

                                      -20-

                  (2)      statutory and contractual Liens of landlords and
         Liens of carriers, warehousemen, mechanics, suppliers, materialmen,
         repairmen and other Liens imposed by law incurred in the ordinary
         course of business for sums not yet delinquent or being contested in
         good faith, if such reserve or other appropriate provision, if any, as
         shall be required by GAAP shall have been made in respect thereof;

                  (3)      Liens incurred or deposits made in the ordinary
         course of business in connection with workers' compensation,
         unemployment insurance and other types of social security, including
         any Lien securing letters of credit issued in the ordinary course of
         business consistent with past practice in connection therewith, or to
         secure the performance of tenders, statutory obligations, surety and
         appeal bonds, bids, leases, government contracts, performance and
         return-of-money bonds and other similar obligations (exclusive of
         obligations for the payment of borrowed money);

                  (4)      judgment Liens not giving rise to an Event of
         Default;

                  (5)      easements, rights-of-way, zoning restrictions and
         other similar charges or encumbrances in respect of real property not
         interfering in any material respect with the ordinary conduct of the
         business of the Company or of any of its Restricted Subsidiaries;

                  (6)      any interest or title of a lessor under any
         Capitalized Lease Obligation; provided that such Liens do not extend to
         any property or asset which is not leased property subject to such
         Capitalized Lease Obligation;

                  (7)      purchase money Liens to finance property or assets of
         the Company or any Restricted Subsidiary acquired after the Issue Date;
         provided, however, that

                           (a)      the related purchase money Indebtedness
                  shall not exceed the cost of such property or assets and shall
                  not be secured by property or assets of the Company or any
                  Restricted Subsidiary other than the property and assets so
                  acquired and

                           (b)      the Lien securing such Indebtedness shall be
                  created within 90 days of such acquisition;

                  (8)      Liens upon specific items of inventory or other goods
         and proceeds of any Person securing such Person's obligations in
         respect of bankers' acceptances issued or created for the account of
         such Person to facilitate the purchase, shipment or storage of such
         inventory or other goods;

<PAGE>

                                      -21-

                  (9)      Liens securing reimbursement obligations with respect
         to commercial letters of credit which encumber documents and other
         property relating to such letters of credit and products and proceeds
         thereof;

                  (10)     Liens encumbering deposits made to secure obligations
         arising from statutory, regulatory, contractual or warranty
         requirements of the Company or any of its Restricted Subsidiaries,
         including rights of offset and setoff;

                  (11)     Liens securing Interest Swap Obligations which
         Interest Swap Obligations relate to Indebtedness that is otherwise
         permitted under this Indenture;

                  (12)     Liens securing Indebtedness under Currency
         Agreements;

                  (13)     Liens securing Acquired Indebtedness incurred in
         accordance with Section 4.9; provided that

                           (a)      such Liens secured such Acquired
                  Indebtedness at the time of and prior to the incurrence of
                  such Acquired Indebtedness by the Company or a Restricted
                  Subsidiary and were not granted in connection with, or in
                  anticipation of, the incurrence of such Acquired Indebtedness
                  by the Company or a Restricted Subsidiary and

                           (b)      such Liens do not extend to or cover any
                  property or assets of the Company or of any of its Restricted
                  Subsidiaries other than the property or assets that secured
                  the Acquired Indebtedness prior to the time such Indebtedness
                  became Acquired Indebtedness of the Company or a Restricted
                  Subsidiary and are no more favorable to the lienholders than
                  those securing the Acquired Indebtedness prior to the
                  incurrence of such Acquired Indebtedness by the Company or a
                  Restricted Subsidiary;

                  (14)     Liens on assets of a Restricted Subsidiary that is
         not a Guarantor to secure Indebtedness and other obligations of such
         Restricted Subsidiary that are otherwise permitted under this
         Indenture;

                  (15)     leases, subleases, licenses and sublicenses granted
         to others that do not materially interfere with the ordinary course of
         business of the Company and its Restricted Subsidiaries;

                  (16)     banker's Liens, rights of setoff and similar Liens
         with respect to cash and Cash Equivalents on deposit in one or more
         bank accounts in the ordinary course of business;

<PAGE>

                                      -22-

                  (17)     Liens arising from filing Uniform Commercial Code
         financing statements regarding leases;

                  (18)     Liens in favor of customs and revenue authorities
         arising as a matter of law to secure payment of customs duties in
         connection with the importation of goods; and

                  (19)     additional Liens not to exceed $10.0 million at any
         one time.

                  "Person" means an individual, partnership, corporation,
limited liability company, unincorporated organization, trust or joint venture,
or a governmental agency or political subdivision thereof.

                  "PORTAL Market" means the Portal Market operated by the
National Association of Securities Dealers, Inc. or any successor thereto.

                  "Preferred Stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock of such
Person with respect to dividends or redemptions or upon liquidation.

                  "Purchase Date" means, with respect to any Note to be
repurchased, the date fixed for such repurchase by or pursuant to this
Indenture.

                  "Purchase Money Indebtedness" means Indebtedness of the
Company or its Restricted Subsidiaries incurred for the purpose of financing all
or any part of the purchase price or the cost of installation, construction or
improvement of any property.

                  "Purchase Price" means the amount payable for the repurchase
of any Note on a Purchase Date, exclusive of accrued and unpaid interest and
Additional Interest (if any) thereon to the Purchase Date, unless otherwise
specifically provided.

                  "QIB" means a qualified institutional buyer as defined in Rule
144A under the Securities Act.

                  "Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.

                  "Redemption Date" means, with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to this Indenture.

                  "Redemption Price" means the amount payable for the redemption
of any Note on a Redemption Date, exclusive of accrued and unpaid interest and
Additional Interest (if any) thereon to the Redemption Date, unless otherwise
specifically provided.

<PAGE>

                                      -23-

                  "Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.

                  "Refinancing Indebtedness" means any Refinancing by the
Company or any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with Section 4.9 (other than pursuant to clause (2), (4), (5), (6),
(7), (8), (9), (10), (12), (13), (14) or (15) of the definition of "Permitted
Indebtedness"), in each case that does not:

                  (1)      result in an increase in the aggregate principal
         amount of Indebtedness of such Person as of the date of such proposed
         Refinancing (plus the amount of any premium required to be paid under
         the terms of the instrument governing such Indebtedness and plus the
         amount of reasonable expenses incurred by the Company or any Restricted
         Subsidiary in connection with such Refinancing); or

                  (2)      create Indebtedness with: (a) a Weighted Average Life
         to Maturity that is less than the Weighted Average Life to Maturity of
         the Indebtedness being Refinanced; or (b) a final maturity earlier than
         the final maturity of the Indebtedness being Refinanced; provided that
         (x) if such Indebtedness being Refinanced is Indebtedness solely of the
         Company, then such Refinancing Indebtedness shall be Indebtedness
         solely of the Company and (y) if such Indebtedness being Refinanced is
         subordinate or junior to the Notes, then such Refinancing Indebtedness
         shall be subordinate to the Notes at least to the same extent and in
         the same manner as the Indebtedness being Refinanced.

                  "Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date between the Company and the Initial
Purchaser.

                  "Regulation S" means Regulation S as promulgated under the
Securities Act.

                  "Replacement Assets" means assets of a kind used or usable in
the business of the Company and its Restricted Subsidiaries as conducted on the
date of the relevant Asset Sale.

                  "Responsible Officer" shall mean, 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 and who shall have direct responsibility for the
administration of this Indenture.

<PAGE>

                                      -24-

                  "Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
Board Resolution of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to and in compliance with Section 4.19. Any such Designation
may be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of Section 4.19.

                  "Revocation" has the meaning set forth under Section 4.19.

                  "Rule 144A" means Rule 144A promulgated under the Securities
Act.

                  "S&P" means Standard & Poor's Ratings Service.

                  "Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date or
later acquired, which has been or is to be sold or transferred by the Company or
by such Restricted Subsidiary to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of such
Property.

                  "Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto.

                  "Series A Notes" means the Company's 11% Senior Discount Notes
due 2014.

                  "Series B Notes" means notes to be issued by the Company
pursuant to Section 2.6 hereunder containing terms identical to the Series A
Notes (except (i) that interest thereon shall accrue from the last date on which
interest was paid on the Series A Notes or, if no such interest has been paid,
from the date of original issuance, (ii) that the legend or legends relating to
transferability and other related matters set forth on the Series A Notes,
including the text referred to in footnote 2 of Exhibit A hereto, shall be
removed or appropriately altered and (iii) as otherwise set forth herein), to be
offered to Holders of Series A Notes in exchange for Series B Notes pursuant to
the Exchange Offer or any exchange offer specified in any registration rights
agreement relating to the Additional Notes or to be offered in connection with
any issuance of Additional Notes pursuant to a registration statement filed
pursuant to the Securities Act.

                  "Significant Subsidiary" will have the meaning set forth in
Rule 1.02(w) of Regulation S-X under the Securities Act.

                  "Subordinated Indebtedness" means Indebtedness of the Company
that is by its express terms subordinated or junior in right of payment to the
Notes.

<PAGE>

                                      -25-

                  "Subsidiary", with respect to any Person, means:

                  (1)      any corporation of which the outstanding Capital
         Stock having at least a majority of the votes entitled to be cast in
         the election of directors under ordinary circumstances shall at the
         time be owned, directly or indirectly, by such Person; or

                  (2)      any other Person of which at least a majority of the
         voting interest under ordinary circumstances is at the time, directly
         or indirectly, owned by such Person.

                  "Surviving Entity" has the meaning set forth in Section 5.1.

                  "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA; provided that in the event the Trust Indenture Act of
1939 is amended after such date, "TIA" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.

                  "Transactions" means the manner in which the proceeds received
by the Company from the sale of the Notes on the Issue Date will be used,
including the payment of dividends to the Company's shareholders and the
repurchase of TSI's preferred stock.

                  "Transfer Restricted Security" means a Note that is a
restricted security as defined in Rule 144(a)(3) under the Securities Act.

                  "Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture, and thereafter means the successor serving hereunder.

                  "TSI" means Town Sports International, Inc., a New York
corporation.

                  "Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.19. Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of Section 4.19.

                  "U.S. Certificated Notes" means permanent U.S. Certificated
Notes in registered form in substantially the form set forth in Exhibit A that
are offered and sold to Institutional Accredited Investors.

                  "U.S. Government Obligations" shall mean securities which are
(i) direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person controlled
or supervised by and acting as an agency or instrumentality of the United States
of America, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in

<PAGE>

                                      -26-

either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligations held
by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligations or the specific payment of interest on or principal of
the U.S. Government Obligations evidenced by such depository receipt.

                  "U.S. Person" means any U.S. Person as defined in Regulation
S.

                  "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (1) the then
outstanding aggregate principal amount of such Indebtedness into (2) the sum of
the total of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

                  "Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or another Wholly Owned Restricted
Subsidiary.

                  Section 1.2. Other Definitions.

<TABLE>
<CAPTION>
Term                                                                Defined in Section
----                                                                ------------------
<S>                                                                 <C>
"Adjusted Net Assets"........................................              10.5
"Agent Members"..............................................               2.6
"Certificated Notes".........................................               2.1
"Covenant Defeasance"........................................               8.3
"Event of Default"...........................................               6.1
"Foreign Person".............................................               2.6
"Global Notes"...............................................               2.1
"Legal Defeasance"...........................................               8.2
"Net Proceeds Offer".........................................              4.10
"Net Proceeds Offers Amount".................................              4.10
"Net Proceeds Offers Trigger Date"...........................              4.10
"Paying Agent"...............................................               2.3
"Permanent Regulation S Global Note".........................               2.1
</TABLE>

<PAGE>

                                      -27-

<TABLE>
<CAPTION>
Term                                                                Defined in Section
----                                                                ------------------
<S>                                                                 <C>
"Private Placement Legend"...................................               2.6
"Registrar"..................................................               2.3
"Regulation S Global Note"...................................               2.1
"Restricted Payment".........................................               4.7
"Rule 144A Global Note"......................................               2.1
"Surviving Entity"...........................................               5.1
"Temporary Regulation S Global Note".........................               2.1
</TABLE>

                  Section 1.3. 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:

                  "indenture securities" means the Notes;

                  "indenture security holder" means a Holder;

                  "indenture to be qualified" means this Indenture;

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

                  "obligor" on the Notes means the Company and any successor
obligor upon the Notes.

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

                  Section 1.4. 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 GAAP;

                  (c)      "or" is not exclusive;

<PAGE>

                                      -28-

                  (d)      words in the singular include the plural, and in the
         plural include the singular;

                  (e)      provisions apply to successive events and
         transactions; and

                  (f)      references to sections of or rules under the
         Securities Act, the Exchange Act and the TIA shall be deemed to include
         substitute, replacement and successor sections or rules adopted by the
         Commission from time to time.

                  Section 1.5. 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 an 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 (subject to Section 7.1) 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 the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him or her the
execution thereof. Where such execution is by an officer of a corporation or a
member of a partnership, on behalf of such corporation or partnership, such
certificate or affidavit shall also constitute sufficient proof of his or her
authority.

                  (c)      The ownership of Notes shall be proved by the
register maintained by the Registrar.

                  (d)      Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Note shall bind every
future Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done 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 Note.

<PAGE>

                                      -29-

                                   ARTICLE II.

                                    THE NOTES

                  Section 2.1. Form and Dating.

                  The Series A Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of Exhibit A
hereto. The Notes may have notations, legends or endorsements required by law,
stock exchange rule or usage in addition to those set forth in Exhibit A hereto.
The Series B Notes shall be substantially in the form of Exhibit B hereto. The
notation on each Note relating to the Guarantees, if any, shall be substantially
in the form set forth on Exhibit C hereto. Each Note shall be dated the date of
its authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof.

                  The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

                  Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of a single permanent global Note in registered
form, substantially in the form set forth in Exhibit A (the "Rule 144A Global
Note"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter provided
and shall bear the legend set forth in Section 2.6(h). The aggregate principal
amount of the Rule 144A Global Note may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.

                  Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of a single temporary global
Note in registered form, substantially in the form set forth in Exhibit A (the
"Temporary Regulation S Global Note"), deposited with the Trustee, as custodian
for the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided and shall bear the legend set forth in Section
2.6(h). At any time following 40 days after the later of the commencement of the
offering of the Notes and the Issue Date, upon receipt by the Trustee and the
Company of a duly executed certificate substantially in the form of Exhibit D(1)
hereto, a single permanent Global Note in registered form substantially in the
form set forth in Exhibit A (the "Permanent Regulation S Global Note," and
together with the Temporary Regulation S Global Note, the "Regulation S Global
Note") duly executed by the Company and authenticated by the Trustee as
hereinafter provided shall be deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the Regulation S Global Note in an
amount equal to the principal amount of the beneficial interest in the
Regulation S Global Note transferred.

<PAGE>

                                      -30-

                  The Rule 144A Global Note and the Regulation S Global Note are
sometimes referred to herein as the "Global Notes."

                  Section 2.2. Execution and Authentication.

                  Two Officers of the Company shall sign the Notes for the
Company by manual or facsimile signature.

                  If an Officer whose signature is on a Note was an Officer at
the time of such execution but no longer holds that office or position at the
time a Note is authenticated, the Note shall nevertheless be valid.

                  A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.

                  The Trustee, upon a written order of the Company signed by two
Officers of the Company, together with the other documents required by Sections
12.4 and 12.5, shall authenticate (i) Series A Notes for original issue on the
Issue Date in the aggregate principal amount at maturity of $213.0 million
(Accreted Value on the Issue Date of $585.95 per $1,000 principal amount at
maturity of the Notes) as of the Issue Date and (ii) subject to Section 4.9,
Additional Notes. The Trustee, upon written order of the Company signed by two
Officers of the Company, together with the other documents required by Sections
12.4 and 12.5, shall authenticate Series B Notes; provided that such Series B
Notes shall be issuable only upon the valid surrender for cancellation of Series
A Notes of a like Accreted Value and aggregate principal amount at maturity in
accordance with the Exchange Offer or an exchange offer specified in any
registration rights agreement relating to the Additional Notes or to be offered
in connection with any issuance of Additional Notes pursuant to a registration
statement filed pursuant to the Securities Act. Such written order of the
Company shall specify the amount of Notes to be authenticated and the date on
which the original issue of Notes is to be authenticated. Any Additional Notes
shall be part of the same issue as the Notes being issued on the Issue Date and
will vote on all matters as one class with the Notes being issued on the Issue
Date, including, without limitation, waivers, amendments, redemptions, Change of
Control Offers and Net Proceeds Offers. For the purposes of this Indenture,
except for Section 4.9, references to the Notes include Additional Notes, if
any.

                  The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. Unless otherwise provided in the appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or with any Affiliate of the Company.

<PAGE>

                                      -31-

                  Section 2.3. Registrar and Paying Agent.

                  The Company shall maintain an office or agency where Notes may
be presented or surrendered for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. At the option of the Company, payment of interest and
Additional Interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders; provided that payment by wire
transfer of immediately available funds will be required with respect to
principal, Redemption Price and Purchase Price of, and interest and Additional
Interest (if any) on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Trustee or the Paying
Agent. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional paying agent. The Company may change
any Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Paying Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Company
may act as Paying Agent or Registrar. The Depositary shall, by acceptance of a
Global Note, agree that transfers of beneficial interests in such Global Note
may be effected only through a book-entry system maintained by the Depositary
(or its agent), and that ownership of a beneficial interest in the Note shall be
required to be reflected in a book entry.

                  The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes, until such time as the Trustee has resigned or a successor has
been appointed.

                  Section 2.4. Paying Agents to Hold Money in Trust.

                  The Company shall require each Paying Agent other than the
Trustee to agree in writing that such the Paying Agent shall hold in trust for
the benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of Accreted Value of, premium, if any, interest and Additional Interest,
if any, on the Notes, and shall notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and account for any money disbursed. Upon payment over to the Trustee,
the Paying Agent (if other than the Company) shall have no further liability for
the money. If the Company acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.

<PAGE>

                                      -32-

                  Section 2.5. Holder 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 all Holders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish or cause the
Registrar to furnish to the Trustee at least five Business Days before each
interest payment date 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 the Holders of Notes, and the Company
shall otherwise comply with TIA Section 312(a).

                  Section 2.6. Transfer and Exchange.

                  (a)      Transfer and Exchange Generally: Book Entry
Provisions. Upon surrender for registration of transfer of any Note to the
Registrar, and satisfaction of the requirements for such transfer set forth in
this Section 2.6, the Company shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Notes of any authorized denominations and of a like aggregate principal
amount at maturity and bearing such restrictive legends as may be required by
this Indenture.

                  Notes may be exchanged for other Notes of any authorized
denominations and of a like aggregate principal amount at maturity, upon
surrender of the Notes to be exchanged at any such office or agency maintained
by the Company pursuant to Section 4.2. Whenever any Notes are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Notes which the Holder making the exchange is entitled to receive
bearing registration numbers not contemporaneously outstanding.

                  All Notes presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Registrar, and the Notes shall be duly executed by the Holder thereof or his
attorney duly authorized in writing. Except as otherwise provided in this
Indenture, and in addition to the requirements set forth in the legend referred
to in Section 2.6(h)(i) below, in connection with any transfer of Transfer
Restricted Securities any request for transfer shall be accompanied by a
certification to the Trustee relating to the manner of such transfer
substantially in the form of Exhibit D(2) hereto.

                  (b)      Book-Entry Provisions for the Global Notes. The Rule
144A Global Note and Regulation S Global Note initially shall (i) be registered
in the name of the Depositary or the nominee of such Depositary, (ii) be
delivered to the Trustee as custodian for the Depositary and (iii) bear legends
as set forth in Section 2.6(h).

                  Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Rule
144A Global Note or Regulation S Global Note, as the case may be, held on their
behalf by the Depositary, or the Trustee as its

<PAGE>

                                      -33-

custodian, or under the Rule 144A Global Note or Regulation S Global Note, as
the case may be, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of Rule 144A
Global Note or Regulation S Global Note, as the case may be, 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 impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Note.

                  Transfers of the Rule 144A Global Note and the Regulation S
Global Note shall be limited to transfers of such Rule 144A Global Note or
Regulation S Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Beneficial interests in the Rule 144A
Global Note and the Regulation S Global Note may be transferred in accordance
with the applicable rules and procedures of the Depositary and the provisions of
this Section 2.6. The registration of transfer and exchange of beneficial
interests in the Global Note, which does not involve the issuance of a
Certificated Note, shall be effected through the Depositary, in accordance with
this Indenture (including the restrictions on transfer set forth herein) and the
procedures of the Depositary therefor. The Trustee shall have no responsibility
or liability for any act or omission of the Depositary.

                  At any time at the request of the beneficial holder of an
interest in the Rule 144A Global Note or Permanent Regulation S Global Note to
obtain a Certificated Note, such beneficial holder shall be entitled to obtain a
Certificated Note upon written request to the Trustee and the Note Custodian in
accordance with the standing instructions and procedures existing between the
Note Custodian and Depositary for the issuance thereof. Upon receipt of any such
request, the Trustee, or the Note Custodian at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Note Custodian, the aggregate principal amount of
the Rule 144A Global Note or Permanent Regulation S Global Note, as appropriate,
to be reduced by the principal amount of the Certificated Note issued upon such
request to such beneficial holder and, following such reduction, the Company
will execute and the Trustee will authenticate and deliver to such beneficial
holder (or its nominee) a Certificated Note or Certificated Notes in the
appropriate aggregate principal amount in the name of such beneficial holder (or
its nominee) and bearing such restrictive legends as may be required by this
Indenture.

                  (c)      Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the registration
of any proposed transfer of a Transfer Restricted Security to any Institutional
Accredited Investor that is not a QIB (other than any Person that is not a U.S.
Person as defined under Regulation S, a "Foreign Person"):

                  (i)      the Registrar shall register the transfer of any
         Note, whether or not such Note bears the Private Placement Legend, if
         (x) (A) the requested transfer is at least

<PAGE>

                                      -34-

         two years after the later of the Issue Date of the Notes and (B) the
         proposed transferee has certified to the Registrar that the requested
         transfer is at least two years after last date on which such Note was
         held by an Affiliate of the Company, or (y) the proposed transferee has
         delivered to the Registrar (A) a certificate substantially in the form
         of Exhibit E hereto and (B) such certifications, legal opinions and
         other information as the Trustee and the Company may reasonably request
         to confirm that such transaction is in compliance with the Securities
         Act; and

                  (ii)     if the proposed transferor is an Agent Member holding
         a beneficial interest in the Global Note, upon receipt by the Registrar
         of (x) the documents, if any, required by clause (i) and (y)
         instructions given in accordance with the Depositary's and the
         Registrar's procedures, the Registrar shall reflect on its books and
         records the date and a decrease in the principal amount of the Global
         Note in an amount equal to the principal amount of the beneficial
         interest in the Global Note to be transferred, and the Company shall
         execute, and the Trustee shall authenticate and deliver, one or more
         Certificated Notes of like tenor and amount.

                  (d)      Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a Transfer
Restricted Security to a QIB (other than Foreign Persons):

                  (i)      if the Note to be transferred consists of
         Certificated Notes or an interest in the Regulation S Global Note, the
         Registrar shall register the transfer if such transfer is being made by
         a proposed transferor who has checked the box provided for on a
         certificate substantially in the form of Exhibit D(2) stating, or has
         otherwise advised the Company and the Registrar in writing, that the
         sale has been made in compliance with the provisions of Rule 144A to a
         transferee who is a QIB within the meaning of Rule 144A and is aware
         that the sale to it is being made in reliance on Rule 144A; and

                  (ii)     if the proposed transferee is an Agent Member, and
         the Note to be transferred consists of Certificated Notes or an
         interest in the Regulation S Global Note, upon receipt by the Registrar
         of the documents referred to in clause (i) and instructions given in
         accordance with the Depositary's and the Registrar's procedures, the
         Registrar shall reflect on its books and records the date and an
         increase in the principal amount of the Rule 144A Global Note in an
         amount equal to the principal amount of the Certificated Notes or the
         interest in the Regulation S Global Note, as the case may be, to be
         transferred, and the Trustee shall cancel the Certificated Notes or
         decrease the amount of the Regulation S Global Note so transferred.

                  (e)      Transfers of Interests in the Temporary Regulation S
Global Note. The following provisions shall apply with respect to the
registration of any proposed transfer of interests in the Temporary Regulation S
Global Note:

<PAGE>

                                      -35-

                  (i)      the Registrar shall register the transfer of an
         interest in the Temporary Regulation S Global Note if (x) the proposed
         transferor has delivered to the Registrar a certificate substantially
         in the form of Exhibit F hereto stating, among other things, that the
         proposed transferee is a Foreign Person or (y) the proposed transferee
         is a QIB and the proposed transferor has checked the box provided for
         on a certificate substantially in the form of Exhibit D(2) stating, or
         has otherwise advised the Company and the Registrar in writing, that
         the sale has been made in compliance with the provisions of Rule 144A
         to a transferee who is a QIB within the meaning of Rule 144A, and is
         aware that the sale to it is being made in reliance on Rule 144A; and

                  (ii)     if the proposed transferee is an Agent Member, upon
         receipt by the Registrar of the documents referred to in clause (i)(y)
         above and instructions given in accordance with the Depositary's and
         the Registrar's procedures, the Registrar shall reflect on its books
         and records the date and an increase in the principal amount of the
         Rule 144A Global Note in an amount equal to the principal amount of the
         Temporary Regulation S Global Note to be transferred, and the Trustee,
         as Note Custodian, shall decrease the amount of the Temporary
         Regulation S Global Note.

                  (f)      Transfers to Foreign Persons. The following
provisions shall apply with respect to any transfer of a Transfer Restricted
Security to a Foreign Person:

                  (i)      the Registrar shall register any proposed transfer of
         a Note to a Foreign Person upon receipt of a certificate substantially
         in the form of Exhibit F hereto from the proposed transferor and such
         certifications, legal opinions and other information as the Trustee or
         the Company may reasonably request; and

                  (ii)     (a) if the proposed transferor is an Agent Member
         holding a beneficial interest in the Rule 144A Global Note or the Note
         to be transferred consists of Certificated Notes, upon receipt by the
         Registrar of (x) the documents, if any, required by paragraph (i) and
         (y) instructions in accordance with the Depositary's and the
         Registrar's procedures, the Registrar shall reflect on its books and
         records the date and a decrease in the principal amount of the Rule
         144A Global Note in an amount equal to the principal amount of the
         beneficial interest in the Rule 144A Global Note or cancel the
         Certificated Notes, as the case may be, to be transferred, and (b) if
         the proposed transferee is an Agent Member, upon receipt by the
         Registrar of instructions given in accordance with the Depositary's and
         the Registrar's procedures, the Registrar shall reflect on its books
         and records the date and an increase in the principal amount of the
         Regulation S Global Note in an amount equal to the principal amount of
         the Certificated Notes to be transferred, and the Trustee shall
         decrease the amount of the Rule 144A Global Note.

                  (g)      The Depositary. The Depositary shall be a clearing
agency registered under the Exchange Act. The Company initially appoints The
Depository Trust Company to

<PAGE>

                                      -36-

act as Depositary with respect to the Global Note. Initially, the Rule 144A
Global Note and the Regulation S Global Note shall be issued to the Depositary,
registered in the name of Cede & Co., as the nominee of the Depositary, and
deposited with the Note Custodian for Cede & Co.

                  Notes in Certificated form issued in exchange for all or a
part of a Global Note pursuant to this Section 2.6 shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. Upon execution and authentication, the Trustee shall
deliver such Certificated Notes in Certificated form to the persons in whose
names such Notes in Certificated form are so registered.

                  Certificated Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in the Rule 144A Global Note
or the Permanent Regulation S Global Note, as the case may be, if at any time:

                  (i)      the Depositary for the Notes notifies the Company
         that the Depositary is unwilling or unable to continue as Depositary
         for the Rule 144A Global Note or the Permanent Regulation S Global
         Note, as the case may be, and a successor Depositary is not appointed
         by the Company within 90 days after delivery of such notice; or

                  (ii)     the Company, at its sole discretion, notifies the
         Trustee in writing that it elects to cause the issuance of Certificated
         Notes under this Indenture,

and the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2, authenticate and deliver
Certificated Notes in an aggregate principal amount equal to the principal
amount of the Rule 144A Global Note or the Permanent Regulation S Global Note,
as the case may be, in exchange for such Global Notes.

                  (h)      Legends.

                  (i)      Except as permitted by the following paragraphs (ii)
and (iii), each Note certificate evidencing Global Notes and Certificated Notes
(and all Notes issued in exchange therefor or substitution thereof) shall (x) be
subject to the restrictions on transfer set forth in this Section 2.6 (including
those set forth in the legend below) unless such restrictions on transfer shall
be waived by written consent of the Company, and the Holder of each Transfer
Restricted Security, by such Holder's acceptance thereof, agrees to be bound by
all such restrictions on transfer and (y) bear the legend set forth below (the
"Private Placement Legend"):

         THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
         1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
         OFFERED OR SOLD WITHIN THE

<PAGE>

                                      -37-

         UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
         EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
         REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
         IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND
         IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
         REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN ACCREDITED
         INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER THE
         SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT
         WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR
         OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO TOWN SPORTS INTERNATIONAL
         HOLDINGS, INC. OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES
         TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
         THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED
         INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
         ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
         CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
         RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE
         OBTAINED FROM THE TRUSTEE FOR THIS NOTE), (D) OUTSIDE THE UNITED STATES
         IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
         SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM
         REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
         AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
         REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
         OPINION OF COUNSEL IF TOWN SPORTS INTERNATIONAL HOLDINGS, INC. SO
         REQUESTS) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
         THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
         WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
         THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO
         YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED
         TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
         TRANSFER, FURNISH TO THE TRUSTEE AND TOWN SPORTS INTERNATIONAL
         HOLDINGS, INC. SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
         AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER
         IS BEING MADE PURSUANT TO AN
<PAGE>

                                      -38-

         EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
         TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN
         TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

                  (ii)     Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by a Global
Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:

                  (a)      in the case of any Transfer Restricted Security that
         is a Certificated Note, the Registrar shall permit the Holder thereof
         to exchange such Transfer Restricted Security for a Certificated Note
         that does not bear the legend set forth in (i) above and rescind any
         restriction on the transfer of such Transfer Restricted Security; and

                  (b)      in the case of any Transfer Restricted Security
         represented by a Global Note, such Transfer Restricted Security shall
         not be required to bear the legend set forth in (i) above, but shall
         continue to be subject to the provisions of Section 2.6(b); provided,
         however, that with respect to any request for an exchange of a Transfer
         Restricted Security that is represented by a Global Note for a
         Certificated Note that does not bear the legend set forth in (i) above,
         which request is made in reliance upon Rule 144, the Holder thereof
         shall certify in writing to the Registrar that such request is being
         made pursuant to Rule 144 (such certifications to be substantially in
         the form of Exhibit D(2) hereto).

                  (iii)    Notwithstanding the foregoing, upon consummation of
the Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2, the Trustee shall
authenticate Series B Notes in exchange for Series A Notes accepted for exchange
in the Exchange Offer, which Series B Notes shall not bear the legend set forth
in (i) above, and the Registrar shall rescind any restriction on the transfer of
such Series A Notes, in each case unless the Company has notified the Registrar
in writing that the Holder of such Series A Notes is either (A) a broker-dealer,
(B) a Person participating in the distribution of the Series A Notes or (C) a
Person who is an affiliate (as defined in Rule 144A) of the Company.

                  (iv)     Each Global Note, whether or not a Transfer
Restricted Security, shall also bear the following legend on the fact thereof:

         THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
         HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
         OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS
         NOT EXCHANGEABLE

<PAGE>

                                      -39-

         FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY
         OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
         INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS
         NOTE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
         A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
         DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
         DESCRIBED IN THE INDENTURE.

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
         THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
         COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
         PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
         CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
         REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
         OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
         ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
         TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
         & CO., HAS AN INTEREST HEREIN.

                  (v)      Any Global Note may be endorsed with or have
incorporated in the text thereof such legends or recitals or changes not
inconsistent with the provisions of this Indenture as may be required by the
Note Custodian, the Depositary or by the National Association of Securities
Dealers, Inc. in order for the Notes to be tradable on the PORTAL Market or
tradable on Euroclear or Clearstream or as may be required for the Notes to be
tradable on any other market developed for trading of securities pursuant to
Rule 144A or Regulation S under the Securities Act or required to comply with
any applicable law or any regulation thereunder or with the rules and
regulations of any securities exchange or automated quotation system upon which
the Notes may be listed or traded or to conform with any usage with respect
thereto, or to indicate any special limitations or restrictions to which any
particular Notes are subject.

                  (i)      Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in Global Notes have been exchanged for
Certificated Notes, redeemed, repurchased or canceled, all Global Notes shall be
returned to or retained and canceled by the Trustee in accordance with Section
2.11. At any time prior to such cancellation, if any beneficial interest in a
Global Note is exchanged for Certificated Notes, redeemed, repurchased or
canceled, the principal amount of Notes represented by such Global Notes shall
be reduced

<PAGE>

                                      -40-

accordingly and an endorsement shall be made on such Global Note by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction. In the event of any transfer of any beneficial interest between the
Rule 144A Global Note and the Regulation S Global Note in accordance with the
standing procedures and instructions between the Depositary and the Note
Custodian and the transfer restrictions set forth herein, the aggregate
principal amount of each of the Rule 144A Global Note and the Regulation S
Global Note shall be appropriately increased or decreased, as the case may be,
and an endorsement shall be made on each of the Rule 144A Global Note and the
Regulation S Global Note by the Trustee or the Note Custodian, at the direction
of the Trustee, to reflect such reduction or increase.

                  (j)      General Provisions Relating to Transfers and
Exchanges.

                  (i)      To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate Certificated Notes
and Global Notes at the Registrar's request.

                  (ii)     No service charge shall be made to a Holder for any
registration of transfer, fee or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to Sections 3.6
and 9.5).

                  (iii)    The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.

                  (iv)     All Certificated Notes and Global Notes issued upon
any registration of transfer or exchange of Certificated Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Certificated Notes or
Global Notes surrendered upon such registration of transfer or exchange.

                  (v)      The Company shall not be required:

                  (a)      to issue, to register the transfer of or to exchange
         Notes during a period beginning at the opening of business 15 days
         before the day of any selection of Notes for redemption under Section
         3.2 and ending at the close of business on the day of selection; or

                  (b)      to register the transfer of or to exchange any Note
         so selected for redemption in whole or in part, except the unredeemed
         portion of any Note being redeemed in part; or

<PAGE>

                                      -41-

                  (c)      to register the transfer of or to exchange a Note
         between a record date and the next succeeding interest payment date.

                  (vi)     Prior to due presentment of the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of all payments with respect to such Notes, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.

                  (vii)    The Trustee shall authenticate Certificated Notes and
Global Notes in accordance with the provisions of Section 2.2.

                  Section 2.7.      Replacement Notes.

                  If any mutilated Note is surrendered to the Trustee or either
the Company or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an authentication order in accordance with Section 2.2, shall
authenticate a replacement Note if the Trustee's requirements for replacement of
Notes are met. If required by the Trustee or the Company, an indemnity bond must
be supplied by the Holder that is sufficient in the judgment of the Trustee and
the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Trustee and the Company each may charge such Holder for their
expenses in replacing such Note.

                  Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.

                  Section 2.8.      Outstanding Notes.

                  The Notes outstanding at any time are all the Notes that have
been authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Note effected by the Trustee or the Note Custodian in accordance with the
provisions hereof, and those described in this Section as not outstanding.
Except as set forth in Section 2.9, a Note does not cease to be outstanding
because the Company or any of its Affiliates holds the Note.

                  If a Note is replaced pursuant to Section 2.7, it shall cease
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser for value.

                  If the principal amount of any Note is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.

<PAGE>

                                      -42-

                  If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.

                  Section 2.9.      Treasury Notes.

                  In determining whether the Holders of the required principal
amount at maturity of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company or by any Affiliate thereof shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver of consent,
only Notes that a Responsible Officer of the Trustee knows are so owned shall be
so disregarded. The Company agrees to notify the Trustee of the existence of any
such treasury Notes or Notes owned by the Company or an Affiliate thereof.

                  Section 2.10.     Temporary Notes.

                  Until Certificated Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an authentication order in
accordance with Section 2.2, shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of Certificated Notes, but may have such
variations as the Company considers appropriate for temporary Notes and as shall
be reasonably acceptable to the Trustee. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Certificated Notes in exchange
for temporary Notes.

                  Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.

                  Section 2.11.     Cancellation.

                  The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or Paying Agent, and
no one else shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall dispose of all canceled
Notes in accordance with the Trustee's usual procedures. The Trustee shall
maintain a record of all canceled Notes. All cancelled Notes shall be delivered
to the Company. Subject to Section 2.7 the Company may not issue new Notes to
replace Notes that have been paid or that have been delivered to the Trustee for
cancellation.

<PAGE>

                                      -43-

                  Section 2.12.     Defaulted Interest.

                  If the Company defaults in a payment of interest on the Notes,
the Company shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Notes and in Section 4.1. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date; provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.

                  Section 2.13.     Persons Deemed Owners.

                  Prior to due presentment of a Note for registration of
transfer and subject to Section 2.12, the Company, the Trustee, any Paying
Agent, any co-registrar and any Registrar may deem and treat the person in whose
name any Note shall be registered upon the register of Notes kept by the
Registrar as the absolute owner of such Note (whether or not such Note shall be
overdue and notwithstanding any notation of the ownership or other writing
thereon made by anyone other than the Company, any co-registrar or any
Registrar) for the purpose of receiving all payments with respect to such Note
and for all other purposes, and none of the Company, the Trustee, any Paying
Agent, any co-registrar or any Registrar shall be affected by any notice to the
contrary.

                  Section 2.14.     CUSIP Numbers.

                  The Company in issuing the Notes may use a "CUSIP" number, and
if so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes, and that reliance may be placed
only on the other identification numbers printed on the Notes. The Company shall
notify the Trustee of any change to the CUSIP numbers.

<PAGE>

                                      -44-

                                  ARTICLE III.

                            REDEMPTION AND REPURCHASE

                  Section 3.1.      Notices to Trustee.

                  If the Company elects to redeem Notes pursuant to the
provisions of Section 3.7 or 3.8, it shall furnish to the Trustee, at least 30
days but not more than 60 days before the Redemption Date (unless a shorter
notice period shall be satisfactory to the Trustee), an Officers' Certificate
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the Redemption Date, the Accreted Value and principal amount at
maturity of Notes to be redeemed and the Redemption Price.

                  If the Registrar is not the Trustee, the Company shall,
concurrently with each notice of redemption or repurchase, cause the Registrar
to deliver to the Trustee a certificate (upon which the Trustee may rely)
setting forth the principal amounts of Notes held by each Holder.

                  Section 3.2.      Selection of Notes.

                  Except as set forth below, if less than all of the Notes are
to be redeemed, the Trustee shall select the Notes or portions thereof to be
redeemed in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed or, if such Notes
are not then listed on a national securities exchange, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate. In the
event of partial redemption by lot, the particular Notes or portions thereof to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the Redemption Date (unless a shorter period
shall be satisfactory to the Trustee) by the Trustee from the outstanding Notes
not previously called for redemption.

                  If less than all of the Notes tendered are to be repurchased
pursuant to the provisions of Section 3.8, the Trustee shall select the Notes
only on a pro rata basis or on as nearly a pro rata basis as is practicable
(subject to DTC procedures), unless such method is otherwise prohibited.

                  The Trustee shall promptly notify the Company in writing of
the Notes or portions thereof selected for redemption or repurchase and, in the
case of any Note selected for partial redemption or repurchase, the principal
amount thereof to be redeemed or repurchased. Notes and portions thereof
selected shall be in amounts of $1,000 principal amount at maturity or integral
multiples of $1,000 principal amount at maturity, except that if all of the
Notes of a Holder are to be redeemed, the entire outstanding amount of Notes
held by such Holder, even if not a multiple of $1,000 principal amount at
maturity, shall be redeemed. No Notes of a principal amount at maturity of
$1,000 or less shall be redeemed in part.

<PAGE>

                                      -45-

                  Section 3.3.      Notice of Optional Redemption.

                  In the event Notes are to be redeemed pursuant to Section 3.7
or 3.8, at least 30 days but not more than 60 days before the Redemption Date,
the Company shall send, by first-class mail, a notice of redemption to each
Holder whose Notes are to be redeemed in whole or in part, with a copy to the
Trustee.

                  The notice shall identify the Notes or portions thereof to be
redeemed (including the CUSIP number, if any) and shall state:

                  (a)      the Redemption Date;

                  (b)      the Redemption Price;

                  (c)      if any Note is being redeemed in part, the portion of
         the Accreted Value and principal amount at maturity of such Note to be
         redeemed and that, after the Redemption Date, upon surrender of such
         Note, a new Note or Notes in Accreted Value and principal amount at
         maturity equal to the unredeemed portion will be issued;

                  (d)      the name and address of the Paying Agent;

                  (e)      that Notes called for redemption must be surrendered
         to the Paying Agent to collect the Redemption Price, Additional
         Interest, if any, and, unless the Redemption Date is after a record
         date and or before the succeeding interest payment date, accrued
         interest thereon to the Redemption Date;

                  (f)      that, unless the Company defaults in making the
         redemption payment, Accreted Value or interest and any Additional
         Interest on Notes called for redemption will cease to accrete or accrue
         on and after the Redemption Date, as the case may be, and the only
         remaining right of the Holders of such Notes is to receive payment of
         the Redemption Price, any Additional Interest and, unless the
         Redemption Date is after a record date and on or before the succeeding
         interest payment date, Accreted Value or accrued interest thereon to
         the Redemption Date upon surrender to the Paying Agent of the Notes
         redeemed;

                  (g)      if fewer than all the Notes are to be redeemed, the
         identification of the particular Notes (or portions thereof) to be
         redeemed, as well as the aggregate principal amount at maturity of the
         Notes to be redeemed and the aggregate principal amount at maturity of
         Notes to be outstanding after such partial redemption;

                  (h)      the section of this Indenture pursuant to which the
         Notes called for redemption are being redeemed; and

<PAGE>

                                      -46-

                  (i)      that no representation is made as to the correctness
         or accuracy of the CUSIP number, if any, listed in such notice or
         printed on the Notes and that reliance may be placed only on the other
         identification numbers printed on the Notes.

                  At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided that the Company
shall deliver to the Trustee, at least 30 days prior to the Redemption Date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.

                  Section 3.4.      Effect of Notice of Redemption.

                  Once notice of redemption is mailed, Notes or portions thereof
called for redemption become due and payable on the Redemption Date at the
Redemption Price. Upon surrender to any Paying Agent, such Notes or portions
thereof shall be paid at the Redemption Price, plus Additional Interest, if any,
and accrued interest to the Redemption Date; provided, however, that
installments of interest which are due and payable on or prior to the Redemption
Date shall be payable to the Holders of such Notes, registered as such, at the
close of business on the relevant record date for the payment of such
installment of interest.

                  Section 3.5.      Deposit of Redemption Price or Purchase
                                    Price.

                  On or before 10:00 a.m. Eastern Time on each Redemption Date
or Purchase Date, the Company shall irrevocably deposit with the Trustee or with
the Paying Agent money sufficient to pay the aggregate amount due on all Notes
to be redeemed or repurchased on that date, including without limitation any
accrued and unpaid interest and Additional Interest, if any, to the Redemption
Date or Purchase Date. Upon written request by the Company, the Trustee or the
Paying Agent shall promptly return to the Company any money not required for
that purpose.

                  Unless the Company defaults in making such payment, Accreted
Value will cease to accrete and interest and any Additional Interest on the
Notes to be redeemed or repurchased will cease to accrue on the applicable
Redemption Date or Purchase Date, whether or not such Notes are presented for
payment. If any Note called for redemption shall not be so paid upon surrender
because of the failure of the Company to comply with the preceding paragraph,
interest will be paid on the unpaid principal, from the applicable Redemption
Date or Purchase Date until such principal is paid, and on any interest not paid
on such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1.

                  Section 3.6.      Notes Redeemed or Repurchased in Part.

                  Upon surrender of a Note that is redeemed or repurchased in
part, the Company shall issue and the Trustee shall authenticate for the Holder
at the expense of the Company

<PAGE>

                                      -47-

a new Note equal in Accreted Value and principal amount at maturity to portion
of the Note surrendered that is not to be redeemed or repurchased.

                  Section 3.7.      Optional Redemption.

                  The Company may redeem any or all of the Notes at any time on
or after February 1, 2009 at the Redemption Prices set forth in paragraph 5 of
the Notes (an "Optional Redemption"). Any redemption pursuant to this Section
3.7 shall be made pursuant to the provisions of Sections 3.1 through 3.6.

                  Section 3.8.      Optional Redemption upon Equity Offerings.

                  In the event the Company completes one or more Equity
Offerings on or before February 1, 2007, the Company may, at its option, use the
net cash proceeds from any such Equity Offering to redeem up to 35% of the
original principal amount of the Notes, in each case, at a Redemption Price
equal to 111% of the Accreted Value thereof at the date of redemption; provided,
however, that at least 65% of the aggregate principal amount at maturity of the
Notes initially issued under this Indenture will remain outstanding immediately
after any such redemption; and provided, further, that the Company shall make
such redemption not more than 120 days after the consummation of any such Equity
Offering. Any redemption pursuant to this Section 3.8 shall be made pursuant to
the provisions of Sections 3.1 through 3.6.

                  Section 3.9.      Repurchase upon Change of Control Offer.

                  In the event that, pursuant to Section 4.15, the Company shall
be required to commence a Change of Control Offer, it shall follow the
procedures specified below.

                  Within 30 days following the date upon which the Change of
Control occurred, the Company must send, by first-class mail, a notice to each
Holder, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Change of Control Offer. The Change of Control shall be made to all Holders. The
notice, which shall govern the terms of the Change of Control Offer, shall
state:

                  (a)      the transaction or transactions that constitute the
         Change of Control, providing information, to the extent publicly
         available, regarding the Person or Persons acquiring control, and
         stating that the Change of Control Offer is being made pursuant to this
         Section 3.9 and Section 4.15 and that, to the extent lawful, all Notes
         tendered will be accepted for payment;

                  (b)      the Purchase Price, the last day of the Change of
         Control Offer Period and the Purchase Date, which must be no earlier
         than 30 days nor later than 45 days

<PAGE>

                                      -48-

         from the date such notice is mailed, other than as may be required by
         law (the "Change of Control Payment Date");

                  (c)      that any Note not properly tendered or otherwise not
         accepted for repurchase will continue to accrete Accreted Value and
         accrue interest and Additional Interest, if any;

                  (d)      that, unless the Company defaults in the payment of
         the amount due on the Change of Control Payment Date, Accreted Value
         will cease to accrete on all Notes or portions thereof accepted for
         repurchase pursuant to the Change of Control Offer and such Notes or
         portions thereof shall cease to accrue interest and Additional
         Interest, if any, after the Change of Control Payment Date;

                  (e)      that Holders electing to have any Notes purchased
         pursuant to the Change of Control Offer will be required to surrender
         the Notes, with the form entitled "Option of Holder to Elect Purchase"
         on the reverse of the Notes completed, or transfer by book-entry
         transfer, to the Company, a Depositary, if appointed by the Company, or
         a Paying Agent at the address specified in the notice prior to the
         close of business on the third Business Day prior to the Change of
         Control Payment Date;

                  (f)      that Holders will be entitled to withdraw their
         election if the Company, the Depositary or the Paying Agent, as the
         case may be, receives, not later than the Change of Control Offer
         Payment Date, a telegram, facsimile transmission or letter setting
         forth the name of the Holder, the principal amount of Notes delivered
         for repurchase, and a statement that such Holder is withdrawing his
         election to have the Notes redeemed in whole or in part; and

                  (g)      that Holders whose Notes are being repurchased only
         in part will be issued new Notes equal in Accreted Value and principal
         amount at maturity to the portion of the Notes tendered (or transferred
         by book-entry transfer) that is not to be repurchased, which portion
         must be equal to $1,000 in principal amount or an integral multiple
         thereof.

                  On or before the Change of Control Payment Date, the Company
shall to the extent lawful, (i) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Purchase Price, together with accrued and
unpaid interest and Additional Interest, if any, thereon to the Change of
Control Payment Date in respect of all Notes or portions thereof so tendered and
accepted for repurchase and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being repurchased by the
Company. The Paying Agent shall promptly (but in any case not later than five
days after the Change of Control Payment Date) mail to each Holder of Notes so
repurchased the amount due in connection with such

<PAGE>

                                      -49-

Notes, and the Company shall promptly issue a new Note, and the Trustee, upon
written request from the Company in the form of an Officers' Certificate shall
authenticate and mail or deliver (or cause to transfer by book entry) to each
relevant Holder a new Note, in a principal amount equal to any unpurchased
portion of the Notes surrendered to the Holder thereof; provided that each such
new Note shall be in a principal amount of $l,000 or and integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.

                  If the Change of Control Payment Date is on or after an
interest record date and on or before the related interest payment date, any
accrued and unpaid interest and Additional Interest, if any, in each case to the
Change of Control Payment Date, shall be paid to the Person in whose name a Note
is registered at the close of business on such record date, and no additional
interest shall be payable to Holders pursuant to the Change of Control Offer.

                  Section 3.10.     Repurchase upon Application of Excess
                                    Proceeds.

                  In the event that, pursuant to Section 4.10, the Company shall
be required to commence a Net Proceeds Offer, it shall follow the procedures
specified below.

                  The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Net Proceeds
Offer. The Net Proceeds Offer shall be made to all Holders. Each Net Proceeds
Offer will be mailed to the record Holders as shown on the register of Holders
within 30 days following the Net Proceeds Offer Trigger Date, with a copy to the
Trustee, and shall comply with the procedures set forth in this Indenture. Upon
receiving notice of the Net Proceeds Offer, Holders may elect to tender their
Notes in whole or in part in integral multiples of $1,000 principal amount at
maturity in exchange for cash. A Net Proceeds Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law. The
notice, which shall govern the terms of the Net Proceeds Offer, shall state:

                  (a)      that the Net Proceeds Offer is being made pursuant to
         this Section 3.10 and Section 4.10;

                  (b)      the Net Proceeds Offer Amount, the Purchase Price and
         the Purchase Date;

                  (c)      that any Note not properly tendered or otherwise not
         accepted for repurchase shall continue to accrete Accreted Value and
         accrue interest and Additional Interest, if any;

                  (d)      that, unless the Company defaults in the payment of
         the amount due on the Purchase Date, Accreted Value will cease to
         accrete on all Notes or portions thereof accepted for repurchase
         pursuant to the Net Proceeds Offer and such Notes or

<PAGE>

                                      -50-

         portions thereof shall cease to accrue interest and Additional
         Interest, if any, after the Purchase Date;

                  (e)      that Holders electing to have any Notes repurchased
         pursuant to any Net Proceeds Offer shall be required to tender the
         Notes, with the form entitled "Option of Holder to Elect Purchase" on
         the reverse of the Notes completed, or transfer by book-entry transfer,
         to the Company, a Depositary, if appointed by the Company, or a Paying
         Agent at the address specified in the notice prior to the close of
         business on the third Business Day preceding the Purchase Date;

                  (f)      that Holders will be entitled to withdraw their
         election if the Company, the Depositary or the Paying Agent, as the
         case may be, receives, not later than the Purchase Date, a telegram,
         facsimile transmission or letter setting forth the name of the Holder,
         the principal amount of the Notes delivered for repurchase and a
         statement that such Holder is withdrawing his election to have such
         Notes repurchased in whole or in part;

                  (g)      that, to the extent Holders properly tender Notes and
         holders of Indebtedness of the Company that ranks pari passu in right
         of payment with the Notes properly tender such Indebtedness in an
         amount exceeding the Net Proceeds Offer Amount, the tendered Notes and
         such other pari passu Indebtedness will be purchased on a pro rata
         basis based on the aggregate principal amounts of Notes and such other
         pari passu Indebtedness tendered (and the Trustee shall select the
         tendered Notes of tendering Holders on a pro rata basis based on the
         amount of Notes tendered); and

                  (h)      that Holders whose Notes are being repurchased only
         in part will be issued new Notes equal in Accreted Value and principal
         amount at maturity to the portion of the Notes tendered (or transferred
         by book-entry transfer) that is not to be repurchased, which portion
         must be equal to $1,000 in aggregate principal amount at maturity or an
         integral multiple thereof.

                  On or before the Purchase Date, the Company shall to the
extent lawful, (i) accept for payment, on a pro rata basis in accordance with
this Indenture to the extent necessary, the Net Proceeds Offer Amount of (A)
Notes or portions thereof properly tendered pursuant to the Net Proceeds Offer
and (B) properly tendered other Indebtedness of the Company that ranks pari
passu in right of payment with the Notes, or if less than the Net Proceeds Offer
Amount has been tendered, all Notes and such other pari passu Indebtedness
properly tendered, (ii) deposit with the Paying Agent an amount equal to the
Purchase Price, plus accrued and unpaid interest and Additional Interest, if
any, thereon to the Purchase Date in respect of all Notes or portions thereof so
tendered and accepted for repurchase and (iii) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
repurchased by the Company. The Paying Agent shall promptly (but in any case not
later than five days

<PAGE>

                                      -51-

after the Purchase Date) mail to each Holder of Notes so repurchased the amount
due in connection with such Notes, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company in the form of an
Officers' Certificate shall authenticate and mail or deliver such new Note to
such Holder, in a principal amount equal to any unpurchased portion to the
Holder thereof; provided that each such new Note shall be in a principal amount
at maturity of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Net Proceeds Offer on or as soon as
practicable after the Purchase Date.

                  If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest and Additional Interest, if any, in each case to the Purchase Date,
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders to the Net Proceeds Offer.

                                   ARTICLE IV.

                                    COVENANTS

                  Section 4.1.      Payment of Principal and Interest.

                  The Company shall pay or cause to be paid the Accreted Value
(and premium, if any), Redemption Price and Purchase Price of, and interest on
the Notes on the dates, in the amounts and in the manner provided herein and in
the Notes. Accreted Value (and premium, if any), Redemption Price, Purchase
Price and interest shall be considered paid on the date due if the Paying Agent,
if other than the Company, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay the aggregate amount then due. The Company shall pay all
Additional Interest, if any, on the dates, in the amounts and in the manner set
forth in the Registration Rights Agreement.

                  The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue Accreted Value
(and premium, if any), Redemption Price and Purchase Price at the same rate per
annum on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Additional Interest (without regard to any
applicable grace period) at the same rate to the extent lawful.

                  Section 4.2.      Maintenance of Office or Agency.

                  The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer

<PAGE>

                                      -52-

or for exchange and where notices and demands to or upon the Company in respect
of the Notes and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the 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 Corporate Office of the Trustee.

                  The Company may also from time to time designate one or more
other offices or agencies where the Notes 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 obligations to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.

                  The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.3. The Trustee may resign such agency at any time by giving written
notice to the Company no later than 30 days prior to the effective date of such
resignation.

                  Section 4.3.      Reports to Holders.

                  Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish the
Holders, with a copy to the Trustee:

                  (i)      all quarterly and annual financial information that
         would be required to be contained in a filing with the Commission on
         Forms 10-Q and 10-K if the Company were required to file such Forms,
         including a "Management's Discussion and Analysis of Financial
         Condition and Results of Operations" that describes the financial
         condition and results of operations of the Company and its consolidated
         Subsidiaries (showing in reasonable detail, either on the face of the
         financial statements or in the footnotes thereto and in "Management's
         Discussion and Analysis of Financial Condition and Result of
         Operations," the financial condition and results of operations of the
         Company and its Restricted Subsidiaries separate from the financial
         condition and results of operations of the Unrestricted Subsidiaries of
         the Company, if any) and, with respect to the annual information only,
         a report thereon by the Company's certified independent accountants;
         and

                  (ii)     the information that would be required to be included
         in all current reports that would be required to be filed with the
         Commission on Form 8-K if the Company were required to file such
         reports, in each case within the time periods specified in the
         Commission's rules and regulations.

<PAGE>

                                      -53-

                  In addition, following the consummation of the Exchange Offer,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, the Company has agreed that, for so long as any Notes
remain outstanding, it will furnish to the Holders and to securities analysts
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

                  Section 4.4.      Compliance Certificate.

                  The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture in all material
respects, and further stating, as to each such Officer signing such certificate,
that to the best of his or her knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture in
all material respects and is not in Default in the performance or observance of
any of the terms, provisions and conditions of this Indenture (and, if a Default
or an Event of Default shall have occurred, describing all such Defaults or
Events of Default) of which he or she may have knowledge, and that to the best
of his or her knowledge no event has occurred and remains in existence by reason
of which, payments on account of the principal of or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event.

                  So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements, nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Article IV or Article V or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.

                  The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith (and in any event within five
Business Days) upon any Officer of the Company becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default.

<PAGE>

                                      -54-

                  Section 4.5.      Taxes.

                  The Company shall pay or discharge, and shall cause each of
its Subsidiaries to pay or discharge, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.

                  Section 4.6.      Stay, Extension and Usury Laws.

                  The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this 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 it shall not, by resort to any such
law, hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
such law has not been enacted.

                  Section 4.7.      Limitation on Restricted Payments.

                  The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly:

                  (1)      declare or pay any dividend or make any distribution
         (other than dividends or distributions payable in the Qualified Capital
         Stock of the Company) on or in respect of shares of the Company's
         Capital Stock to holders of such Capital Stock;

                  (2)      purchase, redeem or otherwise acquire or retire for
         value any Capital Stock of the Company or any warrants, rights or
         options to purchase or acquire shares of any class of such Capital
         Stock;

                  (3)      make any principal payment on, purchase, defease,
         redeem, prepay, decrease or otherwise acquire or retire for value,
         prior to (a) any scheduled maturity, (b) any scheduled or mandatory
         repayment or (c) any scheduled sinking fund payment, any Indebtedness
         of the Company that is subordinate or junior in right of payment to the
         Notes; or

                  (4)      make any Investment (other than Permitted
         Investments)

(each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being
referred to as a "Restricted Payment"), if at the time of such Restricted
Payment or immediately after giving effect thereto,

<PAGE>

                                      -55-

                  (i)      a Default or an Event of Default shall have occurred
         and be continuing;

                  (ii)     the Company is not able to incur at least $1.00 of
         additional Indebtedness (other than Permitted Indebtedness) in
         compliance with Section 4.9; or

                  (iii)    the aggregate amount of Restricted Payments
         (including such proposed Restricted Payment) made subsequent to April
         16, 2003 (the amount expended for such purposes, if other than in cash,
         being the fair market value of such property as determined reasonably
         and in good faith by the Board of Directors of the Company (or if prior
         to the Issue Date, by the Board of Directors of TSI)) shall exceed the
         sum of, without duplication:

                           (a)      50% of the cumulative Consolidated Net
                  Income (or if cumulative Consolidated Net Income shall be a
                  loss, minus 100% of such loss) of the Company earned
                  subsequent to the end of the fiscal quarter immediately prior
                  to April 16, 2003 (determined as if the Company owned TSI for
                  all periods prior to the Issue Date) and on or prior to the
                  end of the most recently ended fiscal quarter for which
                  internal financial statements are available as of the date the
                  Restricted Payment occurs (treating such period as a single
                  accounting period); plus

                           (b)      100% of the aggregate net cash proceeds
                  received by the Company from any Person (other than a
                  Subsidiary of the Company) from the issuance and sale
                  subsequent to April 16, 2003 and on or prior to the date the
                  Restricted Payment occurs of Qualified Capital Stock of the
                  Company (or if prior to the Issue Date, Qualified Capital
                  Stock of TSI); plus

                           (c)      without duplication of any amounts included
                  in clause (iii)(b) above, 100% of the aggregate net cash
                  proceeds of any equity contribution received by the Company
                  from a holder of the Company's Capital Stock subsequent to
                  April 16, 2003 (or if prior to the Issue Date, received by TSI
                  from a holder of TSI's Capital Stock) and on or prior to the
                  date the Restricted Payment occurs; plus

                           (d)      without duplication, an amount equal to the
                  sum of:

                                    (x)      the net reduction in Investments in
                           Unrestricted Subsidiaries resulting from dividends,
                           repayments of loans or advances or other transfers of
                           assets by any Unrestricted Subsidiary to the Company
                           or any Restricted Subsidiary or the receipt of
                           proceeds by the Company or any Restricted Subsidiary
                           from the sale or other disposition of any portion of
                           the Capital Stock of any Unrestricted Subsidiary, in
                           each case occurring subsequent to April 16, 2003, and

<PAGE>

                                      -56-

                                    (y)      the consolidated net Investments on
                           the date of Revocation made by the Company or any of
                           its Restricted Subsidiaries in any Subsidiary of the
                           Company that has been designated an Unrestricted
                           Subsidiary after April 16, 2003 upon its
                           redesignation as a Restricted Subsidiary in
                           accordance with Section 4.19.

                  Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit:

                  (1)      the payment of any dividend or redemption payment
         within 60 days after the date of declaration of such dividend or the
         mailing of such irrevocable redemption notice if the dividend or
         redemption payment, as the case may be, would have been permitted on
         the date of declaration or the date of mailing of such notice;

                  (2)      if no Default or Event of Default shall have occurred
         and be continuing, the acquisition of any shares of Capital Stock of
         the Company, either

                           (a)      solely in exchange for shares of Qualified
                  Capital Stock of the Company or

                           (b)      through the application of net proceeds of a
                  substantially concurrent sale for cash (other than to a
                  Restricted Subsidiary of the Company) of shares of Qualified
                  Capital Stock of the Company;

                  (3)      if no Default or Event of Default shall have occurred
         and be continuing, the acquisition of any Indebtedness of the Company
         that is subordinate or junior in right of payment to the Notes either

                           (a)      solely in exchange for shares of Qualified
                  Capital Stock of the Company or

                           (b)      through the application of net proceeds of a
                  substantially concurrent sale for cash (other than to a
                  Restricted Subsidiary of the Company) of

                                    (x)      shares of Qualified Capital Stock
                           of the Company or

                                    (y)      Refinancing Indebtedness;

                  (4)      if no Default or Event of Default shall have occurred
         and be continuing, repurchases by the Company of Capital Stock of the
         Company or options or warrants to purchase Capital Stock of the
         Company, stock appreciation rights or any similar equity interest in
         the Company from consultants, directors, officers and employees of the
         Company or any of its Subsidiaries or their authorized representatives
         upon the death,

<PAGE>

                                      -57-

         disability, retirement or termination of employment of such
         consultants, directors, officers or employees in an aggregate amount
         not to exceed $750,000 in any calendar year plus the amount of any
         proceeds received under key-man life insurance policies that are used
         to make such payments;

                  (5)      if no Default shall have occurred and be continuing,
         the purchase, redemption, defeasance or other acquisition or retirement
         of Indebtedness of the Company that is subordinate or junior in right
         of payment to the Notes in connection with an asset sale net proceeds
         amount offer or change of control offer after complying with Sections
         4.10 and 4.15;

                  (6)      if no Default or Event of Default shall have occurred
         and be continuing, Restricted Payments in an aggregate amount not to
         exceed $10.0 million; and

                  (7)      any payments made in furtherance of the Transactions
         with the net proceeds received by the Company from the sale of the
         Notes on the Issue Date.

                  In determining the aggregate amount of Restricted Payments
made subsequent to April 16, 2003 in accordance with clause (iii) of the second
preceding paragraph, amounts expended pursuant to clauses (1), (2)(b), 3(b)(x),
(4) and (6) of the immediately preceding paragraph shall be included in such
calculation.

                  Section 4.8.      Limitation on Dividend and Other Payment
                                    Restrictions Affecting Subsidiaries.

                  The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to:

                  (1)      pay dividends or make any other distributions on or
         in respect of its Capital Stock;

                  (2)      make loans or advances or pay any Indebtedness or
         other obligation owed to the Company or any other Restricted
         Subsidiary; or

                  (3)      transfer any of its property or assets to the Company
         or any other Restricted Subsidiary,

in each case, except for such encumbrances or restrictions existing under or by
reason of:

                  (a)      applicable law;

                  (b)      this Indenture, the Notes, the Existing TSI Indenture
         as in effect on the Issue Date and the Existing TSI Notes and the
         guarantees thereof;

<PAGE>

                                      -58-

                  (c)      customary non-assignment provisions of any contract
         or any lease governing a leasehold interest of any Restricted
         Subsidiary;

                  (d)      any instrument governing Acquired Indebtedness, which
         encumbrance or restriction is not applicable to any Person, or the
         properties or assets of any Person, other than the Person or the
         properties or assets of the Person so acquired (including, but not
         limited to, such Person's direct and indirect Subsidiaries);

                  (e)      agreements existing on the Issue Date (other than the
         Credit Agreement) to the extent and in the manner such agreements are
         in effect on the Issue Date;

                  (f)      the Credit Agreement or an agreement governing any
         other Indebted-ness of the Company or any Restricted Subsidiary
         permitted to be incurred under this Indenture; provided that either (y)
         with respect to any agreement governing such other Indebtedness, the
         provisions relating to such encumbrance or restriction are no less
         favorable to the Company in any material respect than the provisions
         contained in the Credit Agreement as in effect on the Issue Date or (z)
         any encumbrance or restriction contained in such other Indebtedness
         does not prohibit (except upon a default or event of default
         thereunder) the payment of dividends or the making of loans or advances
         in an amount sufficient, as determined by its Board of Directors in its
         reasonable and good faith judgment (including the use of reasonable
         projections of future operating performance), to make scheduled
         payments of cash interest on the Notes;

                  (g)      restrictions on the transfer of assets subject to any
         Lien permitted under this Indenture imposed by the holder of such Lien;

                  (h)      restrictions imposed by any agreement to sell assets
         or Capital Stock permitted under this Indenture to any Person pending
         the closing of such sale;

                  (i)      customary provisions in joint venture agreements and
         other similar agreements in each case relating solely to the respective
         joint venture or similar entity or to the equity interest therein;

                  (j)      customary provisions imposed by agreements governing
         Indebtedness of a Foreign Restricted Subsidiary permitted to be
         incurred under this Indenture to the extent that such encumbrance or
         restriction relates solely to the respective Foreign Restricted
         Subsidiary; and

                  (k)      an agreement governing Indebtedness incurred to
         Refinance the Indebtedness issued, assumed or incurred pursuant to an
         agreement referred to in clauses (b) and (d) through (g) above;
         provided, however, that the provisions relating to such encumbrance or
         restriction contained in any such Indebtedness are no less favorable to
         the Company in any material respect as determined by the Board of
         Directors of the

<PAGE>

                                      -59-

         Company in its reasonable and good faith judgment than the provisions
         relating to such encumbrance or restriction contained in agreements
         referred to in such clauses (b) and (d) through (g) above.

                  Section 4.9.      Limitation on Incurrence of Additional
                                    Indebtedness.

                  The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, acquire, become liable, contingently or otherwise, with respect to,
or otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if no
Default or Event of Default shall have occurred and be continuing at the time of
or as a consequence of the incurrence of any such Indebtedness, (i) the Company
may incur Indebtedness (including, without limitation, Acquired Indebtedness) if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than 2.00 to 1.00 and (ii) any of TSI and its Restricted Subsidiaries
may incur Indebtedness (including, without limitation, Acquired Indebtedness) if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, TSI's Consolidated Fixed Charge Coverage Ratio is greater
than 2.00 to 1.00.

                  Section 4.10.     Limitation on Asset Sales.

                  (A)      The Company will not, and will not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:

                  (1)      the Company or the applicable Restricted Subsidiary,
         as the case may be, receives consideration at the time of such Asset
         Sale at least equal to the fair market value of the assets sold or
         otherwise disposed of (as determined in good faith by the Board of
         Directors of the Company);

                  (2)      at least 75% of the consideration received by the
         Company or its Restricted Subsidiary, as the case may be, from such
         Asset Sale shall be in the form of cash or Cash Equivalents and shall
         be received at the time of such disposition; provided, however, that
         the amount of (a) any liabilities (as shown on the Company's or such
         Restricted Subsidiary's most recent balance sheet or the notes thereto)
         of the Company or any Restricted Subsidiary (other than liabilities
         that are by their terms subordinated to the Notes) that are assumed by
         the transferee in such Asset Sale and from which the Company or such
         Restricted Subsidiary is released and (b) any notes, securities or
         other obligations received by the Company or by any such Restricted
         Subsidiary from such transferee that are immediately converted by the
         Company or by such Restricted Subsidiary into cash or Cash Equivalents
         shall be deemed to be cash for purposes of this provision; and

<PAGE>

                                      -60-

                  (3)      upon the consummation of an Asset Sale, the Company
         shall apply, or cause such Restricted Subsidiary to apply, the Net Cash
         Proceeds relating to such Asset Sale within 360 days of receipt thereof
         either:

                           (a)      to pay (i) Indebtedness under the Credit
                  Agreement (and, in the case of any such Indebtedness under any
                  revolving credit facility, effect a corresponding permanent
                  reduction in the availability under such revolving credit
                  facility) or other Indebtedness ranking pari passu with the
                  Notes; provided, however, that if the Company repays such
                  other pari passu Indebtedness it must make an equal and
                  ratable offer to all holders of Notes as provided in the
                  following paragraph or (ii) in the case of an Asset Sale by a
                  Restricted Subsidiary, Indebtedness of such Restricted
                  Subsidiary,

                           (b)      to make an Investment in properties and
                  assets that replace the properties and assets that were the
                  subject of such Asset Sale or in properties and assets that
                  will be used in the business of the Company and its Restricted
                  Subsidiaries as existing on the Issue Date or in businesses
                  reasonably related thereto ("Replacement Assets"), and/or

                           (c)      a combination of prepayment and investment
                  permitted by the foregoing clauses (3)(a) and (3)(b).

                  (B)      On the 361st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of paragraph (A) above
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds that have not been applied on or before such Net Proceeds Offer Trigger
Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of paragraph (A) above
(each a "Net Proceeds Offer Amount") shall be applied by the Company or such
Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on
a date not less than 45 nor more than 60 days following the applicable Net
Proceeds Offer Trigger Date, the maximum Accreted Value of Notes and principal
amount of other Indebtedness of the Company that ranks pari passu in right of
payment with the Notes (to the extent required by the instrument governing such
other Indebtedness) that may be purchased out of the Net Proceeds Offer Amount;
provided, however, notwithstanding the foregoing, in the case of an Asset Sale
by a Restricted Subsidiary of the Company, the Company shall not be required to
make a Net Proceeds Offer to the extent such Restricted Subsidiary is not
permitted pursuant to its outstanding Indebtedness to make a Restricted Payment
to the Company. Any Notes and other Indebtedness to be purchased pursuant to a
Net Proceeds Offer shall be purchased pro rata based on the aggregate principal
amount at maturity of Notes and such other Indebtedness outstanding and all
Notes shall be purchased at an offer price in cash in an amount equal to 100% of
the Accreted Value thereof, plus accrued and unpaid interest to the date of
purchase.

<PAGE>

                                      -61-

The Net Proceeds Offer shall be made in compliance with the applicable
procedures set forth in Article III and shall include all instructions and
materials necessary to enable Holders to tender their Notes.

                  (C)      The Company may defer the Net Proceeds Offer until
there is an aggregate unutilized Net Proceeds Offer Amount equal to or in excess
of $10.0 million resulting from one or more Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in excess
of $10.0 million, shall be applied as required pursuant to this Section 4.10).

                  (D)      In the event of the transfer of substantially all
(but not all) of the property and assets of the Company and its Restricted
Subsidiaries as an entirety to a Person in a transaction permitted under Section
5.1, the successor corporation shall be deemed to have sold the properties and
assets of the Company and its Restricted Subsidiaries not so transferred for
purposes of this Section 4.10, and shall comply with the provisions of this
Section 4.10 with respect to such deemed sale as if it were an Asset Sale. In
addition, the fair market value of such properties and assets of the Company or
its Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this Section 4.10.

                  (E)      Notwithstanding paragraphs (A) through (D) of this
Section 4.10, the Company and its Restricted Subsidiaries will be permitted to
consummate an Asset Sale without complying with such paragraphs to the extent:

                  (i)      at least 75% of the consideration for such Asset Sale
         constitutes Replacement Assets; and

                  (ii)     such Asset Sale is for fair market value;

provided that any consideration not constituting Replacement Assets received by
the Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph shall constitute Net Cash
Proceeds subject to the provisions of paragraphs (A) through (D) of this Section
4.10.

                  (F)      The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.10, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.10 by virtue thereof.

<PAGE>

                                      -62-

                  Section 4.11.     Limitations on Transactions with Affiliates.

                  The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under the third paragraph of this Section 4.11 and (y) Affiliate
Transactions on terms that are no less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary.

                  All Affiliate Transactions (and each series of related
Affiliate Transactions which are similar or part of a common plan) involving
aggregate payments or other property with a fair market value in excess of $2.5
million will be approved by the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or a series of
related Affiliate Transactions related to a common plan) that involves an
aggregate fair market value of more than $10.0 million, the Company or such
Restricted Subsidiary, as the case may be, will, prior to the consummation
thereof, obtain an opinion from an Independent financial Advisor stating that
such transaction or series of related transactions are fair to the Company or to
the relevant Restricted Subsidiary, as the case may be, from a financial point
of view.

                  The restrictions set forth in the first paragraph of this
Section 4.11 shall not apply to:

                  (1)      reasonable fees and compensation paid to and
         indemnity provided on behalf of officers, directors, employees or
         consultants of the Company or any Restricted Subsidiary as determined
         in good faith by the Company's Board of Directors or senior management;

                  (2)      transactions exclusively between or among the Company
         and any of its Restricted Subsidiaries or exclusively between or among
         such Restricted Subsidiaries provided such transactions are not
         otherwise prohibited by this Indenture;

                  (3)      Restricted Payments and Permitted Investments
         permitted by this Indenture; or

                  (4)      management or advisory fees to BRS Group or its
         affiliates in accordance with the terms of the Management Agreement as
         in effect on the Issue Date or as the same may be modified or amended;
         provided, however, that such modification
<PAGE>

                                      -63-

         or amendment cannot provide for the payment of such fees in an amount
         in excess of 1.5% of Consolidated EBITDA of the Company.

                  Section 4.12. Limitation on Liens.

                  The Company will not, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens upon any property or assets of the
Company (excluding property, assets and Capital Stock of Restricted Subsidiaries
to secure Indebtedness of Restricted Subsidiaries), whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive income or profits therefrom unless:

                  (1)      in the case of Liens securing Subordinated
         Indebtedness, the Notes are secured by a Lien on such property, assets
         or proceeds that is senior in priority to such Liens; and

                  (2)      in all other cases, the Notes are secured on an equal
         and ratable basis,

except for

                  (a)      Liens existing as of the Issue Date to the extent and
         in the manner such Liens are in effect on the Issue Date,

                  (b)      (x) Liens securing Indebtedness permitted by clauses
         (2) and (15) of the definition of "Permitted Indebtedness" and (y)
         Liens securing Indebtedness permitted under Section 4.9 (other than
         Indebtedness permitted by clauses (2) and (15) of the definition of
         "Permitted Indebtedness"); provided that the principal amount of such
         Indebtedness so incurred under Section 4.9 (other than pursuant to
         clauses (2) and (15) of the definition of Permitted Indebtedness), and
         the principal amount of all other Indebtedness secured by Liens
         permitted by this clause (y), shall, at the time such Indebtedness is
         incurred and after giving effect to such incurrence, not exceed an
         aggregate principal amount equal to the difference between (i) 1.25
         times Consolidated EBITDA of the Company for the most recently ended
         four full fiscal quarters for which internal financial statements are
         available and (ii) the amount of Indebtedness then outstanding under
         clauses (2) and (15) of the definition of "Permitted Indebtedness,"

                  (c)      Liens securing the Notes,

                  (d)      Liens of the Company on assets of any Restricted
         Subsidiary of the Company,

<PAGE>

                                      -64-

                  (e)      Liens securing Refinancing Indebtedness that is
         incurred to Refinance any Indebtedness that has been secured by a Lien
         permitted under this Indenture and that has been incurred in accordance
         with the provisions of this Indenture; provided, however, that such
         Liens

                           (x)      are no less favorable to the Holders and are
                  not more favorable to the lienholders with respect to such
                  Liens, in each case in any material respect, than the Liens in
                  respect of the Indebtedness being Refinanced and

                           (y)      do not extend to or cover any property or
                  assets of the Company not securing the Indebtedness so
                  Refinanced,

                  (f)      Liens in favor of the Company and

                  (g)      Permitted Liens.

                  Section 4.13. Continued Existence.

                  Subject to Article V, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate or other existence in accordance with the organizational documents (as
the same may be amended from time to time) of the Company and (ii) the material
rights (charter and statutory), licenses and franchises of the Company, except
to the extent that the Board of Directors of the Company determines in good
faith that the preservation of such right, license or franchise is no longer
necessary or desirable in the conduct of the business of the Company and that
the loss thereof is not disadvantageous in any material respect to the Holders.

                  Section 4.14. Insurance Matters.

                  The Company shall provide or cause to be provided, for itself
and each of its Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the reasonable, good faith opinion
of the Company, are adequate and appropriate for the conduct of the business of
the Company and its Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices of the Company or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of the Company, for corporations similarly situated in the industry,
unless the failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.

<PAGE>

                                      -65-

                  Section 4.15. Offer to Repurchase upon Change of Control.

                  Upon the occurrence of a Change of Control, each Holder will
have the right to require that the Company purchase all or a portion (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes (a "Change of
Control Offer") at a Purchase Price equal to 101% of the Accreted Value thereof,
plus accrued and unpaid interest and Additional Interest, if any, thereon to the
Change of Control Payment Date. The Change of Control Offer shall be made in
compliance with the applicable procedures set forth in Article III and shall
include all instructions and materials necessary to enable Holders to tender
their Notes.

                  The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.

                  The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.15, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.15 by virtue thereof.

                  Section 4.16. Limitation of Guarantees by Restricted
                                Subsidiaries.

                  The Company will not permit any of its Restricted
Subsidiaries, directly or indirectly, by way of the pledge of any intercompany
note or otherwise, to assume, guarantee or in any other manner become liable
with respect to any Indebtedness of the Company (other than Indebtedness
represented by any guarantees (including through the pledge of intercompany
notes or otherwise) of Indebtedness under the Credit Agreement and the Existing
TSI Notes), unless, in any such case (a) such Restricted Subsidiary executes and
delivers a supplemental indenture to this Indenture providing a Guarantee and
(b) if any such assumption, guarantee or other liability of such Restricted
Subsidiary is provided in respect of Indebtedness that is expressly subordinated
to the Notes, the guarantee or other instrument provided by such Restricted
Subsidiary in respect of such subordinated Indebtedness shall be subordinated to
the Guarantee substantially to the same extent as such Indebtedness is
subordinated to the Notes. This Section 4.16 shall not apply to guarantees by
Restricted Subsidiaries of Indebtedness of Restricted Subsidiaries.

                  Notwithstanding the foregoing, any such Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally re-

<PAGE>

                                      -66-

leased and discharged, without any further action required on the part of the
Trustee or any Holder, upon: (i) the unconditional release of such Restricted
Subsidiary from its liability in respect of the Indebtedness in connection with
which such Guarantee was executed and delivered pursuant to the preceding
paragraph or (ii) any sale or other disposition (by merger or otherwise) to any
Person which is not a Restricted Subsidiary of the Company of all of the
Company's Capital Stock in, or all or substantially all of the assets of, such
Restricted Subsidiary; provided that (a) such sale or disposition of such
Capital Stock or assets is otherwise in compliance with the terms of this
Indenture and (b) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Indebtedness
so guaranteed.

                  Section 4.17. Payments for Consent.

                  The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

                  Section 4.18. Limitation on Preferred Stock of Restricted
                                Subsidiaries.

                  The Company will not permit any of its Restricted Subsidiaries
to issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary) or permit any Person (other than the Company or a Wholly
Owned Restricted Subsidiary) to own any Preferred Stock of any Restricted
Subsidiary.

                  Section 4.19. Limitation on Designation of Unrestricted
                                Subsidiaries.

                  (a)      The Company may designate any Subsidiary of the
Company (other than a Subsidiary of the Company that owns Capital Stock of a
Restricted Subsidiary) as an "Unrestricted Subsidiary" under this Indenture (a
"Designation") only if:

                  (1)      no Default shall have occurred and be continuing at
         the time of or after giving effect to such Designation;

                  (2)      the Company would be permitted under this Indenture
         to make an Investment at the time of Designation (assuming the
         effectiveness of such Designation) in an amount (the "Designation
         Amount") equal to the sum of:

<PAGE>

                                      -67-

                           (a)      the fair market value of the Capital Stock
                  of such Subsidiary owned by the Company and its Restricted
                  Subsidiaries on such date and

                           (b)      the aggregate amount of other Investments of
                  the Company and its Restricted Subsidiaries in such Subsidiary
                  on such date; and

                  (3)      the Company would be permitted to incur $1.00 of
         additional Indebtedness (other than Permitted Indebtedness) pursuant to
         Section 4.9 at the time of Designation (assuming the effectiveness of
         such Designation).

                  In the event of any such Designation, the Company shall be
deemed to have made an Investment constituting a Restricted Payment pursuant to
Section 4.7 for all purposes of this Indenture in the Designation Amount.

                  (b)      The Company shall not, and shall not permit any
Restricted Subsidiary to, at any time:

                  (1)      provide direct or indirect credit support for or a
         guarantee of any Indebtedness of any Unrestricted Subsidiary (including
         of any undertaking, agreement or instrument evidencing such
         Indebtedness); or

                  (2)      be directly or indirectly liable for any Indebtedness
         of any Unrestricted Subsidiary.

                  (c)      The Company may revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary (a "Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if:

                  (1)      no Default shall have occurred and be continuing at
         the time of and after giving effect to such Revocation; and

                  (2)      all Liens and Indebtedness of such Unrestricted
         Subsidiary outstanding immediately following such Revocation would, if
         incurred at such time, have been permitted to be incurred for all
         purposes of this Indenture.

                  All Designations and Revocations must be evidenced by Board
Resolutions of the Company certifying compliance with the foregoing provisions.

<PAGE>

                                      -68-

                                   ARTICLE V.

                                   SUCCESSORS

                  Section 5.1. Merger, Consolidation and Sale of Assets.

                  The Company will not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) whether as
an entirety or substantially as an entirety to any Person, unless:

                  (1)      either:

                           (a)      the Company shall be the surviving or
                  continuing corporation; or

                           (b)      the Person (if other than the Company)
                  formed by such consolidation or into which the Company is
                  merged or the Person which acquires by sale, assignment,
                  transfer, lease, conveyance or other disposition the
                  properties and assets of the Company and of its Restricted
                  Subsidiaries substantially as an entirety (the "Surviving
                  Entity"):

                                    (x)      will be a corporation organized and
                           validly existing under the laws of the United States
                           or any State thereof or the District of Columbia; and

                                    (y)      will expressly assume, by
                           supplemental indenture (in form and substance
                           reasonably satisfactory to the Trustee), executed and
                           delivered to the Trustee, the due and punctual
                           payment of the principal of and premium, if any, and
                           interest on all of the Notes and the performance of
                           every covenant of the Notes, this Indenture and the
                           Registration Rights Agreement on the part of the
                           Company to be performed or observed;

                  (2)      immediately after giving effect to such transaction
         and the assumption contemplated by clause(1)(b)(y) above (including
         giving effect to any Indebtedness and Acquired Indebtedness incurred or
         anticipated to be incurred in connection with or in respect of such
         transaction), the Company or such Surviving Entity, as the case may be,
         shall be able to incur at least $1.00 of additional Indebtedness (other
         than Permitted Indebtedness) pursuant to clause (i) of Section 4.9;

<PAGE>

                                      -69-

                  (3)      immediately before and immediately after giving
         effect to such transaction and the assumption contemplated by clause
         (1)(b)(y) above (including, without limitation, giving effect to any
         Indebtedness and Acquired Indebtedness incurred or anticipated to be
         incurred and any Lien granted in connection with or in respect of the
         transaction), no Default or Event of Default shall have occurred or be
         continuing; and

                  (4)      the Company or the Surviving Entity shall have
         delivered to the Trustee an Officers' Certificate and an Opinion of
         Counsel, each stating that such consolidation, merger, sale,
         assignment, transfer, lease, conveyance or other disposition and, if a
         supplemental indenture is required in connection with such transaction,
         such supplemental indenture comply with the applicable provisions of
         this Indenture and that all conditions precedent in this Indenture
         relating to such transaction have been satisfied.

                  For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Restricted Subsidiaries, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, will be deemed to
be the transfer of all or substantially all of the properties and assets of the
Company.

                  Upon any consolidation, combination or merger or any transfer
of all or substantially all of the assets of the Company in accordance with the
foregoing in which the Company is not the continuing corporation, the Surviving
Entity shall succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Indenture and the Notes with the same
effect as if such Surviving Entity had been named as such.

                  Each Guarantor (other than any Guarantor whose Guarantee is to
be released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.10)
will not, and the Company will not cause or permit any Guarantor to, consolidate
with or merge with or into any Person other than the Company or any other
Guarantor unless:

                  (1)      the entity formed by or surviving any such
         consolidation or merger (if other than the Guarantor) or to which such
         sale, lease, conveyance or other disposition shall have been made is a
         corporation, limited liability company or partnership organized and
         existing under the laws of the United States or any State thereof or
         the District of Columbia;

                  (2)      such entity assumes by supplemental indenture all of
         the obligations of the Guarantor on its Guarantee; and

                  (3)      immediately after giving effect to such transaction,
         no Default or Event of Default shall have occurred and be continuing.

<PAGE>

                                      -70-

                  Any merger or consolidation of a Guarantor with and into the
Company (with the Company being the surviving entity) or another Guarantor that
is a Restricted Subsidiary need only comply with clause (4) of the first
paragraph of this Section 5.1.

                  Section 5.2. Successor Corporation Substituted.

                  Upon any consolidation or merger, or any sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.1, the Surviving Entity 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 Surviving Entity had been
named as the Company herein; provided, however, that the predecessor Company
shall not be relieved from the obligation to pay the principal, Purchase Price
or Redemption Price of or interest or Additional Interest, if any, on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.1.

                                  ARTICLE VI.

                              DEFAULTS AND REMEDIES

                  Section 6.1. Events of Default.

                  Each of the following constitutes an "Event of Default":

                  (a)      the failure to pay interest on any Note when the same
         becomes due and payable and the default continues for a period of 30
         days;

                  (b)      the failure to pay the principal of any Note, when
         such principal becomes due and payable, at maturity, upon redemption or
         otherwise (including the failure to make a payment to purchase Notes
         tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
         on the date specified for such payment in the applicable offer to
         purchase;

                  (c)      a default in the observance or performance of any
         other covenant or agreement contained herein which default continues
         for a period of 30 days after the Company receives written notice
         specifying the default (and demanding that such default be remedied)
         from the Trustee or the Holders of at least 25% of the outstanding
         principal amount at maturity of the Notes (except in the case of a
         default with respect to Section 5.1, which will constitute an Event of
         Default with such notice requirement but without such passage of time
         requirement);

                  (d)      the failure to pay at final stated maturity (giving
         effect to any applicable grace periods and any extensions thereof) the
         principal amount of any Indebtedness of the Company or any Restricted
         Subsidiary of the Company, or the acceleration

<PAGE>

                                      -71-

         of the final stated maturity of any such Indebtedness (which
         acceleration is not rescinded, annulled or otherwise cured within 20
         days of receipt by the Company or such Restricted Subsidiary of notice
         of any such acceleration), if the aggregate principal amount of such
         Indebtedness, together with the principal amount of any other such
         Indebtedness in default for failure to pay principal at final stated
         maturity or which has been accelerated (in each case with respect to
         which the 20-day period described above has passed), aggregates $5.0
         million or more at any time;

                  (e)      one or more judgments in an aggregate amount in
         excess of $5.0 million (to the extent not covered by insurance) shall
         have been rendered against the Company or any of its Significant
         Subsidiaries and such judgments remain undischarged, unpaid or unstayed
         for a period of 60 days after such judgment or judgments become final
         and non-appealable;

                  (f)      the Company or any Significant Subsidiary of the
         Company:

                           (i)      commences a voluntary case under any
                  Bankruptcy Law,

                           (ii)     consents to the entry of an order for relief
                  against it in an involuntary case,

                           (iii)    consents to the appointment of a custodian
                  or receiver of it or for all or substantially, all of its
                  property, or

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

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

                           (i)      is for relief in an involuntary case against
                  the Company or any Significant Subsidiary of the Company,

                           (ii)     appoints a custodian or receiver of the
                  Company or any Significant Subsidiary or for all or
                  substantially all of the property of any of the foregoing, or

                           (iii)    orders the liquidation of the Company or any
                  of its Significant Subsidiaries,

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

<PAGE>

                                      -72-

                  Section 6.2. Acceleration.

                  If an Event of Default (other than an Event of Default
specified in clause (f) or (g) of Section 6.1 with respect to the Company) shall
occur and be continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount at maturity of outstanding Notes may declare the Accreted Value
of and accrued and unpaid interest, if any, on all the Notes to be due and
payable by notice in writing to the Company and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration" and the
same shall become immediately due and payable. If an Event of Default specified
in clause (f) or (g) of Section 6.1 relating to the Company occurs and is
continuing, then all unpaid Accreted Value of and premium, if any, and accrued
and unpaid interest, if any, on all of the outstanding Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder.

                  The Holders of not less than a majority in aggregate principal
amount at maturity of the Notes by written notice to the Company and the Trustee
may, on behalf of the Holders of all of the Notes, rescind such declaration and
its consequences:

                  (1)      if the rescission would not conflict with any
         judgment or decree;

                  (2)      if all existing Events of Default have been cured or
         waived except nonpayment of principal or interest that has become due
         solely because of the acceleration;

                  (3)      to the extent the payment of such interest is lawful,
         if interest on overdue installments of interest and overdue principal
         that has become due otherwise than by such declaration of acceleration
         has been paid;

                  (4)      if the Company has paid the Trustee its reasonable
         compensation and reimbursed the Trustee for its expenses, disbursements
         and advances; and

                  (5)      in the event of the cure or waiver of an Event of
         Default of the type described in clause (f) or (g) of Section 6.1, if
         the Trustee shall have received an Officers' Certificate and an Opinion
         of Counsel stating that such Event of Default has been cured or waived.

                  No such rescission shall affect any subsequent Default or
impair any right consequent thereto.

                  Section 6.3. Other Remedies.

                  If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of Accreted Value,
premium, if any, interest or Addi-

<PAGE>

                                      -73-

tional Interest, if any, on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.

                  The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding, and
any recovery or judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the Holders of the Notes.
A delay or omission by the Trustee or any Holder 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. All remedies are
cumulative to the extent permitted by law.

                  Section 6.4. Waiver of Existing Defaults.

                  The Holders of a majority in aggregate principal amount at
maturity of the Notes may waive any existing Default or Event of Default under
this Indenture, and its consequences, except a default in the payment of the
Accreted Value, premium, if any, or interest on any Notes. Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.

                  Section 6.5. Control by Majority.

                  Holders of a majority in aggregate principal amount at
maturity of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with applicable law or this Indenture
that the Trustee reasonably determines may be unduly prejudicial to the rights
of other Holders of Notes or that may subject the Trustee to personal liability
and shall be entitled to the benefit of Sections 7.1(c)(iii) and (e).

                  Section 6.6. Limitation on Suits.

                  A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:

                  (a)      the Holder of a Note gives to the Trustee written
         notice of a continuing Event of Default;

                  (b)      the Holders of at least 25% in aggregate principal
         amount at maturity of the then outstanding Notes make a written request
         to the Trustee to pursue the remedy;

<PAGE>

                                      -74-

                  (c)      such Holder or Holders of Notes offer and, if
         requested, provide to the Trustee indemnity satisfactory to the Trustee
         against any loss, liability or expense;

                  (d)      the Trustee does not comply with the request within
         60 days after receipt of the request and the offer and, if requested,
         the provision of indemnity; and

                  (e)      during such 60-day period the Holders of a majority
         in aggregate principal amount at maturity of the then outstanding Notes
         do not give the Trustee a direction inconsistent with the request.

A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.

                  Section 6.7. Rights of Holders of Notes to Receive Payment.

                  Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of Accreted Value, or premium,
if any, interest or Additional Interest, if any, on the Note, on or after the
respective due dates thereon (including in connection with an offer to
repurchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
written consent of such Holder.

                  Section 6.8. Collection Suit by Trustee.

                  If an Event of Default specified in Section 6.l(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of Accreted Value, premium and Additional Interest, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, Accreted Value, premium, if any, and interest and Additional
Interest, if any, and such further amounts as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expense, disbursements and advances of the Trustee, its agents and counsel.

                  Section 6.9. Notice.

                  The Company shall provide an Officers' Certificate to the
Trustee promptly upon any such Officer obtaining knowledge of any Default or
Event of Default (provided that such Officers shall provide such certification
at least annually whether or not such Officers know of any Default or Event of
Default) that has occurred and, if applicable, describe such Default or Event of
Default and the status thereof.

<PAGE>

                                      -75-

                  Section 6.10. Trustee May File Proofs of Claim.

                  The Trustee is authorized to file such proofs of claim and
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 (including
accountants, experts or such other processionals as the Trustee deems necessary,
advisable or appropriate) and counsel and the Holders of the Notes allowed in
any judicial proceedings relative to the Company (or any other obligor upon the
Notes), its creditors or its property and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims, and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to 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 7.7. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. 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 Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.

                  Section 6.11. Priorities.

                  If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:

                  First: to the Trustee, its agents and attorneys for amounts
         due under Section 7.7, including payment of all compensation, expense
         and liabilities incurred, and all advances made, by the Trustee and the
         costs and expenses of collection;

                  Second: to Holders of Notes for amounts due and unpaid on the
         Notes for Accreted Value or Purchase Price, Redemption Price and
         Additional Interest, if any, and interest, ratably, without preference
         or priority of any kind, according to the amounts due and payable on
         the Notes for Accreted Value or Purchase Price, Redemption Price and
         Additional Interest, if any, and interest, respectively; and

                  Third: to the Company or to such party as a court of competent
         jurisdiction shall direct.

<PAGE>

                                      -76-

The Trustee may fix a special record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.11.

                  Section 6.12. 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 a Trustee, a court in its discretion may require the filing by
any party litigant 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, 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 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7, or a suit by Holders of more than 10% in
aggregate principal amount at maturity of the then outstanding Notes.

                                  ARTICLE VII.

                                     TRUSTEE

                  Section 7.1. Duties of Trustee.

                  (a)      If an Event of Default has occurred and is
continuing, the Trustee shall exercise such rights and powers vested in it by
this Indenture, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.

                  (b)      Except during the continuance of an Event of Default:

                  (i)      the duties of the Trustee shall be determined solely
         by the express provisions of this Indenture and the TIA and the Trustee
         need perform only those duties that are specifically set forth in this
         Indenture and no others, and no implied covenants or obligations shall
         be read into this Indenture or the TIA against the Trustee; and

                  (ii)     in the absence of bad faith on its part, the Trustee
         may conclusively rely, without investigation, as to the truth or the
         statements and the correctness of the opinions expressed therein, upon
         and statements, certificates or opinions furnished to the Trustee and
         conforming to the requirements of this Indenture.

However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform on their face to the requirements of this Indenture.

                  (c)      The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

<PAGE>

                                      -77-

                  (i)      this paragraph does not limit the effect of paragraph
         (b) of this Section;

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

                  (iii)    the Trustee shall not be liable with respect to any
         action it takes or omits to take in good faith in accordance with a
         direction received by it pursuant to Section 6.5.

                  (d)      Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
this Section 7.1.

                  (e)      No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, pursuant to the provisions of this
Indenture, including, without limitation, Section 6.5, unless such Holder shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense which might be incurred by it in compliance with
such request or direction.

                  (f)      The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.

                  Section 7.2. Rights of Trustee.

                  (a)      The Trustee may conclusively rely and shall be
protected in acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.

                  (b)      Before the Trustee acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel of its own selection and the written advice of
such counsel and Opinions of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.

                  (c)      The Trustee may act through its attorneys,
accountants, experts and such other professionals as the Trustee deems
necessary, advisable or appropriate and shall not be responsible for the
misconduct or negligence of any attorney, accountant, expert or other such
professional appointed with due care.

<PAGE>

                                      -78-

                  (d)      The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or within
the rights or powers conferred upon it by this Indenture.

                  (e)      Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficiently evidenced by a written order signed by two Officers of the Company.

                  (f)      The Trustee shall not be charged with knowledge of
any Default or Event of Default under Section 6.1 (other than under Section
6.1(a) (subject to the following sentence) or Section 6.1(b)) unless either (i)
a Responsible Officer shall have actual knowledge thereof, or (ii) the Trustee
shall have received notice thereof in accordance with Section 12.2 from the
Company or any Holder of the Notes. The Trustee shall not be charged with
knowledge of the Company's obligation to pay Additional Interest, or the
cessation of such obligation, unless the Trustee receives written notice thereof
from the Company or any Holder.

                  (g)      The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and each agent, custodian and other Person employed
to act hereunder.

                  The Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person specified as so
authorized in any such certificate previously delivered and not superseded.

                  Section 7.3. Individual Rights of Trustee.

                  The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest within the meaning of the TIA it must eliminate such conflict within 90
days, or apply (subject to the consent of the Company) to the Commission for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11.

                  Section 7.4. Trustee's Disclaimer.

                  The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture, or the Notes,
it shall not be accountable for the Company's use of the proceeds from the Notes
or any money paid to the Company or upon the

<PAGE>

                                      -79-

Company's direction under any provision of this Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or any statement in the Notes or any other document in connection
with the sale of the Notes or pursuant to this Indenture other than its
certificate of authentication.

                  Section 7.5. Notice of Defaults.

                  If a Default or Event of Default occurs and is continuing, the
Trustee shall mail to Holders of Notes a notice of the Default or Event of
Default within 90 days after it occurs. Except in the case of a Default in
payment on any Note (including the failure to make a mandatory repurchase
pursuant hereto), the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.

                  Section 7.6. Reports by Trustee to Holder of the Notes.

                  Within 60 days after each May 1 beginning with the May 1
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if no
event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).

                  A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the Commission
and each stock exchange on which the Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange.

                  Section 7.7. Compensation, Reimbursement and Indemnity.

                  The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and the rendering by it of the
services required hereunder as shall be agreed upon in writing by the Company
and the Trustee. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by or on behalf of it in addition to the compensation
for its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's attorneys, accountants, experts and
such other professionals as the Trustee deems necessary, advisable or
appropriate.

<PAGE>

                                      -80-

                  The Company shall indemnify the Trustee (which for purposes of
this Section 7.7 shall include its officers, directors, employees and agents)
and any predecessor Trustee against any and all losses, liabilities, claims,
damages or expenses, including taxes (other than taxes based upon, measured by
or determined by the income of the Trustee), incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture (including its duties under Section 9.6), including the costs and
expenses of enforcing this Indenture against the Company (including this Section
7.7) and defending itself against or investigating any claim (whether asserted
by the Company, any Holder or any other Person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or willful misconduct. The Trustee shall notify the Company promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder.
The Company shall defend any claim or threatened claim asserted against the
Trustee, and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.

                  The obligations of the Company under this Section 7.7 shall
survive the resignation or removal of the Trustee, the satisfaction and
discharge of this Indenture and the termination of this Indenture.

                  To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a Lien prior to the Notes on all money or property
held or collected by the Trustee, except that held in trust to pay Accreted
Value, premium, if any, Redemption Price or Purchase Price of or Additional
Interest, if any, or interest on, particular Notes. Such Lien shall survive the
resignation or removal of the Trustee, the satisfaction and discharge of this
Indenture and the termination of this Indenture.

                  When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(f) or (g) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.

                  In no event shall the Trustee be liable for any indirect,
special, punitive or consequential loss or damage of any kind whatsoever,
including, but not limited to, lost profits, even if the Trustee has been
advised of the likelihood of such loss or damage and regardless of the form of
action.

                  In no event shall the Trustee be liable for any failure or
delay in the performance of its obligations hereunder because of circumstances
beyond its control, including, but not limited to, acts of God, flood, war
(whether declared or undeclared), terrorism, fire, riot, embargo, government
action, including any laws, ordinances, regulations, governmental ac-

<PAGE>

                                      -81-

tion or the like which delay, restrict or prohibit the providing of the services
contemplated by this Agreement.

                  Section 7.8. Replacement of Trustee.

                  A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.

                  The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:

                  (a)      the Trustee fails to comply with Section 7.10;

                  (b)      the Trustee is adjudged a bankrupt or an insolvent or
         an order for relief is entered with respect to the Trustee under any
         Bankruptcy Law;

                  (c)      a custodian, receiver or public officer takes charge
         of the Trustee or its property for the purpose of rehabilitation,
         conversation or liquidation; or

                  (d)      the Trustee becomes incapable of acting.

                  If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the date on which the successor Trustee
takes office, the Holders of a majority in aggregate principal amount at
maturity of the then outstanding Notes may appoint a successor Trustee to
replace the successor Trustee appointed by the Company.

                  If a successor Trustee does not take office within 30 days
after the retiring trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in aggregate principal amount
at maturity of the then outstanding Notes may petition any court of competent
jurisdiction, in the case of the Trustee, at the expense of the Company, for the
appointment of a successor Trustee.

                  If the Trustee, after written request by any Holder of a Note
who has been a bona fide holder of a Note or Notes for at least six months,
fails to comply with Section 7.10, such Holder of a Note may petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.

                  A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring

<PAGE>

                                      -82-

Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The Company shall
mail a notice of its succession to each Holder of a Note. The retiring Trustee
shall promptly transfer all property held by it as Trustee to the successor
Trustee; provided all sums owing to the Trustee hereunder have been paid and
subject to the Lien provided for in Section 7.7. Notwithstanding replacement of
the Trustee pursuant to this Section 7.8, the Company's obligations under
Section 7.7 shall continue for the benefit of the retiring Trustee.

                  Section 7.9. Successor Trustee by Merger, Etc.

                  If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation that is eligible under Section 7.10, the successor corporation
without any further act shall be the successor Trustee.

                  Section 7.10. Eligibility; Disqualification.

                  There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof (including the District of Columbia) that is
authorized under such laws to exercise corporate trust power, that is subject to
supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $50.0 million as set forth in its most
recent published annual report of condition.

                  This Indenture shall always have a Trustee who satisfies the
requirements of TIA Sections 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).

                  Section 7.11. Preferential Collection of Claims Against
                                Company.

                  The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.

                                 ARTICLE VIII.

                    LEGAL DEFEASANCE AND COVENANT DEFEASANCE

                  Section 8.1. Option to Effect Legal Defeasance or Covenant
                               Defeasance.

                  The Company may, at the option of its Board of Directors
evidenced by a Board Resolution set forth in an Officers' Certificate, at any
time, elect to have either Sec-

<PAGE>

                                      -83-

tion 8.2 or 8.3 applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article VIII.

                  Section 8.2. Legal Defeasance and Discharge.

                  Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4, be deemed to have been discharged
from its obligations with respect to all outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.5 and the other Sections of this Indenture referred to in
clauses (a) through (d) below, and to have satisfied all their other obligations
under such Notes and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions that shall survive until otherwise
terminated or discharged hereunder:

                  (a)      the rights of Holders to receive payments in respect
         of the Accreted Value, premium, if any, and interest on the Notes when
         such payments are due;

                  (b)      the Company's obligations with respect to the Notes
         concerning issuing temporary Notes, registration of Notes, mutilated,
         destroyed, lost or stolen Notes and the maintenance of an office or
         agency for payments;

                  (c)      the rights, powers, trust, duties and immunities of
         the Trustee and the Company's obligations in connection therewith; and

                  (d)      the Legal Defeasance provisions of this Article VIII.

                  Subject to compliance with this Article VIII, the Company may
exercise its option under this Section 8.2, notwithstanding the prior exercise
of its option under Section 8.3.

                  Section 8.3. Covenant Defeasance.

                  Upon the Company's exercise under Section 8.1 of the option
applicable to this Section 8.3, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4, be released from its obligations
under the covenants contained in Sections 3.9, 3.10, 4.5, 4.7 through 4.12, 4.13
(except to the extent that it applies to the Company's existence), and 4.14
through 4.19, both inclusive, and Section 5.1 with respect to the outstanding
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any

<PAGE>

                                      -84-

thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document, and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.1
of the option applicable to this Section 8.3, subject to the satisfaction of the
conditions set forth in Section 8.4 and Sections 6.1(c) through 6.1(e) shall not
constitute Events of Default.

                  Section 8.4. Conditions to Legal or Covenant Defeasance.

                  The following are the conditions precedent to the application
of either Section 8.2 or 8.3 to the outstanding Notes:

                  In order to exercise either Legal Defeasance or Covenant
Defeasance:

                  (1)      the Company must irrevocably deposit with the
         Trustee, in trust, for the benefit of the Holders cash in U.S. dollars,
         U.S. Government Obligations, or a combination thereof, in such amounts
         as will be sufficient, in the written opinion of a nationally
         recognized firm of independent public accountants (a copy of which
         shall be provided to the Trustee), to pay the Accreted Value, premium,
         if any, and interest on the Notes on the stated date for payment
         thereof or on the applicable redemption date, as the case may be;

                  (2)      in the case of Legal Defeasance, the Company shall
         have delivered to the Trustee an Opinion of Counsel in the United
         States reasonably acceptable to the Trustee confirming that:

                           (a)      the Company has received from, or there has
                  been published by, the Internal Revenue Service a ruling; or

                           (b)      since the date of this Indenture, there has
                  been a change in the applicable federal income tax law,

         in either case to the effect that, and based thereon such Opinion of
         Counsel shall confirm that, the Holders will not recognize income, gain
         or loss for federal income tax purposes as a result of such Legal
         Defeasance and will be subject to federal income

<PAGE>

                                      -85-

         tax on the same amounts, in the same manner and at the same times as
         would have been the case if such Legal Defeasance had not occurred;

                  (1)      in the case of Covenant Defeasance, the Company shall
         have delivered to the Trustee an Opinion of Counsel in the United
         States reasonably acceptable to the Trustee confirming that the Holders
         will not recognize income, gain or loss for federal income tax purposes
         as a result of such Covenant Defeasance and will be subject to federal
         income tax on the same amounts, in the same manner and at the same
         times as would have been the case if such Covenant Defeasance had not
         occurred;

                  (2)      no Default or Event of Default shall have occurred
         and be continuing on the date of such deposit (other than a Default or
         Event of Default resulting from the borrowing of funds to be applied to
         such deposit and the grant of any Lien securing such borrowings);

                  (3)      such Legal Defeasance or Covenant Defeasance shall
         not result in a breach or violation of, or constitute a default under
         this Indenture (other than a Default or an Event or Default resulting
         from the borrowing of funds to be applied to such deposit and the grant
         of any Lien securing such borrowings) or any other material agreement
         or instrument to which the Company or any of its Subsidiaries is a
         party or by which the Company or any of its Subsidiaries is bound;

                  (4)      the Company shall have delivered to the Trustee an
         Officers' Certificate stating that the deposit was not made by the
         Company with the intent of preferring the Holders over any other
         creditors of the Company or with the intent of defeating, hindering,
         delaying or defrauding any other creditors of the Company or others;

                  (5)      the Company shall have delivered to the Trustee an
         Officers' Certificate and an Opinion of Counsel, each stating that all
         conditions precedent provided for or relating to the Legal Defeasance
         or the Covenant Defeasance have been complied with; and

                  (6)      the Company shall have delivered to the Trustee an
         Opinion of Counsel to the effect that, assuming no intervening
         bankruptcy of the Company between the date of deposit and the 91st day
         following the date of deposit and that no Holder is an insider of the
         Company, after the 91st day following the date of deposit, the trust
         funds will not be subject to the effect of any applicable federal
         bankruptcy, insolvency, reorganization or similar laws affecting
         creditors' rights generally.

                  Notwithstanding the foregoing, the Opinion of Counsel required
by clauses (2)(a) and (3) above need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (1) have become due and
payable, (2) will become due and payable on the maturity date within one year or
(3) are to be called for redemption within one year un-

<PAGE>

                                      -86-

der arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company.

                  Section 8.5. Deposited Money and U.S. Government
                               Obligations to Be Held in Trust; Other
                               Miscellaneous Provisions.

                  Subject to Section 8.6, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5 only,
the "Trustee") pursuant to Section 8.4 in respect of the outstanding Notes shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (other than the Company) as the Trustee may determine, to the
Holders of such Notes of all sums due and to become due thereon in respect of
Accreted Value or Redemption Price of, and Additional Interest, if any, interest
on, the Notes, that such money need not be segregated from other funds except to
the extent required by law.

                  The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to Section 8.4 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.

                  Anything in this Article VIII to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or U.S. Government Obligations held by it as
provided in Section 8.4 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a)), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

                  Section 8.6. Repayment to the Company.

                  Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the Accreted Value,
Redemption Price or Purchase Price of, or Additional Interest, if any, or
interest on any Note and remaining unclaimed for two years after such amount has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Note shall thereafter look only to the Company for payment thereof as a general
creditor, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, at the expense of the Company,
may cause to be published once, in The New York Times and The

<PAGE>

                                      -87-

Wall Street Journal (national editions), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days after the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.

                  Section 8.7. Reinstatement.

                  If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 8.2 or
8.3, as the case may be, by reason of any order of judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of the Company under this Indenture and the
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3, as the
case may be; provided, however, that if the Company makes any payment with
respect to any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.

                                  ARTICLE IX.

                        AMENDMENT, SUPPLEMENT AND WAIVER

                  Section 9.1. Without Consent of Holders of Notes.

                  Notwithstanding Section 9.2, the Company and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:

                  (a)      to cure any ambiguity, defect or inconsistency so
         long as such changes do not, in the opinion of the Trustee, adversely
         affect the rights of any of the Holders in any material respect.

                  (b)      to provide for uncertificated notes in addition to or
         in place of certificated Notes;

                  (c)      to provide for the assumption of the Company's
         obligations to the Holders of the Notes in the case of a merger or
         consolidation or sale of all or substantially all of the Company's
         assets pursuant to Article V;

                  (d)      to comply with the requirements of the Commission in
         order to effect or maintain the qualification of this Indenture under
         the TIA; or
<PAGE>

                                      -88-

                  (e)      to make any change that would provide any additional
         rights or benefits to the Holders of the Notes or that does not
         adversely affect the legal rights hereunder of any Holder of the Notes.

                  Upon the request of the Company, accompanied by a Board
Resolution (evidenced by an Officers' Certificate) (a copy of which shall be
provided to the Trustee) authorizing the execution of any such amended or
supplemental indenture, and upon receipt by the Trustee of an Officers'
Certificate and an Opinion of Counsel in compliance with Section 9.6, the
Trustee shall join with the Company in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.

                  Section 9.2. With Consent of Holders of Notes.

                  Except as provided below in this Section 9.2, the Company and
the Trustee may amend or supplement this Indenture and the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
aggregate principal amount at maturity of the Notes then outstanding (including,
without limitation, consents obtained in connection with a tender offer or
exchange offer for the Notes), and, subject to Sections 6.2, 6.4 and 6.7, any
existing Default or Event of Default or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).

                  Without the consent of each Holder affected, an amendment or
waiver may not:

                  (1)      reduce the amount of Notes whose Holders must consent
         to an amendment;

                  (2)      reduce the rate of or change or have the effect of
         changing the time for payment of interest, including defaulted
         interest, on any Notes;

                  (3)      reduce the Accreted Value of or change or have the
         effect of changing the fixed maturity of any Notes, or change the date
         on which any Notes may be subject to redemption or repurchase or reduce
         the redemption or repurchase price therefor;

                  (4)      make any Notes payable in money other than that
         stated in the Notes;

                  (5)      make any change in provisions of this Indenture
         protecting the right of each Holder to receive payment of principal of
         and interest on such Note on or after

<PAGE>
                                      -89-

         the due date thereof or to bring suit to enforce such payment, or
         permitting Holders of a majority in principal amount of Notes to waive
         Defaults or Events of Default;

                  (6)      after the Company's obligation to purchase Notes
         arises hereunder, amend, change or modify in any material respect the
         obligation of the Company to make and consummate a Change of Control
         Offer in the event of a Change of Control or make and consummate a Net
         Proceeds Offer with respect to any Asset Sale that has been consummated
         or modify any of the provisions or definitions with respect thereto; or

                  (7)      modify or change any provision of this Indenture or
         the related definitions affecting the ranking of the Notes in a manner
         which adversely affects the Holders.

                  Upon the written request of the Company accompanied by a Board
Resolution (evidenced by an Officers' Certificate) (a copy of which shall be
provided to the Trustee) authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of an Officers' Certificate and an Opinion of
Counsel in compliance with Section 9.6, the Trustee shall join with the Company
in the execution of such amended or supplemental indenture unless such amended
or supplemental Indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.

                  It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.

                  After an amendment, supplement or waiver under this Section
9.2 becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver.

                  Section 9.3. Compliance with Trust Indenture Act.

                  Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental indenture that complies with the
TIA as then in effect.

<PAGE>
                                      -90-

                  Section 9.4. Revocation and Effect of Consents.

                  Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and therefore binds every Holder.

                  Section 9.5. Notation on or Exchange of Notes.

                  The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.

                  Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.

                  Section 9.6. Trustee to Sign Amendment, Etc.

                  The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article IX if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amended or supplemental indenture until the Board of
Directors approves such amended or supplemental indenture. In executing any
amended or supplemental indenture, the Trustee shall be entitled to receive, in
addition to the documents required by Sections 12.4 and 12.5, and, subject to
Section 7.1, shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel stating that (i) the execution of such amended or
supplemental indenture is authorized or permitted by this Indenture, (ii) no
Event of Default shall occur as a result of the execution or delivery of such
amended or supplemental indenture and (iii) the amended or supplemental
indenture complies with the terms of this Indenture.

                                   ARTICLE X.

                                    GUARANTEE

                  Section 10.1. Unconditional Guarantee.

                  Each Guarantor, if any, hereby unconditionally guarantees
(such guarantee to be referred to herein as a "Guarantee"), on a senior
unsecured basis jointly and severally, to

<PAGE>
                                      -91-

each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, the Notes or the obligations of the
Company hereunder or thereunder, that: (i) the Accreted Value and interest on
the Notes will be promptly paid in full when due, subject to any applicable
grace period, whether at maturity, by acceleration or otherwise and interest on
the overdue principal, if any, and interest on any interest, to the extent
lawful, of the Notes and all other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be promptly paid in full or performed,
all in accordance with the terms hereof and thereof; and (ii) in case of any
extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 10.3. Each Guarantor, if any, hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, and action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor, if any, hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Guarantee will not be
discharged except by complete performance of the obligations contained in the
Notes, this Indenture and in this Guarantee. If any Holder or the Trustee is
required by any court or otherwise to return to the Company, any Guarantor, or
any custodian, trustee, liquidator or other similar official acting in relation
to the Company or any Guarantor, any amount paid by the Company or any Guarantor
to the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor, if
any, further agrees that, as between each Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article VI for the purposes
of this Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby,
and (y) in the event of any acceleration of such obligations as provided in
Article VI, such obligations (whether or not due and payable) shall forthwith
become due and payable by each Guarantor for the purpose of this Guarantee.

                  Section 10.2. Severability.

                  In case any provision of this Guarantee 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.

<PAGE>
                                      -92-

                  Section 10.3. Limitation of Guarantor's Liability.

                  Each Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities (including all of its obligations under or with
respect to the Credit Agreement and all Interest Swap Obligations and
obligations under Currency Agreements) of such Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 10.5, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.

                  Section 10.4. Release of Guarantor.

                  (a)      The Guarantee of a Guarantor will be automatically
and unconditionally released without any action on the part of the Trustee or
the Holders of the Notes: (1) in connection with any sale or other disposition
of all or substantially all of the assets of that Guarantor (including, without
limitation, by way of merger or consolidation), if the Company applies the Net
Cash Proceeds of that sale or other disposition in accordance with the
applicable provisions of this Indenture; (2) in connection with any sale of all
of the Capital Stock of that Guarantor, if the Company applies the Net Cash
Proceeds of that sale in accordance with the applicable provisions of this
Indenture; (3) if the Company designates that Guarantor as an Unrestricted
Subsidiary in accordance with the applicable provisions of this Indenture; (4)
upon the payment in full of the Notes; or (5) as provided in Section 4.16.

                  In addition, concurrently with any Legal Defeasance or
Covenant Defeasance, the Guarantors shall be released from all of their
Obligations under their respective applicable Guarantees.

                  (b)      The Trustee shall deliver an appropriate instrument
evidencing such release upon receipt of a request by the Company accompanied by
an Officers' Certificate and Opinion of Counsel certifying as to the compliance
with this Section 10.4.

                  Section 10.5. Contribution.

                  In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted

<PAGE>
                                      -93-

Net Assets (as defined below) of each Guarantor (including the Funding
Guarantor) for all payments, damages and expenses incurred by that Funding
Guarantor in discharging the Company's obligations with respect to the
Securities or any other Guarantor's obligations with respect to its Guarantee.
"Adjusted Net Assets" of such Guarantor at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Guarantor exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under its
Guarantee, of such Guarantor at such date and (y) the present fair salable value
of the assets of such Guarantor at such date exceeds the amount that will be
required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date), excluding debt in respect of the Guarantee of such Guarantor, as
they become absolute and matured.

                  Section 10.6. Waiver of Subrogation.

                  Until all Obligations are paid in full, each Guarantor hereby
irrevocably waives any claims or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of such Guarantor's obligations under its Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in any
claim or remedy of any Holder against the Company, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
the Notes shall not have been paid in full, such amount shall have been deemed
to have been paid to such Guarantor for the benefit of, and held in trust for
the benefit of, the Holders, and shall, forthwith be paid to the Trustee for the
benefit of such Holders to be credited and applied upon the Notes, whether
matured or unmatured, in accordance with the terms of this Indenture. Each
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by this Indenture and that the waiver
set forth in this Section 10.6 is knowingly made in contemplation of such
benefits.

                  Section 10.7. Execution of Guarantee.

                  To evidence their guarantee to the Holders set forth in this
Article X, the Guarantors hereby agree to execute the Guarantee in substantially
the form attached hereto as Exhibit C, which shall be endorsed on each Note
ordered to be authenticated and delivered by the Trustee. Each Guarantor hereby
agrees that its Guarantee set forth in this Article X shall remain in full force
and effect notwithstanding any failure to endorse on each Note a notation of
such Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor
by one of its authorized Officers prior to the authentication of the Note on
which it is endorsed, and

<PAGE>
                                      -94-

the delivery of such Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of such Guarantee on behalf of such
Guarantor. Such signatures upon the Guarantee may be by manual or facsimile
signature of such officers and may be imprinted or otherwise reproduced on the
Guarantee, and in case any such officer who shall have signed the Guarantee
shall cease to be such officer before the Note on which such Guarantee is
endorsed shall have been authenticated and delivered by the Trustee or disposed
of by the Company, such Note nevertheless may be authenticated and delivered or
disposed of as though the Person who signed the Guarantee had not ceased to be
such officer of the Guarantor.

                  Section 10.8. Waiver of Stay, Extension or Usury Laws.

                  Each Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive each such Guarantor
from performing its Guarantee as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
each such Guarantor 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 XI.

                           SATISFACTION AND DISCHARGE

                  Section 11.1. Satisfaction and Discharge.

                  This Indenture will be discharged and will cease to be of
further effect (except as set forth below) and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture when:

                  (1)      either:

                           (a)      all the Notes theretofore authenticated and
                  delivered (except lost, stolen or destroyed Notes which have
                  been replaced or paid as provided in Section 2.7 and Notes for
                  whose payment money has theretofore been deposited in trust or
                  segregated and held in trust by the Company and thereafter
                  repaid to the Company or discharged from such trust) have been
                  delivered to the Trustee for cancellation; or

                           (b)      all Notes not theretofore delivered to the
                  Trustee for cancellation have become due and payable or will
                  be due and payable within one year and the Company has
                  irrevocably deposited or caused to be deposited with the

<PAGE>
                                      -95-

                  Trustee funds in an amount sufficient to pay and discharge the
                  entire Indebtedness on the Notes not theretofore delivered to
                  the Trustee for cancellation, for principal of, premium, if
                  any, and interest on the Notes to the date of deposit together
                  with irrevocable written instructions from the Company
                  directing the Trustee to apply such funds to the payment
                  thereof at maturity or redemption, as the case may be;

                  (2)      the Company has paid all other sums payable by the
         Company under this Indenture; and

                  (3)      the Company has delivered to the Trustee an Officers'
         Certificate and an Opinion of Counsel stating that all conditions
         precedent under this Indenture relating to the satisfaction and
         discharge of this Indenture have been complied with.

                  Notwithstanding the satisfaction and discharge of this
Indenture, the Company's obligations in Sections 2.3, 2.4, 2.6, 2.7, 2.11, 7.7,
7.8, 12.2, 12.3 and 12.4 and the Trustee's and Paying Agent's obligations in
Section 11.2 shall survive until the Notes are no longer outstanding.
Thereafter, only the Company's obligations in Section 7.7 shall survive.

                  Section 11.2. Application of Trust.

                  All money deposited with the Trustee pursuant to Section 11.1
shall be held in trust and, at the written direction of the Company, be invested
prior to maturity in U.S. Government Obligations, and applied by the Trustee in
accordance with the provisions of the Notes and this Indenture, to the payment,
either directly or through any Paying Agent as the Trustee may determine, to the
Persons entitled thereto, of the principal (and premium, if any) and interest
for the payment of which money has been deposited with the Trustee; but such
money need not be segregated from other funds except to the extent required by
law.

                                  ARTICLE XII.

                                  MISCELLANEOUS

                  Section 12.1. Trust Indenture Act Controls.

                  If any provision hereof limits, qualifies or conflicts with a
provision of the TIA or another provision that would be required or deemed under
such Act to be part of and govern this Indenture if this Indenture were subject
thereto, the latter provision shall control. If any provision of this Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.

<PAGE>
                                      -96-

                  Section 12.2. Notices.

                  Any notice or communication by the Company or the Trustee to
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:

                  If to the Company:

                           Town Sports International Holdings, Inc.
                           888 Seventh Avenue
                           New York, New York  10106
                           Attention: Richard Pyle
                           Fax: (212) 664-8906

                  With a copy to:

                           Kirkland & Ellis LLP
                           153 E. 53rd Street
                           39th Floor
                           New York, New York  10022
                           Attention: Joshua N. Korff, Esq.
                           Fax: (212) 446-4943

                  If to the Trustee:

                           The Bank of New York
                           Attention: Corporate Trust Trustee Administration
                           101 Barclay Street, Floor 8W
                           New York, New York 10286
                           Fax: (212) 815-5707

                  The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.

                  All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.

                  Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next

<PAGE>
                                      -97-

day delivery to its address shown on the register kept by the Registrar. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.

                  If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the address
receives it.

                  If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.

                  Section 12.3. Communication by Holders of Notes with Other
                                Holders of Notes.

                  Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).

                  Section 12.4. 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:

                  (a)      an Officers' Certificate in form and substance
         reasonably satisfactory to the Trustee stating that, in the opinion of
         the signers, all conditions precedent and covenants, if any, provided
         for in this Indenture relating to the proposed action have been
         satisfied; and

                  (b)      an Opinion of Counsel in form and substance
         reasonably satisfactory to the Trustee stating that, in the opinion of
         such counsel, all such conditions precedent and covenants have been
         satisfied.

                  Section 12.5. Statements Required in Certificate or Opinion.

                  Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:

                  (a)      a statement that the Person making such certificate
         or opinion has read such covenant or condition;

<PAGE>
                                      -98-

                  (b)      a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                  (c)      a statement that, in the opinion of such Person, he
         or she has made such examination or investigation as is necessary to
         enable him to express an informed opinion as to whether or not such
         covenant or condition has been satisfied; and

                  (d)      a statement as to whether or not, in the opinion of
         such Person, such condition or covenant has been satisfied.

                  Section 12.6. Rules by Trustee and Agents.

                  The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.

                  Section 12.7. No Personal Liability of Directors, Officers,
                                Employees and Stockholders.

                  No past, present or future director, officer, employee,
incorporator, agent or stockholder or Affiliate or Subsidiary of the Company, as
such, shall have any liability (except for any liability for any obligations of
the Guarantors under the Guarantees, if any) for any obligations of the Company
under the Notes, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liabilities. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities law and it is the view of the
Commission that such a waiver is against public policy.

                  Section 12.8. Governing Law; Submission to Jurisdiction;
                                Waiver of Jury Trial.

                  THIS INDENTURE, THE GUARANTEES AND THE NOTES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY. THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS

<PAGE>
                                      -99-

INDENTURE, THE GUARANTEES AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE COMPANY AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT THAT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY
AND ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY OR ANY GUARANTOR IN ANY OTHER JURISDICTION.

                  Section 12.9. No Adverse Interpretation of Other Agreements.

                  This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.

                  Section 12.10. Successors.

                  All agreements of the Company in this Indenture and the Notes
shall bind their successors. All agreements of the Trustee in this Indenture
shall bind its successors.

                  Section 12.11. Severability.

                  In case any provision in this Indenture or in the Notes 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 12.12. Counterpart 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.

                  Section 12.13. Table of Contents, Headings, Etc.

                  The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture, which have been inserted for
convenience of reference only, are not to be considered a part of this Indenture
and shall in no way modify or restrict any of the terms or provisions hereof.

<PAGE>
                                     -100-

                  Section 12.14. Qualification of Indenture.

                  The Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the Registration Rights Agreement
and shall pay all reasonable costs and expenses (including attorneys' fees for
the Company, the Trustee and the Holders of the Notes) incurred in connection
therewith, including, but not limited to, costs and expenses of qualification of
this Indenture and the Notes and printing this Indenture and the Notes. The
Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.

                         [Signatures on following page]

<PAGE>

                                   SIGNATURES

                                        TOWN SPORTS INTERNATIONAL
                                         HOLDINGS, INC.

                                        By: /s/ Richard Pyle
                                            -------------------------------
                                            Name: Richard Pyle
                                            Title: Chief Financial Officer

                                        THE BANK OF NEW YORK,
                                         as Trustee

                                        By: /s/ Patricia Gallagher
                                            --------------------------------
                                            Name: Patricia Gallagher
                                            Title: Vice President

                                      S-1
<PAGE>

                                                                       EXHIBIT A

                              FORM OF SERIES A NOTE

                                 (Face of Note)

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

                        11% SENIOR DISCOUNT NOTE DUE 2014

[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1)

[THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURI-

---------------
(1)      To be included only if the Note is issued in global form.

                                      A-1
<PAGE>

TIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT
IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR"), (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO TOWN SPORTS INTERNATIONAL HOLDINGS, INC. OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
(OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE FOR THIS NOTE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE),
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF TOWN SPORTS INTERNATIONAL HOLDINGS, INC. SO REQUESTS) OR (G) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE, IF THE
PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND TOWN SPORTS INTERNATIONAL, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.](2)

------------------
(2)      To be included only if the Note is a Transfer Restricted Security

                                      A-2
<PAGE>

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

                        11% SENIOR DISCOUNT NOTE DUE 2014

                                                            CUSIP No.___________
No.____________                                             $___________________

Interest Payment Dates: February 1 and August 1 with cash interest payments
                        commencing August 1, 2009
Record Dates: January 15 and July 15

                  THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES
OF SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE PRICE IS $585.95. THE ISSUE DATE OF
THIS NOTE IS FEBRUARY 4, 2004 AND THE YIELD TO MATURITY IS 11%.

                  TOWN SPORTS INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (the "Company," which term includes any successor corporation under
the indenture hereinafter referred to ), for value received promises to pay to
____________________________________________________ or registered assigns, the
principal sum of _____________________ Dollars on February 1, 2014.

                  Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefits under the Indenture referred to
on the reverse hereof or be valid or obligatory for any purpose.

                                      A-3
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.

[SEAL]                                               Dated:

                                        TOWN SPORTS INTERNATIONAL
                                         HOLDINGS, INC.

                                        By: ____________________________________
                                            Name:
                                            Title:

                                        By: ____________________________________
                                            Name:
                                            Title:

This is one of the Notes referred to
in the within-mentioned Indenture:

THE BANK OF NEW YORK,
  as Trustee

By: ________________________________
    Name:
    Title:

                                      A-4
<PAGE>

                                 (Back of Note)

                       11% Senior Discount Notes due 2014

                  Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.

                  (1)      Interest. The Company promises to pay interest on the
principal amount of this Note at the rate of 11% per annum from February 4, 2004
until maturity and shall pay the Additional Interest pursuant to Section 4 of
the Registration Rights Agreement referred below. Prior to February 1, 2009,
interest will accrue on the Notes in the form of an increase in the Accreted
Value of the Notes, and no cash interest will be paid. The Accreted Value of the
Notes will increase from the date of issuance until February 1, 2009 at a rate
of 11% per annum compounded semi-annually as provided in the definition of
"Accreted Value" in the Indenture such that the Accreted Value will equal the
principal amount at maturity on February 1, 2009. The Company will pay cash
interest and Additional Interest semi-annually on February 1 and August 1 of
each year commencing August 1, 2009, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Cash
interest on the Note will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from February 1, 2009; provided that
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be August 1, 2009. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
payments of the principal, Purchase Price and Redemption Price of this Note from
time to time on demand at the same rate per annum on the Notes to the extent
lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Additional Interest, if any (without regard to any applicable grace periods),
hereon from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.

                  (2)      Method of Payment. The Company will pay interest on
the Notes (except defaulted interest) and Additional Interest, if any, to the
Persons who are registered Holders of Notes at the close of business on the
January 15 and July 15 next preceding the Interest Payment Date, even if such
Notes are canceled after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. Any such installment of interest or Additional Interest, if
any, not punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holders on such Interest Payment Date, and may be paid
to the registered Holders at the close of business on a special interest payment
date to be fixed by the Trustee for the payment of such defaulted interest,
notice whereof shall be given to the registered Holders not less than 10 days
prior to such special interest payment date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully

                                      A-5
<PAGE>

provided in the Indenture. The Notes will be payable as to Accreted Value or
principal, Redemption Price, Purchase Price, interest and Additional Interest,
if any, at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Additional Interest may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, provided
that payment by wire transfer of immediately available funds will be required
with respect to Accreted Value or principal, Redemption Price and Purchase Price
of, and interest and Additional Interest (if any) on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Trustee or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.

                  (3)      Paying Agent and Registrar. Initially, The Bank of
New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company may act in any such capacity.

                  (4)      Indenture. The Company issued the Notes under an
Indenture dated as of February 4, 2004 (as in effect from time to time, the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S.C. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Notes are
general obligations of the Company.

                  (5)      Optional Redemption. The Company may redeem the
Notes, at the Company's option, in whole at any time, or in part from time to
time, on or after February 1, 2009, upon not less than 30 nor more than 60 days'
notice at the following Redemption Prices (expressed as a percentage of the
principal amount), if redeemed during the 12-month period commencing on February
1 of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:

<TABLE>
<CAPTION>
                                                              Redemption
Year                                                            Price
----                                                            -----
<S>                                                           <C>
2009...............................................            105.500%
2010...............................................            103.667%
2011...............................................            101.833%
2012 and thereafter................................            100.000%
</TABLE>

                  If less than all the Notes are to be redeemed, the Trustee
will select the particular Notes or portions thereof to be redeemed by lot, pro
rata or by any other method the Trustee shall deem fair and reasonable.

                  (6)      Optional Redemption upon Equity Offerings. At any
time, or from time to time, on or prior to February 1, 2007, the Company may, at
its option, use the net cash

                                      A-6
<PAGE>

proceeds of one or more Equity Offerings to redeem up to 35% of the original
principal amount of the Notes issued under the Indenture at a Redemption Price
equal to 111% of the Accreted Value thereof at the date of redemption, provided
that at least 65% of the aggregate principal amount at maturity of Notes issued
under the Indenture remains outstanding immediately after any such redemption;
and provided, further, that the Company shall make such redemption not more than
120 days after the consummation of any such Equity Offering. If less than all
the Notes are to be redeemed, the Trustee will select the particular Notes or
portions thereof to be redeemed by lot, only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures).

                  (7)      Mandatory Redemption. Except as set forth in
Paragraph 9 below with respect to repurchases of Notes in certain events, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.

                  (8)      Notice of Redemption. Subject to the provisions of
the Indenture, a notice of redemption will be mailed at least 30 days but not
more than 60 days (or in the case of a Change of Control Offer, at least 30 days
but not more than 45 days, or in the case of a Net Proceeds Offer, within 30
days) before the applicable redemption date to each Holder whose Notes are to be
redeemed at its registered address. Notes in denominations larger than $1,000
principal amount at maturity may be redeemed in part but only in whole multiples
of $1,000 principal amount at maturity, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to accrue
on Notes or portions thereof called for redemption.

                  (9)      Repurchase at Option of Holder.

                  (a)      If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a Purchase Price equal to 101% of the Accreted Value thereof plus accrued and
unpaid interest and Additional Interest, if any, to the date of repurchase, in
accordance with the procedures set forth in the Indenture. Within 30 days
following any Change of Control, the Company shall send, by first class mail, a
notice to each Holder setting forth the procedures governing the Change of
Control Offer as required by the Indenture.

                  (b)      On the 361st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of paragraph (A) of
Section 4.10 of the Indenture (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and
(3)(c) of paragraph (A) of Section 4.10 of the Indenture (each, a "Net Proceeds
Offer Amount") shall be applied by the Company or such Restricted Subsidiary to
make an offer to purchase (the "Net Proceeds Offer") on a date not less than 45
nor more than 60 days following the applicable Net Proceeds Offer Trigger Date,
the maximum Accreted Value of Notes and principal amount of other Indebtedness
of the Company that ranks pari passu in right of payment with

                                      A-7
<PAGE>

the Notes (to the extent required by the instrument governing such other
Indebtedness) that may be purchased out of the Net Proceeds Offer Amount;
provided, however, notwithstanding the foregoing, in the case of an Asset Sale
by a Restricted Subsidiary of the Company, the Company shall not be required to
make a Net Proceeds Offer to the extent such Restricted Subsidiary is not
permitted pursuant to its outstanding Indebtedness to make a Restricted Payment
to the Company. Any Notes and other Indebtedness to be purchased pursuant to a
Net Proceeds Offer shall be purchased pro rata based on the aggregate principal
amount of Notes and such other Indebtedness outstanding and all Notes shall be
purchased at an offer price in cash in an amount equal to 100% of the Accreted
Value thereof, plus accrued and unpaid interest to the date of purchase. Each
Net Proceeds Offer will be mailed to the record Holders as shown on the register
of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a
copy to the Trustee, and shall comply with the procedures set forth in the
Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to
tender their Notes in whole or in part in integral multiples of $1,000 principal
amount at maturity in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law.

                  (10)     Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 principal amount at
maturity and integral multiples of $1,000 principal amount at maturity. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.

                  (11)     Persons Deemed Owners. The registered Holder of a
Note may be treated as its owner for all purposes.

                  (12)     Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount at maturity of
the then outstanding Notes, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount at maturity of the then outstanding
Notes. Without the consent of any Holder of a Note, the Indenture and the Notes
may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of

                                      A-8
<PAGE>

any such Holder, or to comply with the requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.

                  (13)     Defaults and Remedies. Events of Default include: (i)
default for 30 days in the payment when due of interest or Additional Interest,
if any, on the Notes; (ii) default in payment when due of principal, Redemption
Price or Purchase Price of the Notes when the same becomes due and payable at
maturity, upon redemption, repurchase or otherwise (including the failure to
make a payment to purchase Notes tendered pursuant to a Change of Control Offer
or a Net Proceeds Offer); (iii) failure by the Company to comply with any
covenant contained in the Indenture for 30 days after notice to the Company by
the Trustee or the Holders of at least 25% of the aggregate principal amount at
maturity of the Notes outstanding; (iv) default under certain other agreements
relating to Indebtedness of the Company which default (a) is caused by a failure
to pay any amount due at the final stated maturity thereof or (b) results in the
acceleration of such Indebtedness prior to its express final stated maturity
and, in each case, the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
default for failure to pay principal at final stated maturity or the final
stated maturity of which has been so accelerated, aggregates $5.0 million or
more and such failure shall not have been cured or waived within 20 days
thereof; (v) certain final judgments of the Company or any Significant
Subsidiary for the payment of money that remain undischarged for a period of 60
days, provided that the aggregate of all such undischarged judgments exceeds
$5.0 million; and (vi) certain events of bankruptcy or insolvency with respect
to the Company or any Significant Subsidiary of the Company. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Upon any such declaration, the Accreted
Value of, and accrued and unpaid interest, if any, and Additional Interest, if
any, on the Notes shall become immediately due and payable. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, all outstanding Notes will
become due and payable without further action or notice. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in aggregate principal amount at
maturity of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to payment on any Note) if it determines that withholding notice is in
their interest. The Holders of a majority in principal amount at maturity of the
Notes may waive any existing or past Default or Event of Default under the
Indenture, and its consequences, except a default in the payment of the
principal of, or interest on any Notes. The Company is required to deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company is required upon becoming aware of any Default or Event of Default,
to deliver to the Trustee a statement specifying such Default or Event of
Default.

                  (14)     Trustee Dealings with Company. Subject to certain
limitations, the Trustee under the Indenture, in its individual or any other
capacity, may become owner or

                                      A-9
<PAGE>

pledge of Notes and may otherwise deal with the Company or its Affiliates as if
it were not Trustee.

                  (15)     No Recourse Against Others. No past, present or
future director, officer, employee, incorporator or stockholder or Affiliate or
Subsidiary of the Company, as such, shall have any liability (except for any
liability for any obligations of the Guarantors under the Guarantees, if any)
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.

                  (16)     Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

                  (17)     Abbreviations. Customary abbreviations may be used in
the name of a Holder 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 Gifts to Minors Act).

                  (18)     Discharge Prior to Maturity. If the Company deposits
with the Trustee or Paying Agent cash or U.S. Government Obligations sufficient
to pay the principal or Redemption Price of, and interest and Additional
Interest, if any, on, the Notes to maturity or a specified Redemption Date and
satisfies certain conditions specified in the Indenture, the Company will be
discharged from the Indenture, except for certain Sections thereof.

                  (19)     Governing Law. The Indenture and this Note shall be
governed by and construed in accordance with the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby. The Company hereby irrevocably submits to the jurisdiction of any New
York state court sitting in the Borough of Manhattan in the City of New York or
any Federal court sitting in the Borough of Manhattan in the City of New York in
respect of any suit, action or proceeding arising out of or relating to the
Indenture and the Notes, and irrevocably accepts for itself and in respect of
its property, generally and unconditionally, jurisdiction of the aforesaid
courts. The Company irrevocably waives, to the fullest extent that it may
effectively do so under applicable law, trial by jury and any objection which it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Trustee or any Holder of the Notes
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.

                  (20)     CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the correctness or ac-

                                      A-10
<PAGE>

curacy of such numbers either as printed on the Notes or as contained in any
notice of redemption or repurchase and reliance may be placed only on the other
identification numbers placed thereon.

                  (21)     Registration Rights. Pursuant to the Registration
Rights Agreement, the Company will be obligated upon the occurrence of certain
events to consummate an exchange offer pursuant to which the Holder of this Note
shall have the right to exchange this Series A Note for the Company's 11% Senior
Notes due 2014, Series B, which have been registered under the Securities Act,
in like principal amount and having terms identical in all material respects as
the Series A Notes. The Holders shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.

                  The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:

                                    Town Sports International Holdings, Inc.
                                    888 Seventh Avenue
                                    New York, New York  10106
                                    Attention:  Richard Pyle

                                      A-11
<PAGE>

                                 ASSIGNMENT FORM

                  To assign this Note, fill in the form below:

                  (I) or (we) assign and transfer this Note to

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name address and zip code)

and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.

    Date: _____________________

                              Your Signature: __________________________________
                                              (Sign exactly as your name appears
                                              on the face of this Note)

                  Signature Guarantee: _________________________________________
                                       (Participant in recognized signature
                                       guarantee medallion program)

                                      A-12
<PAGE>

                       OPTION OF HOLDER TO ELECT PURCHASE

                  If you wish to elect to have all or any portion of this Note
purchased by the Company pursuant to Section 4.10 ("Net Proceeds Offer") or
Section 4.15 ("Change of Control Offer") of the Indenture, check the applicable
boxes

                  [ ] Net Proceeds Offer:        [ ] Change of Control Offer:

                      in whole           [ ]         in whole           [ ]

                      in part            [ ]         in part            [ ]

                      Amount to be                   Amount to be
                      purchased: $___________        purchased: $___________

                  Dated: ____________________    Signature: ____________________
                                                           (Sign exactly as your
                                                            name appears on the
                                                            other side of this
                                                            Note)

                  Signature Guarantee: _________________________________________
                                       (Participant in recognized signature
                                       guarantee medallion program)

                  Social Security Number or
                  Taxpayer Identification Number: ______________________________

                                      A-13
<PAGE>

                                                                       EXHIBIT B

                              FORM OF SERIES B NOTE

                                 (Face of Note)

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

                        11% SENIOR DISCOUNT NOTE DUE 2014

[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER
OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](3)

--------------
(3)      To be included only if the Note is issued in global form.

                                      B-1
<PAGE>

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

                        11% SENIOR DISCOUNT NOTE DUE 2014

                                                            CUSIP No.___________
No.____________                                             $___________________

Interest Payment Dates: February 1 and August 1
Record Dates: January 15 and July 15

                  THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES
OF SECTION 1271 ET SEQ. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE PRICE IS $585.95. THE ISSUE DATE OF
THIS NOTE IS FEBRUARY 4, 2004 AND THE YIELD TO MATURITY IS 11%.

                  TOWN SPORTS INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (the "Company," which term includes any successor corporation under
the indenture hereinafter referred to ), for value received promises to pay to
____________________________________________________ or registered assigns, the
principal sum of _____________________ Dollars on February 4, 2014.

                  Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefits under the Indenture referred to
on the reverse hereof or be valid or obligatory for any purpose.

                                      B-2
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed under its corporate seal.

[SEAL]                                       Dated:

                                             TOWN SPORTS INTERNATIONAL
                                               HOLDINGS, INC.

                                             By: _______________________________
                                                 Name:
                                                 Title:

                                             By: _______________________________
                                                 Name:
                                                 Title:

This is one of the Notes referred to
in the within-mentioned Indenture:

THE BANK OF NEW YORK,
  as Trustee

By: ________________________________
    Name:
    Title:

                                      B-3
<PAGE>

                                 (Back of Note)

                       11% Senior Discount Notes due 2014

                  Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.

                  1.       Interest. The Company promises to pay interest on the
principal amount of this Note at the rate of 11% per annum from February 4 until
maturity. Prior to February 1, 2009, interest will accrue on the Notes in the
form of an increase in the Accreted Value of the Notes, and no cash interest
will be paid. The Accreted Value of the Notes will increase from the date of
issuance until February 1, 2009 at a rate of 11% per annum compounded
semi-annually as provided in the definition of "Accreted Value" in the Indenture
such that the Accreted Value will equal the principal amount at maturity on
February 1, 2009. The Company will pay cash interest and Additional Interest
semi-annually on February 1 and August 1 of each year commencing on August 1,
2009, or if any such day is not a Business Day, on the next succeeding Business
Day (each an "Interest Payment Date"). Cash interest on the Note will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from February 1, 2009; provided that if there is no existing Default
in the payment of interest, and if this Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be August 1, 2009.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue payments of the principal,
Purchase Price and Redemption Price of this Note from time to time on demand at
the same rate per annum on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Additional Interest, if any (without regard
to any applicable grace periods), hereon from time to time on demand at the same
rate to the extent lawful. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.

                  2.       Method of Payment. The Company will pay interest on
the Notes (except defaulted interest) and Additional Interest, if any, to the
Persons who are registered Holders of Notes at the close of business on the
January 15 and July 15 next preceding the Interest Payment Date, even if such
Notes are canceled after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. Any such installment of interest or Additional Interest, if
any, not punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holders on such Interest Payment Date, and may be paid
to the registered Holders at the close of business on a special interest payment
date to be fixed by the Trustee for the payment of such defaulted interest,
notice whereof shall be given to the registered Holders not less than 10 days
prior to such special interest payment date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture. The
Notes will be payable as to Accreted Value or principal, Re-

                                      B-4
<PAGE>

demption Price, Purchase Price, interest and Additional Interest, if any, at the
office or agency of the Company maintained for such purpose within or without
the City and State of New York, or, at the option of the Company, payment of
interest and Additional Interest may be made by check mailed to the Holders at
their addresses set forth in the register of Holders, provided that payment by
wire transfer of immediately available funds will be required with respect to
Accreted Value or principal, Redemption Price and Purchase Price of, and
interest and Additional Interest (if any) on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Trustee or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.

                  3.       Paying Agent and Registrar. Initially, The Bank of
New York, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company may act in any such capacity.

                  4.       Indenture. The Company issued the Notes under an
Indenture dated as of February 4, 2004 (as in effect from time to time, the
"Indenture") between the Company and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (15 U.S.C. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The Notes are
general obligations of the Company.

                  5.       Optional Redemption. The Company may redeem the
Notes, at the Company's option, in whole at any time, or in part from time to
time, on or after February 1, 2009, upon not less than 30 nor more than 60 days'
notice at the following Redemption Prices (expressed as a percentage of the
principal amount), if redeemed during the 12-month period commencing on February
1 of the year set forth below, plus, in each case, accrued and unpaid interest
thereon, if any, to the date of redemption:

<TABLE>
<CAPTION>
                                                               Redemption
Year                                                             Price
----                                                             -----
<S>                                                            <C>
2009...............................................             105.500%
2010...............................................             103.667%
2011...............................................             101.833%
2012 and thereafter................................             100.000%
</TABLE>

                  If less than all the Notes are to be redeemed, the Trustee
will select the particular Notes or portions thereof to be redeemed by lot, pro
rata or by any other method the Trustee shall deem fair and reasonable.

                  6.       Optional Redemption upon Equity Offerings. At any
time, or from time to time, on or prior to February 1, 2007, the Company may, at
its option, use the net cash proceeds of one or more Equity Offerings to redeem
up to 35% of the original principal

                                      B-5
<PAGE>

amount of the Notes issued under the Indenture at a Redemption Price equal to
111% of the Accreted Value thereof at the date of redemption, provided that at
least 65% of the aggregate principal amount at maturity of Notes issued under
the Indenture remains outstanding immediately after any such redemption; and
provided, further, that the Company shall make such redemption not more than 120
days after the consummation of any such Equity Offering. If less than all the
Notes are to be redeemed, the Trustee will select the particular Notes or
portions thereof to be redeemed by lot, only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to DTC procedures).

                  7.       Mandatory Redemption. Except as set forth in
Paragraph 9 below with respect to repurchases of Notes in certain events, the
Company shall not be required to make mandatory redemption payments with respect
to the Notes.

                  8.       Notice of Redemption. Subject to the provisions of
the Indenture, a notice of redemption will be mailed at least 30 days but not
more than 60 days (or in the case of a Change of Control Offer, at least 30 days
but not more than 45 days, or in the case of a Net Proceeds Offer, within 30
days) before the applicable redemption date to each Holder whose Notes are to be
redeemed at its registered address. Notes in denominations larger than $1,000
principal amount at maturity may be redeemed in part but only in whole multiples
of $1,000 principal amount at maturity, unless all of the Notes held by a Holder
are to be redeemed. On and after the redemption date interest ceases to accrue
on Notes or portions thereof called for redemption.

                  9.       Repurchase at Option of Holder.

                  (a)      If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a Purchase Price equal to 101% of the Accreted Value thereof plus accrued and
unpaid interest and Additional Interest, if any, to the date of repurchase, in
accordance with the procedures set forth in the Indenture. Within 30 days
following any Change of Control, the Company shall send, by first class mail, a
notice to each Holder setting forth the procedures governing the Change of
Control Offer as required by the Indenture.

                  (b)      On the 361st day after an Asset Sale or such earlier
date, if any, as the Board of Directors of the Company or of such Restricted
Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset
Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of paragraph (A) of
Section 4.10 of the Indenture (each, a "Net Proceeds Offer Trigger Date"), such
aggregate amount of Net Cash Proceeds which have not been applied on or before
such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and
(3)(c) of paragraph (A) of Section 4.10 of the Indenture (each, a "Net Proceeds
Offer Amount") shall be applied by the Company or such Restricted Subsidiary to
make an offer to purchase (the "Net Proceeds Offer") on a date not less than 45
nor more than 60 days following the applicable Net Proceeds Offer Trigger Date,
the maximum Accreted Value of Notes and principal amount of other Indebtedness
of the Company that ranks pari passu in right of payment with the Notes (to the
extent required by the instrument governing such other Indebtedness) that

                                      B-6
<PAGE>

may be purchased out of the Net Proceeds Offer Amount; provided, however,
notwithstanding the foregoing, in the case of an Asset Sale by a Restricted
Subsidiary of the Company, the Company shall not be required to make a Net
Proceeds Offer to the extent such Restricted Subsidiary is not permitted
pursuant to its outstanding Indebtedness to make a Restricted Payment to the
Company. Any Notes and other Indebtedness to be purchased pursuant to a Net
Proceeds Offer shall be purchased pro rata based on the aggregate principal
amount of Notes and such other Indebtedness outstanding and all Notes shall be
purchased at an offer price in cash in an amount equal to 100% of the Accreted
Value thereof, plus accrued and unpaid interest to the date of purchase. Each
Net Proceeds Offer will be mailed to the record Holders as shown on the register
of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a
copy to the Trustee, and shall comply with the procedures set forth in the
Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to
tender their Notes in whole or in part in integral multiples of $1,000 principal
amount at maturity in exchange for cash. To the extent Holders properly tender
Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering
Holders will be purchased on a pro rata basis (based on amounts tendered). A Net
Proceeds Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law.

                  10.      Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 principal amount at
maturity and integral multiples of $1,000 principal amount at maturity. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.

                  11.      Persons Deemed Owners. The registered Holder of a
Note may be treated as its owner for all purposes.

                  12.      Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount at maturity of
the then outstanding Notes, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount at maturity of the then outstanding
Notes. Without the consent of any Holder of a Note, the Indenture and the Notes
may be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
the Notes in case of a merger or consolidation, to make any change that would
provide any additional rights or benefits to the Holders of the Notes or that
does not adversely affect the legal rights under the Indenture of

                                      B-7
<PAGE>

any such Holder, or to comply with the requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.

                  13.      Defaults and Remedies. Events of Default include: (i)
default for 30 days in the payment when due of interest or Additional Interest,
if any, on the Notes; (ii) default in payment when due of principal, Redemption
Price or Purchase Price of the Notes when the same becomes due and payable at
maturity, upon redemption, repurchase or otherwise (including the failure to
make a payment to purchase Notes tendered pursuant to a Change of Control Offer
or a Net Proceeds Offer); (iii) failure by the Company to comply with any
covenant contained in the Indenture for 30 days after notice to the Company by
the Trustee or the Holders of at least 25% of the aggregate principal amount at
maturity of the Notes outstanding; (iv) default under certain other agreements
relating to Indebtedness of the Company which default (a) is caused by a failure
to pay any amount due at the final stated maturity thereof or (b) results in the
acceleration of such Indebtedness prior to its express final stated maturity
and, in each case, the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
default for failure to pay principal at final stated maturity or the final
stated maturity of which has been so accelerated, aggregates $5.0 million or
more and such failure shall not have been cured or waived within 20 days
thereof; (v) certain final judgments of the Company or any Significant
Subsidiary for the payment of money that remain undischarged for a period of 60
days, provided that the aggregate of all such undischarged judgments exceeds
$5.0 million; and (vi) certain events of bankruptcy or insolvency with respect
to the Company or any Significant Subsidiary of the Company. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Upon any such declaration, the Accreted
Value of, and accrued and unpaid interest, if any, and Additional Interest, if
any, if any, on the Notes shall become immediately due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in aggregate
principal amount at maturity of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to payment on any Note) if it
determines that withholding notice is in their interest. The Holders of a
majority in principal amount at maturity of the Notes may waive any existing or
past Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of, or interest on any Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.

                  14.      Trustee Dealings with Company. Subject to certain
limitations, the Trustee under the Indenture, in its individual or any other
capacity, may become owner or

                                      B-8
<PAGE>

pledge of Notes and may otherwise deal with the Company or its Affiliates as if
it were not Trustee.

                  15.      No Recourse Against Others. No past, present or
future director, officer, employee, incorporator or stockholder or Affiliate or
Subsidiary of the Company, as such, shall have any liability (except for any
liability for any obligations of the Guarantors under the Guarantees, if any)
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.

                  16.      Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.

                  17.      Abbreviations. Customary abbreviations may be used in
the name of a Holder 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 Gifts to Minors Act).

                  18.      Discharge Prior to Maturity. If the Company deposits
with the Trustee or Paying Agent cash or U.S. Government Obligations sufficient
to pay the principal or Redemption Price of, and interest and Additional
Interest, if any, on, the Notes to maturity or a specified Redemption Date and
satisfies certain conditions specified in the Indenture, the Company will be
discharged from the Indenture, except for certain Sections thereof.

                  19.      Governing Law. The Indenture and this Note shall be
governed by and construed in accordance with the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby. The Company hereby irrevocably submits to the jurisdiction of any New
York state court sitting in the Borough of Manhattan in the City of New York or
any Federal court sitting in the Borough of Manhattan in the City of New York in
respect of any suit, action or proceeding arising out of or relating to the
Indenture and the Notes, and irrevocably accepts for itself and in respect of
its property, generally and unconditionally, jurisdiction of the aforesaid
courts. The Company irrevocably waives, to the fullest extent that it may
effectively do so under applicable law, trial by jury and any objection which it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Trustee or any Holder of the Notes
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.

                  20.      CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the correctness or ac-

                                      B-9
<PAGE>

curacy of such numbers either as printed on the Notes or as contained in any
notice of redemption or repurchase and reliance may be placed only on the other
identification numbers placed thereon.

                  The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:

                                    Town Sports International Holdings, Inc.
                                    888 Seventh Avenue
                                    New York, New York  10106
                                    Attention:  Richard Pyle

                                      B-10
<PAGE>

                                 ASSIGNMENT FORM

                  To assign this Note, fill in the form below:

                  (I) or (we) assign and transfer this Note to

________________________________________________________________________________
                  (Insert assignee's soc. sec. or tax I.D. no.)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________
              (Print or type assignee's name address and zip code)

and irrevocably appoint_________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.

         Date: _____________________

                                      Your Signature: __________________________
                                                      (Sign exactly as your name
                                                      appears on the face of
                                                      this Note)

                  Signature Guarantee: _________________________________________
                                       (Participant in recognized signature
                                       guarantee medallion program)

                                      B-11
<PAGE>

                       OPTION OF HOLDER TO ELECT PURCHASE

                  If you wish to elect to have all or any portion of this Note
purchased by the Company pursuant to Section 4.10 ("Net Proceeds Offer") or
Section 4.15 ("Change of Control Offer") of the Indenture, check the applicable
boxes

                  [ ] Net Proceeds Offer:        [ ] Change of Control Offer:

                      in whole           [ ]         in whole           [ ]

                      in part            [ ]         in part            [ ]

                      Amount to be                   Amount to be
                      purchased: $___________        purchased: $___________

                  Dated: ____________________    Signature: ____________________
                                                           (Sign exactly as your
                                                            name appears on the
                                                            other side of this
                                                            Note)

                  Signature Guarantee: _________________________________________
                                       (Participant in recognized signature
                                       guarantee medallion program)

                  Social Security Number or
                  Taxpayer Identification Number: ______________________________

                                      B-12
<PAGE>

                                                                       EXHIBIT C

                                    GUARANTEE

                  For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Additional Interest payable
thereon) in the amounts and at the times when due and interest on the overdue
principal, premium, if any, and interest, if any, of this Note, if lawful, and
the payment or performance of all other Obligations of the Company under the
Indenture (as defined below) or the Note, to the Holder of this Note and the
Trustee, all in accordance with and subject to the terms and limitations of this
Note, Article X of the Indenture and this Guarantee. This Guarantee will become
effective in accordance with Article X of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of this Guarantee shall not
be affected by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Indenture dated as of February 4, 2004, between Town Sports
International Holdings, Inc., a Delaware corporation, as issuer (the "Company")
and The Bank of New York, as trustee (the "Trustee") (as amended or
supplemented, the "Indenture").

                  THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Each Guarantor hereby
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Guarantee.

                  This Guarantee is subject to release upon the terms set forth
in the Indenture.

                                                     [GUARANTOR]

                                                     By: _______________________
                                                         Name:
                                                         Title:

                                      C-1

<PAGE>

                                                                    EXHIBIT D(1)

                        FORM OF REGULATION S CERTIFICATE

                                               __________________,______________

The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286

Attention: Corporate Trust Trustee Administration

                  Re:   Town Sports International Holdings, Inc. (the "Company")
                        11% Senior Discount Notes due 2014 (the "Notes")

Dear Sirs:

                  This letter relates to U.S. $ ______________ principal amount
at maturity of Notes represented by a certificate (the "Legended Certificate")
which bears a legend outlining restrictions upon transfer of such Legended
Certificate. Pursuant to Section 2.1 of the Indenture (the "Indenture") dated as
of February 4, 2004 relating to the Notes, we hereby certify that we are (or we
will hold such securities on behalf of) a person outside the United States to
whom the Notes could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.

                  You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this letter have the
meanings set forth in Regulation S).

                                                 Very truly yours,

                                                 [Name of Holder]

                                                 By: ___________________________
                                                     Authorized Signature

                                     D(1)-1
<PAGE>

                                                                    EXHIBIT D(2)

                           CERTIFICATE TO BE DELIVERED
               UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES

                                               __________________,______________

The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286

Attention: Corporate Trust Trustee Administration

                  Re:   Town Sports International Holdings, Inc. (the "Company")
                        11% Senior Discount Notes due 2014 (the "Notes")

Dear Sirs:

                  This Certificate relates to $ _____________ principal amount
of Notes held in *____ book-entry or * _____ certificated form by ____________
(the "Transferor").

                  The Transferor:*

                  [ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the Depositary a
Note or Notes in certificated, registered form of authorized denominations in an
aggregate principal amount equal to its beneficial interest in such Global Note
(or the portion thereof indicated above); or

                  [ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.

                  In connection with such request and in respect of each such
Note, the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Notes and as provided in Section 2.6
of such Indenture, the transfer of this Note does not require registration under
the Securities Act (as defined below) because:*

                  [ ] Such Note is being acquired for the Transferor's own
account, without transfer.

------------------
*        Check applicable box

                                     D(2)-1
<PAGE>

                  [ ] Such Note is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act")) in reliance on Rule 144A.

                  [ ] Such Note is being transferred to an "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) in
accordance with Regulation D under the Securities Act.

                  [ ] Such Note is being transferred pursuant to an exemption
from registration in accordance with Regulation S under the Securities Act.

                  [ ] Such Note is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective registration statement
under the Securities Act.

                  [ ] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, 144 or Rule 904 under the Securities Act.
An Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.

                                              Very truly yours,

                                              __________________________________
                                                  [INSERT NAME OF TRANSFEROR]

                                              By: ______________________________
                                                  Name:
                                                  Title:

Date: __________________

                                     D(2)-2
<PAGE>

                                                                       EXHIBIT E

                            FORM OF CERTIFICATE TO BE
                          DELIVERED IN CONNECTION WITH
                    TRANSFERS TO NON QIB ACCREDITED INVESTORS

                                              _____________________,____________

The Bank of New York
101 Barclay Street, Floor 8W
New York, New York 10286

Attention: Corporate Trust Trustee Administration

                  Re:   Town Sports International Holdings, Inc. (the "Company")
                        11% Senior Discount Notes due 2014 (the "Notes")

Dear Sirs:

                  In connection with our proposed purchase of the Notes of the
Company, we confirm that:

                  We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of February 4, 2004 relating to the Notes (the "Indenture") and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").

                  We understand that the Notes have not been registered under
the Securities Act or any other applicable securities law, and that the Notes
may not be offered, sold or otherwise transferred except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should offer, sell,
transfer, pledge, hypothecate or otherwise dispose of any Notes within two years
after the original issuance of the Notes, we will do so only (A) to the Company
or any Subsidiary thereof, (B) inside the United States to a "qualified
institutional buyer" in compliance with Rule 144A under the Securities Act, (C)
inside the United States to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes to you a signed letter
substantially in the form of this letter, (D) outside the United States to a
foreign person in compliance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available), (F) in accordance with another exemption from
the registration requirements of the Securities Act, or (G) pursuant to an
effective registration statement under the Securities Act, and we further

                                      E-1
<PAGE>

agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein and in the Indenture.

                  We understand that, on any proposed transfer of any Notes
prior to the later of the original issue date of the Notes and the last date the
Notes were held by an affiliate of the Company pursuant to paragraphs 2(C), 2(D)
and 2(E) above, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed transfer complies with the
foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.

                  We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are acquiring the Notes for investment purposes
and not with a view to, or offer of sale in connection with, any distribution in
violation of the Securities Act, and we are each able to bear the economic risk
of our or its investment.

                  We are acquiring the Notes purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.

                  You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.

                                             Very truly yours,

                                             (Name of Transferee)

                                             By: _______________________________
                                                 Authorized Signature

                                      E-2
<PAGE>

                                                                       EXHIBIT F

                       FORM OF CERTIFICATE TO BE DELIVERED
                          IN CONNECTION WITH TRANSFERS
                            PURSUANT TO REGULATION S

                                                     __________________,________

The Bank of New York
Attention: Corporate Trust Trustee Administration
101 Barclay Street, Floor 8W
New York, New York 10286

                  Re:   Town Sports International Holdings, Inc. (the "Company")
                        11% Senior Discount Notes due 2014 (the "Notes")

Dear Sirs:

                  In connection with our proposed sale of $_________ aggregate
principal amount at maturity of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:

                  (1)      the offer of the Notes was not made to a person in
         the United States;

                  (2)      at the time the buy order was originated, the
         transferee was outside the United States or we and any person acting on
         our behalf reasonably believed that the transferee was outside the
         United States;

                  (3)      no directed selling efforts have been made by us in
         the United States in contravention of the requirements of Rule 903(b)
         or Rule 904(b) of Regulation S, as applicable; and

                  (4)      the transaction is not part of a plan or scheme to
         evade the registration requirements of the U.S. Securities Act of 1933.

                                      F-1
<PAGE>

                  You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this letter have the
meanings set forth in Regulation S.

                                             Very truly yours,

                                             [Name of Transferor]

                                             By: _______________________________
                                                 Authorized Signature

                                      F-2<PAGE>

                                                                     EXHIBIT 4.3

================================================================================

                          REGISTRATION RIGHTS AGREEMENT

                          Dated as of February 4, 2004

                                 By and Between

                    TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

                                   as Issuer,

                                       and

                          DEUTSCHE BANK SECURITIES INC.

                              as Initial Purchaser

================================================================================

                       11% SENIOR DISCOUNT NOTES DUE 2014

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>                                                                           <C>
1. DEFINITIONS...............................................................   1

2. EXCHANGE OFFER............................................................   4

3. SHELF REGISTRATION........................................................   8

4. ADDITIONAL INTEREST.......................................................   9

5. REGISTRATION PROCEDURES...................................................  11

6. REGISTRATION EXPENSES.....................................................  19

7. INDEMNIFICATION...........................................................  20

8. RULE 144 AND 144A.........................................................  23

9. UNDERWRITTEN REGISTRATIONS................................................  24

10. MISCELLANEOUS............................................................  24

   (a) No Inconsistent Agreements............................................  24
   (b) Adjustments Affecting Registrable Securities..........................  24
   (c) Amendments and Waivers................................................  24
   (d) Notices...............................................................  25
   (e) Successors and Assigns................................................  26
   (f) Counterparts..........................................................  26
   (g) Headings..............................................................  26
   (h) Governing Law.........................................................  26
   (i) Severability..........................................................  26
   (j) Securities Held by the Issuers or their Affiliates....................  27
   (k) Third Party Beneficiaries.............................................  27
   (l) Entire Agreement......................................................  27
</TABLE>
                                       -i-

<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

                  This Registration Rights Agreement (the "Agreement") is dated
as of February 4, 2004 by and between Town Sports International Holdings, Inc.,
a Delaware corporation (the "Company") and Deutsche Bank Securities Inc. (the
"Initial Purchaser").

                  This Agreement is entered into in connection with the Purchase
Agreement, dated as of January 28, 2004, by and between the Company and the
Initial Purchaser (the "Purchase Agreement") that provides for the sale by the
Company to the Initial Purchaser of $213,000,000 aggregate principal amount at
maturity (yielding gross proceeds of approximately $124,807,350) of the
Company's 11% Senior Discount Notes due 2014 (the "Notes"). In order to induce
the Initial Purchaser to enter into the Purchase Agreement, the Company has
agreed to provide the registration rights set forth in this Agreement for the
benefit of the Initial Purchaser and its direct and indirect transferees and
assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchaser's obligation to purchase the Notes under the Purchase
Agreement.

                  The parties hereby agree as follows:

1.       DEFINITIONS

                  As used in this Agreement, the following terms shall have the
following meanings:

                  Accreted Value: Shall have the meaning assigned thereto in the
Indenture.

                  Additional Interest: See Section 4(a) hereof.

                  Advice: See the last paragraph of Section 5 hereof.

                  Agreement: See the first introductory paragraph hereto.

                  Applicable Period: See Section 2(b) hereof.

                  Closing Date: The Closing Date as defined in the Purchase
Agreement.

                  Company: See the first introductory paragraph hereto.

                  Effectiveness Date: The date that is 210 days after the Issue
Date; provided, however, that with respect to any Shelf Registration, the
Effectiveness Date shall be the 210th day after the delivery of a Shelf Notice
as required pursuant to Section 2(c) hereof.

                  Effectiveness Period: See Section 3(a) hereof.

<PAGE>

                                       -2-

                  Event Date: See Section 4(b) hereof.

                  Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.

                  Exchange Notes: See Section 2(a) hereof.

                  Exchange Offer: See Section 2(a) hereof.

                  Exchange Offer Registration Statement: See Section 2(a)
hereof.

                  Filing Date: (A) If no Exchange Offer Registration Statement
has been filed by the Issuers pursuant to this Agreement, the 120th day after
the Issue Date; and (B) with respect to a Shelf Registration Statement, the
120th day after the delivery of a Shelf Notice as required pursuant to Section
2(c) hereof.

                  Holder: Any holder of a Registrable Security or Registrable
Securities.

                  Indemnified Person: See Section 7(c) hereof.

                  Indemnifying Person: See Section 7(c) hereof.

                  Indenture: The Indenture, dated as of February 4, 2004, by and
between the Company and The Bank of New York, as trustee, pursuant to which the
Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.

                  Initial Purchaser: See the first introductory paragraph
hereto.

                  Inspectors: See Section 5(o) hereof.

                  Issue Date: The date on which the Notes were sold to the
Initial Purchaser pursuant to the Purchase Agreement.

                  NASD: See Section 5(t) hereof.

                  Notes: See the second introductory paragraph hereto.

                  Offering Memorandum: The final offering memorandum of the
Company dated January 28, 2004, in respect of the offering of the Notes.

                  Participant: See Section 7(a) hereof.

                  Participating Broker-Dealer: See Section 2(b) hereof.

<PAGE>

                                       -3-

                  Person: An individual, trustee, corporation, partnership,
limited liability company, joint stock company, trust, unincorporated
association, union, business association, firm or other legal entity.

                  Private Exchange: See Section 2(b) hereof.

                  Private Exchange Notes: See Section 2(b) hereof.

                  Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.

                  Purchase Agreement: See the second introductory paragraph
hereto.

                  Records: See Section 5(o) hereof.

                  Registrable Notes: Each Note upon original issuance of the
Notes and at all times subsequent thereto, each Exchange Note as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and each Private Exchange Note upon original issuance thereof
and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) a Registration Statement (other than, with respect to any Exchange
Note as to which Section 2(c)(v) hereof is applicable, the Exchange Offer
Registration Statement) covering such Note, Exchange Note or Private Exchange
Note, as the case may be, has been declared effective by the SEC and such Note,
Exchange Note or Private Exchange Note, as the case may be, has been disposed of
in accordance with such effective Registration Statement, (ii) such Note,
Exchange Note or Private Exchange Note, as the case may be, is sold in
compliance with Rule 144, (iii) such Note has been exchanged for an Exchange
Note or Exchange Notes pursuant to an Exchange Offer and is entitled to be
resold without complying with the prospectus delivery requirements of the
Securities Act and (iv) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.

                  Registration Statement: Any registration statement of the
Company, including, but not limited to, the Exchange Offer Registration
Statement and any registration statement filed in connection with a Shelf
Registration, filed with the SEC pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration

<PAGE>

                                       -4-

statement, including post-effective amendments, all exhibits and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

                  Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.

                  Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.

                  Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.

                  SEC: The Securities and Exchange Commission.

                  Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.

                  Shelf Notice: See Section 2(c) hereof.

                  Shelf Registration: See Section 3(a) hereof.

                  TIA: The Trust Indenture Act of 1939, as amended.

                  Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).

                  Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.

2.       EXCHANGE OFFER

                  (a)      The Company shall file with the SEC, to the extent
not prohibited by any applicable law or applicable interpretation of the staff
of the SEC no later than the Filing Date, a Registration Statement on an
appropriate registration form (the "Exchange Offer Registration Statement") with
respect to a registered offer (the "Exchange Offer") to exchange any and all of
the Registrable Notes (other than the Private Exchange Notes, if any) for a like
aggregate principal amount at maturity of debt securities of the Company that
are identical in all material respects to the Notes ( the "Exchange Notes") (and
that are entitled to the benefits of the Indenture or a trust indenture that is
identical in all material respects to the Indenture

<PAGE>

                                       -5-

(other than such changes to the Indenture or any such identical trust indenture
as are necessary to comply with any requirements of the SEC to effect or
maintain the qualification thereof under the TIA) and that, in either case, has
been qualified under the TIA), except that the Exchange Notes (other than
Private Exchange Notes, if any) shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company agrees to
use its reasonable best efforts to (x) cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act on or before the
Effectiveness Date; (y) keep the Exchange Offer open for not less than 30 days
(or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 240th day following the Issue Date. If after such Exchange Offer
Registration Statement is declared effective by the SEC, the Exchange Offer or
the issuance of the Exchange Notes thereunder is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Exchange Offer Registration Statement shall
be deemed not to have become effective for purposes of this Agreement during the
period of such interference until the Exchange Offer may legally resume.

                  Each Holder who participates in the Exchange Offer will be
required to represent in writing (i) that any Exchange Notes received by it will
be acquired in the ordinary course of its business, (ii) that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, (iii) that such
Holder is not an affiliate of the Company within the meaning of the Securities
Act and is not acting on behalf of any persons or entities who could not
truthfully make the foregoing representations, (iv) if such Holder is not a
broker-dealer, that it is not engaged in, and does not intend to engage in, the
distribution of Exchange Notes, and (v) if such Holder is a broker-dealer that
will receive Exchange Notes for its own account in exchange for Notes that were
acquired as a result of market-making or other trading activities, that it will
deliver a prospectus in connection with any resale of such Exchange Notes.

                  Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Notes that are Private
Exchange Notes and Exchange Notes held by Participating Broker-Dealers, and the
Company shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and other than in respect of any Exchange Notes as
to which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No
securities other than the Exchange Notes shall be included in the Exchange Offer
Registration Statement.

                  (b)      The Company shall include within the Prospectus
contained in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," reasonably ac-

<PAGE>

                                       -6-

ceptable to the Initial Purchaser, that shall contain a summary statement of the
positions taken or policies made by the Staff of the SEC with respect to the
potential "underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the staff
of the SEC or such positions or policies, in the judgment of the Initial
Purchaser, represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also expressly permit, to the extent permitted by
applicable policies and regulations of the SEC, the use of the Prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including to the extent permitted by applicable policies and regulations of the
SEC, all Participating Broker-Dealers, and include a statement describing the
means by which Participating Broker-Dealers may resell the Exchange Notes in
compliance with the Securities Act.

                  The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as is necessary to comply with applicable
law in connection with any resale of the Exchange Notes covered thereby.

                  If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it and having, or that are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company, upon the request of the Initial Purchaser
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
shall issue and deliver to the Initial Purchaser in exchange (the "Private
Exchange") for such Notes held by the Initial Purchaser a like principal amount
at maturity of debt securities of the Company that are identical in all material
respects to the Exchange Notes (the "Private Exchange Notes") (and that are
issued pursuant to the same indenture as the Exchange Notes), except for the
placement of a restrictive legend on such Private Exchange Notes. The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes.

                  Interest on each Exchange Note will accrue (A) from the later
of (i) the last interest payment date on which interest was paid on the Note
surrendered in exchange therefor, or (ii) if the Note is surrendered for
exchange on a date in a period which includes the record date for an interest
payment date to occur on or after the date of such exchange and as to which
interest will be paid, the date of such interest payment date or (B) if no
interest has been paid on such Note, from the Issue Date.

<PAGE>

                                       -7-

                  In connection with the Exchange Offer, the Company shall:

                  (1)      mail to each Holder a copy of the Prospectus forming
         part of the Exchange Offer Registration Statement, together with an
         appropriate letter of transmittal and related documents;

                  (2)      utilize the services of a depositary for the Exchange
         Offer with an address in the Borough of Manhattan, The City of New
         York;

                  (3)      permit Holders to withdraw tendered Notes at any time
         prior to the close of business, New York time, on the last business day
         on which the Exchange Offer shall remain open; and

                  (4)      otherwise comply in all material respects with all
         applicable laws, rules and regulations.

                  As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:

                  (1)      accept for exchange all Registrable Notes properly
         tendered and not validly withdrawn pursuant to the Exchange Offer or
         the Private Exchange;

                  (2)      deliver to the Trustee for cancellation all
         Registrable Notes so accepted for exchange; and

                  (3)      cause the Trustee to authenticate and deliver
         promptly to each Holder of Notes, Exchange Notes or Private Exchange
         Notes, as the case may be, equal in principal amount at maturity to the
         Notes of such Holder so accepted for exchange.

                  The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture, which in either event has been qualified under the
TIA or is exempt from such qualification and shall provide that (1) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter.

                  (c)      If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Company is not permitted
to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within
240 days of the Issue Date (provided that if the Exchange Offer shall be
consummated after such 240-day period, then the Company's

<PAGE>

                                       -8-

obligation under this clause (ii) arising from the failure of the Exchange Offer
to be consummated within such 240-day period shall terminate), (iii) the holder
of Private Exchange Notes so requests at any time within 90 days after the
consummation of the Private Exchange, (iv) because of any changes in law or in
currently prevailing interpretations of the staff of the SEC, a Holder (other
than the Initial Purchaser holding Notes acquired directly from the Company) is
not permitted to participate in the Exchange Offer or (v) in the case of any
Holder that participates in the Exchange Offer, such Holder does not receive
Exchange Notes on the date of the exchange that may be sold without restriction
under state and federal securities laws (other than due solely to the status of
such Holder as an affiliate of the Company within the meaning of the Securities
Act), then the Company shall promptly deliver written notice thereof (the "Shelf
Notice") to the Trustee and in the case of clauses (i), (ii) and (iv), all
Holders, in the case of clause (iii), the Holders of the Private Exchange Notes
and in the case of clause (v), the affected Holder, and shall file a Shelf
Registration pursuant to Section 3 hereof.

3.       SHELF REGISTRATION

                  If a Shelf Notice is delivered as contemplated by Section 2(c)
hereof, then:

                  (a)      Shelf Registration. The Company shall file with the
         SEC a Registration Statement for an offering to be made on a continuous
         basis pursuant to Rule 415 covering all of the Registrable Notes not
         exchanged in the Exchange Offer, Private Exchange Notes and Exchange
         Notes as to which Section 2(c)(iv) is applicable (the "Shelf
         Registration"). The Company shall use its reasonable best efforts to
         file with the SEC the Shelf Registration on or prior to the applicable
         Filing Date. The Shelf Registration shall be on Form S-1 or another
         appropriate form permitting registration of such Registrable Notes for
         resale by Holders in the manner or manners designated by them
         (including, without limitation, one or more underwritten offerings).
         The Company shall not permit any securities other than the Registrable
         Notes to be included in the Shelf Registration.

                  The Company shall use its reasonable best efforts to cause the
Shelf Registration to be declared effective under the Securities Act on or prior
to the Effectiveness Date and to keep the Shelf Registration continuously
effective under the Securities Act until the date that is two years from the
Issue Date or such shorter period ending when all Registrable Notes covered by
the Shelf Registration have been sold in the manner set forth and as
contemplated in the Shelf Registration or cease to be outstanding (the
"Effectiveness Period"); provided, however, that the Effectiveness Period in
respect of the Shelf Registration shall be extended to the extent required to
permit dealers to comply with the applicable prospectus delivery requirements of
Rule 174 under the Securities Act and as otherwise provided herein.

<PAGE>

                                       -9-

                  (b)      Withdrawal of Stop Orders. If the Shelf Registration
         ceases to be effective for any reason at any time during the
         Effectiveness Period (other than because of the sale of all of the
         securities registered thereunder), the Company shall use its best
         efforts to obtain the prompt withdrawal of any order suspending the
         effectiveness thereof.

                  (c)      Supplements and Amendments. The Company shall
         promptly supplement and amend the Shelf Registration if required by the
         rules, regulations or instructions applicable to the registration form
         used for such Shelf Registration, if required by the Securities Act, or
         if reasonably requested by the Holders of a majority in aggregate
         principal amount at maturity of the Registrable Notes covered by such
         Registration Statement or by any underwriter of such Registrable Notes.

4.       ADDITIONAL INTEREST

                  (a)      The Company and the Initial Purchaser agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay, as liquidated damages, additional interest on the
Notes ("Additional Interest") under the circumstances and to the extent set
forth below (without duplication):

                  (i)      if (A) neither the Exchange Offer Registration
         Statement nor the Shelf Registration has been filed on or prior to the
         applicable Filing Date or (B) notwithstanding that the Company has
         consummated or will consummate the Exchange Offer, the Company is
         required to file a Shelf Registration and such Shelf Registration is
         not filed on or prior to the Filing Date applicable thereto, then,
         commencing on the day after any such Filing Date, Additional Interest
         shall accrue on the Notes over and above the stated interest at a rate
         of 0.25% per annum for the first 90 days immediately following the
         Filing Date, such Additional Interest rate increasing by an additional
         0.25% per annum at the beginning of each subsequent 90-day period;

                  (ii)     if (A) neither the Exchange Offer Registration
         Statement nor the Initial Shelf Registration is declared effective by
         the SEC on or prior to 210 days after the Issue Date or (B)
         notwithstanding that the Company has consummated or will consummate the
         Exchange Offer, the Company is required to file a Shelf Registration
         and such Shelf Registration is not declared effective by the SEC on or
         prior to the 90th day following the date such Shelf Registration was
         filed, then, commencing on the day after such required effective date,
         Additional Interest shall accrue on the principal amount of the Notes
         at a rate of 0.25% per annum for the first 90 days immediately
         following each such filing date, such Additional Interest rate
         increasing by an additional 0.25% per annum at the beginning of each
         subsequent 90-day period; and

<PAGE>

                                      -10-

                  (iii)    if either (A) the Company has not exchanged Exchange
         Notes for all Notes validly tendered in accordance with the terms of
         the Exchange Offer on or prior to the 45th day after the date on which
         the Exchange Offer Registration Statement was declared effective or (B)
         if applicable, a Shelf Registration has been declared effective and
         such Shelf Registration ceases to be effective at any time prior to the
         second anniversary of the Issue Date (other than after such time as all
         Notes have been disposed of thereunder), then Additional Interest shall
         accrue on the principal amount of the Notes at a rate of 0.25% per
         annum for the first 90 days commencing on (x) the 46th day after such
         effective date, in the case of (A) above, or (y) the day such Shelf
         Registration ceases to be effective, in the case of (B) above, such
         Additional Interest rate increasing by an additional 0.25% per annum at
         the beginning of each such subsequent 90-day period;

provided, however, that the Additional Interest rate on the Notes may not accrue
under more than one of the foregoing clauses (i) through (iii) of this Section
4(a) at the same time and at no time shall the aggregate amount of Additional
Interest accruing exceed at any one time in the aggregate 1.0% per annum; and
provided, further, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration (in the case of clause (i) of this Section
4(a)), (2) upon the effectiveness of the Exchange Offer Registration Statement
or the Shelf Registration (in the case of clause (ii) of this Section 4(a)), or
(3) upon the exchange of Exchange Notes for all Notes tendered (in the case of
clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the
applicable Shelf Registration that had ceased to remain effective (in the case
of (iii)(B) of this Section 4(a)), Additional Interest on the Notes as a result
of such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue.

                  (b)      The Company shall notify the Trustee within three
business days after each and every date on which an event occurs in respect of
which Additional Interest is required to be paid (an "Event Date"). Any amounts
of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this
Section 4 on or prior to February 1, 2009 shall be added to the Accreted Value
of each Note and all Additional Interest due thereafter shall be payable in
cash, in each case, semi-annually on each February 1 and August 1 (to the
holders of record on the January 15 and July 15 immediately preceding such
dates), in each case, commencing with the first such date occurring after any
such Additional Interest commences to accrue. The amount of Additional Interest
will be determined by multiplying the applicable Additional Interest rate by the
Accreted Value of the Registrable Notes, multiplied by a fraction, the numerator
of which is the number of days such Additional Interest rate was applicable
during such period (determined on the basis of a 360-day year consisting of
twelve 30-day months and, in the case of a partial month, the actual number of
days elapsed) and the denominator of which is 360.

<PAGE>

                                      -11-

5.       REGISTRATION PROCEDURES

                  In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto and in
connection with any Registration Statement filed by the Company hereunder, the
Company shall:

                  (a)      Prepare and file with the SEC prior to the Filing
         Date, a Registration Statement or Registration Statements as prescribed
         by Sections 2 or 3 hereof, and use its reasonable best efforts to cause
         each such Registration Statement to become effective and remain
         effective as provided herein; provided, however, that, if (1) such
         filing is pursuant to Section 3 hereof or (2) a Prospectus contained in
         an Exchange Offer Registration Statement filed pursuant to Section 2
         hereof is required to be delivered under the Securities Act by any
         Participating Broker-Dealer who seeks to sell Exchange Notes during the
         Applicable Period, before filing any Registration Statement or
         Prospectus or any amendments or supplements thereto, the Company shall
         furnish to and afford the Holders of the Registrable Notes covered by
         such Registration Statement or each such Participating Broker-Dealer,
         as the case may be, their counsel and the managing underwriters, if
         any, a reasonable opportunity to review copies of all such documents
         (including copies of any documents to be incorporated by reference
         therein and all exhibits thereto) proposed to be filed (in each case at
         least three business days prior to such filing). The Company shall not
         file any Registration Statement or Prospectus or any amendments or
         supplements thereto if the Holders of a majority in aggregate principal
         amount at maturity of the Registrable Notes covered by such
         Registration Statement, or any such Participating Broker-Dealer, as the
         case may be, or their counsel, or the managing underwriters, if any,
         shall reasonably object on a timely basis.

                  (b)      Prepare and file with the SEC such amendments and
         post-effective amendments to each Shelf Registration or Exchange Offer
         Registration Statement, as the case may be, as may be necessary to keep
         such Registration Statement continuously effective for the
         Effectiveness Period or the Applicable Period, as the case may be;
         cause the related Prospectus to be supplemented by any prospectus
         supplement required by applicable law, and as so supplemented to be
         filed pursuant to Rule 424 (or any similar provisions then in force)
         promulgated under the Securities Act; and comply in all material
         respects with the provisions of the Securities Act and the Exchange Act
         applicable to it with respect to the disposition of all securities
         covered by such Registration Statement as so amended or in such
         Prospectus as so supplemented and with respect to the subsequent resale
         of any securities being sold by a Participating Broker-Dealer covered
         by any such Prospectus; the Company shall be deemed not to have used
         its reasonable best efforts to keep a Registration Statement effective
         during

<PAGE>

                                      -12-

         the Applicable Period if the Company voluntarily takes any action that
         would result in selling Holders of the Registrable Notes covered
         thereby or Participating Broker-Dealers seeking to sell Exchange Notes
         not being able to sell such Registrable Notes or such Exchange Notes
         during that period, unless such action is required by applicable law or
         unless the Company complies in all material respects with this
         Agreement, including without limitation, the provisions of paragraph
         5(k) hereof and the last paragraph of this Section 5.

                  (c)      If (1) a Shelf Registration is filed pursuant to
         Section 3 hereof or (2) a Prospectus contained in an Exchange Offer
         Registration Statement filed pursuant to Section 2 hereof is required
         to be delivered under the Securities Act by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, the Company shall notify the selling Holders of Registrable
         Notes, or each such Participating Broker-Dealer, as the case may be,
         their counsel and the managing underwriters, if any, promptly (but in
         any event within two business days) and confirm such notice in writing,
         (i) when a Prospectus or any Prospectus supplement or post-effective
         amendment has been filed, and, with respect to a Registration Statement
         or any post-effective amendment, when the same has become effective
         under the Securities Act (including in such notice a written statement
         that any Holder may, upon request, obtain, at the sole expense of the
         Company, one conformed copy of such Registration Statement or
         post-effective amendment including financial statements and schedules,
         documents incorporated or deemed to be incorporated by reference and
         exhibits), (ii) of the issuance by the SEC of any stop order suspending
         the effectiveness of a Registration Statement or of any order
         preventing or suspending the use of any preliminary prospectus or the
         initiation of any proceedings for that purpose, (iii) if at any time
         when a prospectus is required by the Securities Act to be delivered in
         connection with sales of the Registrable Securities or resales of
         Exchange Notes by Participating Broker-Dealers the representations and
         warranties of the Company contained in any agreement (including any
         underwriting agreement), contemplated by Section 5(n) hereof cease to
         be true and correct, (iv) of the receipt by the Company of any
         notification with respect to the suspension of the qualification or
         exemption from qualification of a Registration Statement or any of the
         Registrable Notes or the Exchange Notes to be sold by any Participating
         Broker-Dealer for offer or sale in any jurisdiction, or the initiation
         or written threat of any proceeding for such purpose, (v) of the
         happening of any event, the existence of any condition or any
         information becoming known that makes any statement made in such
         Registration Statement or related Prospectus or any document
         incorporated or deemed to be incorporated therein by reference untrue
         in any material respects or that requires the making of any material
         changes in or amendments or supplements to such Registration Statement,
         Prospectus or documents so that, in the case of the Registration
         Statement, it will not contain any untrue statement of a material fact
         or omit to state any material fact required to be stated therein or
         necessary to make the statements therein not misleading, and that in
         the case of the

<PAGE>

                                      -13-

         Prospectus, it will not contain any untrue statement of a material fact
         or omit to state any material fact required to be stated therein or
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading and (vi) of
         the Company's determination that a post-effective amendment to a
         Registration Statement would be appropriate.

                  (d)      Use its reasonable best efforts to prevent the
         issuance of any order suspending the effectiveness of a Registration
         Statement or of any order preventing or suspending the use of a
         Prospectus or suspending the qualification (or exemption from
         qualification) of any of the Registrable Notes or the Exchange Notes
         for sale in any jurisdiction and, if any such order is issued, to use
         their reasonable best efforts to obtain the withdrawal of any such
         order at the earliest possible moment.

                  (e)      If a Shelf Registration is filed pursuant to Section
         3 and if requested by the managing underwriter or underwriters, if any,
         or the Holders of a majority in aggregate principal amount at maturity
         of the Registrable Notes being sold in connection with an underwritten
         offering, (i) promptly incorporate in a prospectus supplement or
         post-effective amendment such information as the managing underwriter
         or underwriters, if any, such Holders or counsel for any of them
         determine is reasonably necessary to be included therein, (ii) make all
         required filings of such prospectus supplement or such post-effective
         amendment as soon as practicable after the Company has received
         notification of the matters to be incorporated in such prospectus
         supplement or post-effective amendment and (iii) supplement or make
         amendments to such Registration Statement; provided, however, that the
         Company shall not be required to take any action pursuant to this
         Section 5(e) that would, in the opinion of counsel for the Company,
         violate applicable law.

                  (f)      If (1) a Shelf Registration is filed pursuant to
         Section 3 hereof or (2) a Prospectus contained in an Exchange Offer
         Registration Statement filed pursuant to Section 2 hereof is required
         to be delivered under the Securities Act by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, furnish to each selling Holder of Registrable Notes and to each
         such Participating Broker-Dealer who so requests and to their
         respective counsel and each managing underwriter, if any, at the sole
         expense of the Company, one conformed copy of the Registration
         Statement or Registration Statements and each post-effective amendment
         thereto, including financial statements and schedules and, if
         requested, all documents incorporated or deemed to be incorporated
         therein by reference and all exhibits.

                  (g)      If (1) a Shelf Registration is filed pursuant to
         Section 3 hereof or (2) a Prospectus contained in an Exchange Offer
         Registration Statement filed pursuant to Section 2 hereof is required
         to be delivered under the Securities Act by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, de-

<PAGE>

                                      -14-

         liver to each selling Holder of Registrable Notes, or each such
         Participating Broker-Dealer, as the case may be, their respective
         counsel and the underwriters, if any, at the sole expense of the
         Company, as many copies of the Prospectus or Prospectuses (including
         each form of preliminary prospectus) and each amendment or supplement
         thereto and any documents incorporated by reference therein as such
         Persons may reasonably request; and, subject to the last paragraph of
         this Section 5, the Company hereby consents to the use of such
         Prospectus and each amendment or supplement thereto by each of the
         selling Holders of Registrable Notes or each such Participating
         Broker-Dealer, as the case may be, and the underwriters or agents, if
         any, and dealers, if any, in connection with the offering and sale of
         the Registrable Notes covered by, or the sale by Participating
         Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and
         any amendment or supplement thereto.

                  (h)      Prior to any public offering of Registrable Notes or
         Exchange Notes or any delivery of a Prospectus contained in the
         Exchange Offer Registration Statement by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, to use its reasonable best efforts to register or qualify and
         to cooperate with the selling Holders of Registrable Notes or each such
         Participating Broker-Dealer, as the case may be, the managing
         underwriter or underwriters, if any, and their respective counsel in
         connection with the registration or qualification (or exemption from
         such registration or qualification) of such Registrable Notes for offer
         and sale under the securities or Blue Sky laws of such jurisdictions
         within the United States as any selling Holder, Participating
         Broker-Dealer or the managing underwriter or underwriters reasonably
         request in writing; provided, however, that where Exchange Notes held
         by Participating Broker-Dealers or Registrable Notes are offered other
         than through an underwritten offering, the Company agrees to cause
         their counsel to perform Blue Sky investigations and file registrations
         and qualifications required to be filed pursuant to this Section 5(h);
         use its reasonable best efforts to keep each such registration or
         qualification (or exemption therefrom) effective during the period such
         Registration Statement is required to be kept effective and do any and
         all other acts or things reasonably necessary or advisable to enable
         the disposition in such jurisdictions of the Exchange Notes held by
         Participating Broker-Dealers or the Registrable Notes covered by the
         applicable Registration Statement; provided, however, that the Company
         shall not be required to (A) qualify generally to do business in any
         jurisdiction where it is not then so qualified, (B) take any action
         that would subject it to general service of process in any such
         jurisdiction where it is not then so subject or (C) subject itself to
         taxation in any such jurisdiction where it is not then so subject.

                  (i)      If a Shelf Registration is filed pursuant to Section
         3 hereof, cooperate with the selling Holders of Registrable Notes and
         the managing underwriter or underwriters, if any, to facilitate the
         timely preparation and delivery of certificates representing
         Registrable Notes to be sold, which certificates shall not bear any
         restrictive

<PAGE>

                                      -15-

         legends and shall be in a form eligible for deposit with The Depository
         Trust Company; and enable such Registrable Notes to be in such
         denominations and registered in such names as the managing underwriter
         or underwriters, if any, or Holders may reasonably request.

                  (j)      Use their respective reasonable best efforts to cause
         the Registrable Notes covered by the Registration Statement to be
         registered with or approved by such other governmental agencies or
         authorities as may be necessary to enable the Holders thereof or the
         underwriter or underwriters, if any, to consummate the disposition of
         such Registrable Notes, except as may be required solely as a
         consequence of the nature of such selling Holder's business, in which
         case the Company will cooperate in all reasonable respects with the
         filing of such Registration Statement and the granting of such
         approvals.

                  (k)      If (1) a Shelf Registration is filed pursuant to
         Section 3 hereof or (2) a Prospectus contained in an Exchange Offer
         Registration Statement filed pursuant to Section 2 hereof is required
         to be delivered under the Securities Act by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, upon the occurrence of any event contemplated by paragraph
         5(c)(v) or 5(c)(vi) hereof, as promptly as practicable, prepare and
         (subject to Section 5(a) hereof) file with the SEC, at the Company's
         sole expense, a supplement or post-effective amendment to the
         Registration Statement or a supplement to the related Prospectus or any
         document incorporated or deemed to be incorporated therein by
         reference, or file any other required document so that, as thereafter
         delivered to the purchasers of the Registrable Notes being sold
         thereunder or to the purchasers of the Exchange Notes to whom such
         Prospectus will be delivered by a Participating Broker-Dealer, any such
         Prospectus will not contain an untrue statement of a material fact or
         omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading.

                  (l)      Use its reasonable best efforts to cause the
         Registrable Notes covered by a Registration Statement or the Exchange
         Notes, as the case may be, to be rated with the appropriate rating
         agencies, if so requested by the Holders of a majority in aggregate
         principal amount at maturity of Registrable Notes covered by such
         Registration Statement or the Exchange Notes, as the case may be, or
         the managing underwriter or underwriters, if any.

                  (m)      Prior to the effective date of the first Registration
         Statement relating to the Registrable Notes, (i) provide the Trustee
         with certificates for the Registrable Notes or Exchange Notes, as the
         case may be, in a form eligible for deposit with Euroclear and
         Clearstream and (ii) provide a CUSIP number for the Registrable Notes
         or Exchange Notes, as the case may be.

<PAGE>

                                      -16-

                  (n)      In connection with any underwritten offering of
         Registrable Notes pursuant to a Shelf Registration, enter into an
         underwriting agreement as is customary in underwritten offerings of
         debt securities similar to the Notes and take all such other actions as
         are reasonably requested by the managing underwriter or underwriters in
         order to expedite or facilitate the registration or the disposition of
         such Registrable Notes and, in such connection, (i) make such
         representations and warranties to, and covenants with, the underwriters
         with respect to the business of the Company and its subsidiaries
         (including any acquired business, properties or entity, if applicable)
         and the Registration Statement, Prospectus and documents, if any,
         incorporated or deemed to be incorporated by reference therein, in each
         case, as are customarily made by issuers to underwriters in
         underwritten offerings of debt securities similar to the Notes, and
         confirm the same in writing if and when requested; (ii) obtain the
         written opinion of counsel to the Company and written updates thereof
         in form, scope and substance reasonably satisfactory to the managing
         underwriter or underwriters, addressed to the underwriters covering the
         matters customarily covered in opinions requested in underwritten
         offerings of debt similar to the Notes and such other matters as may be
         reasonably requested by the managing underwriter or underwriters; (iii)
         obtain "cold comfort" letters and updates thereof in form, scope and
         substance reasonably satisfactory to the managing underwriter or
         underwriters from the independent certified public accountants of the
         Company (and, if necessary, any other independent certified public
         accountants of any subsidiary of the Company or of any business
         acquired by the Company for which financial statements and financial
         data are, or are required to be, included or incorporated by reference
         in the Registration Statement), addressed to each of the underwriters,
         such letters to be in customary form and covering matters of the type
         customarily covered in "cold comfort" letters in connection with
         underwritten offerings of debt securities similar to the Notes and such
         other matters as reasonably requested by the managing underwriter or
         underwriters; and (iv) if an underwriting agreement is entered into,
         the same shall contain indemnification provisions and procedures no
         less favorable than those set forth in Section 7 hereof (or such other
         provisions and procedures acceptable to Holders of a majority in
         aggregate principal amount at maturity of Registrable Notes covered by
         such Registration Statement and the managing underwriter or
         underwriters or agents) with respect to all parties to be indemnified
         pursuant to said Section. The above shall be done at each closing under
         such underwriting agreement, or as and to the extent required
         thereunder.

                  (o)      If (1) a Shelf Registration is filed pursuant to
         Section 3 hereof or (2) a Prospectus contained in an Exchange Offer
         Registration Statement filed pursuant to Section 2 hereof is required
         to be delivered under the Securities Act by any Participating
         Broker-Dealer who seeks to sell Exchange Notes during the Applicable
         Period, upon reasonable advance notice make available for inspection by
         any selling Holder of such Registrable Notes being sold, or each such
         Participating Broker-Dealer, as the case may be, any underwriter
         participating in any such disposition of Registrable

<PAGE>

                                      -17-

         Notes, if any, and any attorney, accountant or other agent retained by
         any such selling Holder or each such Participating Broker-Dealer, as
         the case may be, or underwriter (collectively, the "Inspectors"), at
         the offices where normally kept, during reasonable business hours
         without interfering in the orderly business of the Company, all
         financial and other relevant records, pertinent corporate documents and
         instruments of the Company and its subsidiaries (collectively, the
         "Records") as shall be reasonably necessary to enable them to exercise
         any applicable due diligence responsibilities, and cause the respective
         officers, directors and employees of the Company and its subsidiaries
         to supply all information reasonably requested by any such Inspector in
         connection with such Registration Statement. Any such access granted to
         the Inspectors under this Section 5(o) shall be subject to the prior
         receipt by the Company of written undertakings, in form and substance
         reasonably satisfactory to the Company, to preserve the confidentiality
         of any information deemed by the Company to be confidential. Records
         that the Company determines, in good faith, to be confidential and any
         Records that they notify the Inspectors are confidential shall not be
         disclosed by the Inspectors unless (i) the Company based upon advice of
         counsel determines that disclosure of such Records is necessary to
         avoid or correct a material misstatement or omission in such
         Registration Statement, (ii) the release of such Records is ordered
         pursuant to a subpoena or other order from a court of competent
         jurisdiction, (iii) after giving reasonable prior notice to the
         Company, disclosure of such information is, in the opinion of counsel
         for any Inspector, necessary or advisable in connection with any
         action, claim, suit or proceeding, directly or indirectly, involving or
         potentially involving such Inspector and arising out of, based upon,
         relating to or involving this Agreement or any transactions
         contemplated hereby or arising hereunder or (iv) the information in
         such Records has been made generally available to the public. Each
         selling Holder of such Registrable Notes and each such Participating
         Broker-Dealer will be required to agree that information obtained by it
         as a result of such inspections shall be deemed confidential and shall
         not be used by it as the basis for any market transactions in the
         securities of the Company unless and until such information is
         generally available to the public. Each selling Holder of such
         Registrable Notes and each such Participating Broker-Dealer will be
         required to further agree that it will, upon learning that disclosure
         of such Records is sought in a court of competent jurisdiction, give
         notice to the Company and allow the Company to undertake appropriate
         action to prevent disclosure of the Records deemed confidential at the
         Company's sole expense.

                  (p)      Provide an indenture trustee for the Registrable
         Notes or the Exchange Notes, as the case may be, and cause the
         Indenture or the trust indenture provided for in Section 2(a) hereof,
         as the case may be, to be qualified under the TIA not later than the
         effective date of the Exchange Offer or the first Registration
         Statement relating to the Registrable Notes; and in connection
         therewith, cooperate with the trustee under any such indenture and the
         Holders of the Registrable Notes, to effect such changes to such
         indenture as may be required for such indenture to be so qualified in
         accordance

<PAGE>

                                      -18-

         with the terms of the TIA; and execute, and use its reasonable best
         efforts to cause such trustee to execute, all documents as may be
         required to effect such changes and all other forms and documents
         required to be filed with the SEC to enable such indenture to be so
         qualified in a timely manner.

                  (q)      Comply in all material respects with all applicable
         rules and regulations of the SEC and make generally available to its
         securityholders earning statements satisfying the provisions of Section
         11(a) of the Securities Act and Rule 158 thereunder (or any similar
         rule promulgated under the Securities Act) no later than 45 days after
         the end of any 12-month period (or 90 days after the end of any
         12-month period if such period is a fiscal year) (i) commencing at the
         end of any fiscal quarter in which Registrable Notes are sold to
         underwriters in a firm commitment or reasonable best efforts
         underwritten offering and (ii) if not sold to underwriters in such an
         offering, commencing on the first day of the first fiscal quarter of
         the Company after the effective date of a Registration Statement, which
         statements shall cover said 12-month periods.

                  (r)      Upon consummation of an Exchange Offer or a Private
         Exchange, obtain an opinion of counsel to the Company, who may, at the
         Company's election, be internal counsel to the Company, in a form
         customary for underwritten transactions, addressed to the Trustee for
         the benefit of all Holders of Registrable Notes participating in the
         Exchange Offer or the Private Exchange, as the case may be, that the
         Exchange Notes or Private Exchange Notes, as the case may be, and the
         related indenture constitute legal, valid and binding obligations of
         the Company, enforceable against the Company in accordance with its
         respective terms, subject to customary exceptions and qualifications.

                  (s)      If an Exchange Offer or a Private Exchange is to be
         consummated, upon delivery of the Registrable Notes by Holders to the
         Company (or to such other Person as directed by the Company) in
         exchange for the Exchange Notes or the Private Exchange Notes, as the
         case may be, the Company shall mark, or cause to be marked, on such
         Registrable Notes that such Registrable Notes are being cancelled in
         exchange for the Exchange Notes or the Private Exchange Notes, as the
         case may be; in no event shall such Registrable Notes be marked as paid
         or otherwise satisfied.

                  (t)      Cooperate with each seller of Registrable Notes
         covered by any Registration Statement and each underwriter, if any,
         participating in the disposition of such Registrable Notes and their
         respective counsel in connection with any filings required to be made
         with the National Association of Securities Dealers, Inc. (the "NASD").

                  (u)      Use their respective reasonable best efforts to take
         all other steps necessary or advisable to effect the registration of
         the Registrable Notes covered by a Registration Statement contemplated
         hereby.

<PAGE>

                                      -19-

                  The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request and in such event shall have no further obligation under
this Agreement (including, without limitation, obligations under Section 4
hereof) with respect to such seller or any subsequent holder of such Registrable
Notes. Each seller as to which any Shelf Registration is being effected agrees
to furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such seller
not materially misleading.

                  Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Company of the happening of any event of
the kind described in Sections 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. During any such discontinuance, no Additional Interest
shall accrue or otherwise be payable on the Registrable Notes. In the event that
the Company shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Notes covered by such Registration
Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as
the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice.

6.       REGISTRATION EXPENSES

                  (a)      All fees and expenses incident to the performance of
         or compliance with this Agreement by the Company shall be borne by the
         Company whether or not the Exchange Offer or a Shelf Registration is
         filed or becomes effective, including, without limitation, (i) all
         registration and filing fees (including, without limitation, (A) fees
         with respect to filings required to be made with the NASD in connection
         with an underwritten offering and (B) fees and expenses of compliance
         with state securities or Blue Sky laws (including, without limitation,
         reasonable fees and disbursements of counsel in connection with Blue
         Sky qualifications of the Registrable Notes or Exchange Notes and
         determination of the eligibility of the Registrable Notes or Exchange
         Notes for investment under the laws of such jurisdic-

<PAGE>

                                      -20-

         tions (x) where the holders of Registrable Notes are located, in the
         case of the Exchange Notes, or (y) as provided in Section 5(h) hereof,
         in the case of Registrable Notes or Exchange Notes to be sold by a
         Participating Broker-Dealer during the Applicable Period)), (ii)
         printing expenses, including, without limitation, expenses of printing
         certificates for Registrable Notes or Exchange Notes in a form eligible
         for deposit with The Depository Trust Company and of printing
         prospectuses if the printing of prospectuses is requested by the
         managing underwriter or underwriters, if any, by the Holders of a
         majority in aggregate principal amount at maturity of the Registrable
         Notes included in any Registration Statement or sold by any
         Participating Broker-Dealer, as the case may be, (iii) reasonable
         messenger, telephone and delivery expenses, (iv) fees and disbursements
         of counsel for the Company and reasonable fees and disbursements of
         special counsel for the sellers of Registrable Notes (subject to the
         provisions of Section 6(b) hereof), (v) fees and disbursements of all
         independent certified public accountants referred to in Section
         5(n)(iii) hereof (including, without limitation, the expenses of any
         special audit and "cold comfort" letters required by or incident to
         such performance), (vi) rating agency fees, if any, and any fees
         associated with making the Registrable Notes or Exchange Notes eligible
         for trading through The Depository Trust Company, (vii) Securities Act
         liability insurance, if the Company desires such insurance, (viii) fees
         and expenses of all other Persons retained by the Company, (ix)
         internal expenses of the Company (including, without limitation, all
         salaries and expenses of officers and employees of the Company
         performing legal or accounting duties), (x) the expense of any annual
         audit, (xi) the fees and expenses incurred in connection with the
         listing of the securities to be registered on any securities exchange,
         if applicable, and (xii) the expenses relating to printing, word
         processing and distributing of all Registration Statements,
         underwriting agreements, securities sales agreements, indentures and
         any other documents necessary to comply with this Agreement.

                  (b)      The Company shall reimburse the Holders of the
         Registrable Notes being registered in a Shelf Registration for the
         reasonable fees and disbursements of not more than one counsel chosen
         by the Holders of a majority in aggregate principal amount at maturity
         of the Registrable Notes to be included in such Registration Statement.

         7.       INDEMNIFICATION

                  (a)      The Company agrees to indemnify and hold harmless
         each Holder of Registrable Notes offered pursuant to a Shelf
         Registration Statement and each Participating Broker-Dealer selling
         Exchange Notes during the Applicable Period, the officers and directors
         of each such Person or its affiliates, and each other Person, if any,
         who controls any such Person or its affiliates within the meaning of
         either Section 15 of the Securities Act or Section 20 of the Exchange
         Act (each, a "Participant"), from and against any and all losses,
         claims, damages and liabilities (including, without limitation, the
         reasonable legal fees and other expenses actually incurred in
         connection with any suit, action or proceeding or any claim asserted)
         caused by, arising out of or based upon any untrue statement or alleged
         untrue statement of a material fact contained in any Registration
         Statement pursuant to which the offering

<PAGE>

                                      -21-

         of such Registrable Notes or Exchange Notes, as the case may be, is
         registered (or any amendment thereto) or related Prospectus (or any
         amendments or supplements thereto) or any related preliminary
         prospectus, or caused by, arising out of or based upon any omission or
         alleged omission to state therein a material fact required to be stated
         therein or necessary to make the statements therein, in the light of
         the circumstances under which they were made, not misleading; provided,
         however, that the Company will not be required to indemnify a
         Participant if (i) such losses, claims, damages or liabilities are
         caused by any untrue statement or omission or alleged untrue statement
         or omission made in reliance upon and in conformity with information
         relating to any Participant furnished to the Company in writing by or
         on behalf of such Participant expressly for use therein or (ii) if such
         Participant sold to the person asserting the claim the Registrable
         Notes or Exchange Notes that are the subject of such claim and such
         untrue statement or omission or alleged untrue statement or omission
         was contained or made in any preliminary prospectus and corrected in
         the Prospectus or any amendment or supplement thereto and the
         Prospectus does not contain any other untrue statement or omission or
         alleged untrue statement or omission of a material fact that was the
         subject matter of the related proceeding and it is established by the
         Company in the related proceeding that such Participant failed to
         deliver or provide a copy of the Prospectus (as amended or
         supplemented) to such Person with or prior to the confirmation of the
         sale of such Registrable Notes or Exchange Notes sold to such Person if
         required by applicable law, unless such failure to deliver or provide a
         copy of the Prospectus (as amended or supplemented) was a result of
         noncompliance by the Company with Section 5 of this Agreement.

                  (b)      Each Participant agrees, severally and not jointly,
         to indemnify and hold harmless the Company, the Company's directors and
         officers and each Person who controls the Company within the meaning of
         Section 15 of the Securities Act or Section 20 of the Exchange Act to
         the same extent as the foregoing indemnity from the Company to each
         Participant, but only (i) with reference to information relating to
         such Participant furnished to the Company in writing by or on behalf of
         such Participant expressly for use in any Registration Statement or
         Prospectus, any amendment or supplement thereto or any preliminary
         prospectus or (ii) with respect to any untrue statement or
         representation made by such Participant in writing to the Company. The
         liability of any Participant under this paragraph shall in no event
         exceed the proceeds received by such Participant from sales of
         Registrable Notes or Exchange Notes giving rise to such obligations.

                  (c)      If any suit, action, proceeding (including any
         governmental or regulatory investigation), claim or demand shall be
         brought or asserted against any Person in respect of which indemnity
         may be sought pursuant to either of the two preceding paragraphs, such
         Person (the "Indemnified Person") shall promptly notify the Person
         against whom such indemnity may be sought (the "Indemnifying Person")
         in writing, and the Indemnifying Person, upon request of the
         Indemnified Person, shall retain counsel reasonably satisfactory to the
         Indemnified Person to represent the Indemnified Person and any others
         the Indemnifying Person may reasonably designate in such proceeding and
         shall pay the reasonable fees and expenses

<PAGE>

                                      -22-

         actually incurred by such counsel related to such proceeding; provided,
         however, that the failure to so notify the Indemnifying Person shall
         not relieve it of any obligation or liability that it may have
         hereunder or otherwise (unless and only to the extent that such failure
         directly results in the loss or compromise of any material rights or
         defenses by the Indemnifying Person and the Indemnifying Person was not
         otherwise aware of such action or claim). In any such proceeding, any
         Indemnified Person shall have the right to retain its own counsel, but
         the fees and expenses of such counsel shall be at the expense of such
         Indemnified Person unless (i) the Indemnifying Person and the
         Indemnified Person shall have mutually agreed in writing to the
         contrary, (ii) the Indemnifying Person shall have failed within a
         reasonable period of time to retain counsel reasonably satisfactory to
         the Indemnified Person or (iii) the named parties in any such
         proceeding (including any impleaded parties) include both the
         Indemnifying Person and the Indemnified Person and representation of
         both parties by the same counsel would be inappropriate due to actual
         or potential differing interests between them. It is understood that,
         unless there exists a conflict among Indemnified Persons, the
         Indemnifying Person shall not, in connection with any one such
         proceeding or separate but substantially similar related proceeding in
         the same jurisdiction arising out of the same general allegations, be
         liable for the fees and expenses of more than one separate firm (in
         addition to any local counsel) for all Indemnified Persons, and that
         all such fees and expenses shall be reimbursed promptly as they are
         incurred. Any such separate firm for the Participants and such control
         Persons of Participants shall be designated in writing by Participants
         who sold a majority in interest of Registrable Notes and Exchange Notes
         sold by all such Participants and any such separate firm for the
         Company, its directors, its officers and such control Persons of the
         Company shall be designated in writing by the Company. The Indemnifying
         Person shall not be liable for any settlement of any proceeding
         effected without its prior written consent, but if settled with such
         consent or if there be a final non-appealable judgment for the
         plaintiff for which the Indemnified Person is entitled to
         indemnification pursuant to this Agreement, the Indemnifying Person
         agrees to indemnify and hold harmless each Indemnified Person from and
         against any loss or liability by reason of such settlement or judgment.
         No Indemnifying Person shall, without the prior written consent of the
         Indemnified Person (which consent shall not be unreasonably withheld or
         delayed), effect any settlement or compromise of any pending or
         threatened proceeding in respect of which any Indemnified Person is or
         could have been a party, and indemnity could have been sought hereunder
         by such Indemnified Person, unless such settlement (A) includes an
         unconditional written release of such Indemnified Person, in form and
         substance reasonably satisfactory to such Indemnified Person, from all
         liability on claims that are the subject matter of such proceeding and
         (B) does not include any statement as to an admission of fault,
         culpability or failure to act by or on behalf of any Indemnified
         Person.

                  (d)      If the indemnification provided for in the first and
         second paragraphs of this Section 7 is for any reason unavailable to,
         or insufficient to hold harmless, an Indemnified Person in respect of
         any losses, claims, damages or liabilities referred to therein, then
         each Indemnifying Person under such paragraphs, in lieu of indemnifying
         such Indemnified Person thereunder and in order to provide for just and
         equitable contribution, shall contribute to the

<PAGE>

                                      -23-

         amount paid or payable by such Indemnified Person as a result of such
         losses, claims, damages or liabilities in such proportion as is
         appropriate to reflect the relative fault of the Indemnifying Person or
         Persons on the one hand and the Indemnified Person or Persons on the
         other in connection with the statements or omissions or alleged
         statements or omissions that resulted in such losses, claims, damages
         or liabilities (or actions in respect thereof). The relative fault of
         the parties shall be determined by reference to, among other things,
         whether the untrue or alleged untrue statement of a material fact or
         the omission or alleged omission to state a material fact relates to
         information supplied by the Company on the one hand or such Participant
         or such other Indemnified Person, as the case may be, on the other, the
         parties' relative intent, knowledge, access to information and
         opportunity to correct or prevent such statement or omission, and any
         other equitable considerations appropriate in the circumstances.

                  (e)      The parties agree that it would not be just and
         equitable if contribution pursuant to this Section 7 were determined by
         pro rata allocation (even if the Participants were treated as one
         entity for such purpose) or by any other method of allocation that does
         not take account of the equitable considerations referred to in the
         immediately preceding paragraph. The amount paid or payable by an
         Indemnified Person as a result of the losses, claims, damages and
         liabilities referred to in the immediately preceding paragraph shall be
         deemed to include, subject to the limitations set forth above, any
         reasonable legal or other expenses actually incurred by such
         Indemnified Person in connection with investigating or defending any
         such action or claim. Notwithstanding the provisions of this Section 7,
         in no event shall a Participant be required to contribute any amount in
         excess of the amount by which proceeds received by such Participant
         from sales of Registrable Notes or Exchange Notes, as the case may be,
         exceeds the amount of any damages that such Participant has otherwise
         been required to pay or has paid by reason of such untrue or alleged
         untrue statement or omission or alleged omission. No Person guilty of
         fraudulent misrepresentation (within the meaning of Section 11(f) of
         the Securities Act) shall be entitled to contribution from any Person
         who was not guilty of such fraudulent misrepresentation.

                  (f)      The indemnity and contribution agreements contained
         in this Section 7 will be in addition to any liability that the
         Indemnifying Persons may otherwise have to the Indemnified Persons
         referred to above.

         8.       RULE 144 AND 144A

                  The Company covenants that it will file the reports required
         to be filed by it under the Securities Act and the Exchange Act and the
         rules and regulations adopted by the SEC thereunder in a timely manner
         in accordance with the requirements of the Securities Act and the
         Exchange Act and, if at any time the Company is not required to file
         such reports, it will, upon the request of any Holder of Registrable
         Notes, make publicly available annual reports and such information,
         documents and other reports of the type specified in Sections 13

<PAGE>

                                      -24-

and 15(d) of the Exchange Act. The Company further covenants for so long as any
Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner of Registrable Notes in connection with any sale thereof and
any prospective purchaser of such Registrable Notes from such Holder or
beneficial owner the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.

9.       UNDERWRITTEN REGISTRATIONS

                  If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount at
maturity of such Registrable Notes included in such offering and reasonably
acceptable to the Company.

                  No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.

10.      MISCELLANEOUS

                  (a)      No Inconsistent Agreements. The Company has not
entered into, as of the date hereof, and shall not, after the date of this
Agreement, enter into any agreement with respect to any of the Company's
securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The Company has not entered and will not enter into any agreement with
respect to any of the Company's securities that will grant to any Person
piggy-back registration rights with respect to a Registration Statement.

                  (b)      Adjustments Affecting Registrable Securities. The
Company shall not, directly or indirectly, take any action with respect to the
Registrable Notes as a class that would adversely affect the ability of the
Holders of Registrable Notes to include such Registrable Notes in a registration
undertaken pursuant to this Agreement.

                  (c)      Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, otherwise than with
the prior written consent of the Holders of not less than a majority in
aggregate principal amount at maturity of the then outstanding Registrable
Notes. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Regis-

<PAGE>

                                      -25-

trable Notes whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Notes may be given by
Holders of at least a majority in aggregate principal amount at maturity of the
Registrable Notes being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.

                  (d)      Notices. All notices and other communications
(including without limitation any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, next-day air courier or facsimile:

                  1.       if to a Holder of the Registrable Notes or any
         Participating Broker-Dealer, at the most current address of such Holder
         or Participating Broker-Dealer, as the case may be, set forth on the
         records of the registrar under the Indenture, with a copy in like
         manner to the Initial Purchaser as follows:

                           DEUTSCHE BANK SECURITIES INC.
                           60 Wall Street
                           New York, NY 10005
                           Facsimile No.: (212) 469-2883
                           Attention: Mark Fedorcik

                  with a copy to:

                           Cahill Gordon & Reindel LLP
                           80 Pine Street
                           New York, New York  10005
                           Facsimile No.: (212) 269-5420
                           Attention: William M. Hartnett, Esq.

                  2.       if to the Initial Purchasers, at the addresses
         specified in Section 10(d)(1)

                  3.       if to the Company, at the address as follows:

                           TOWN SPORTS INTERNATIONAL HOLDINGS, INC.
                           888 Seventh Avenue
                           New York, NY 10106
                           Facsimile No.: (212) 664-8906
                           Attention: Richard Pyle

<PAGE>

                                      -26-

                  with a copy to:

                           Kirkland & Ellis LLP
                           153 E. 53rd Street
                           39th Floor
                           New York, NY 10022
                           Facsimile No.: (212) 446-4900
                           Attention: Joshua N. Korff, Esq.

                  All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.

                  Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.

                  (e)      Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto; provided, however, that this Agreement shall not inure to the
benefit of or be binding upon a successor or assign of a Holder unless and to
the extent such successor or assign holds Registrable Notes.

                  (f)      Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

                  (g)      Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (h)      Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

                  (i)      Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,

<PAGE>

                                      -27-

and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.

                  (j)      Securities Held by the Issuers or their Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or its affiliates (as such term is defined in Rule 405 under the Securities Act)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

                  (k)      Third Party Beneficiaries. Holders of Registrable
Notes and Participating Broker-Dealers are intended third party beneficiaries of
this Agreement and this Agreement may be enforced by such Persons.

                  (l)      Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Initial
Purchaser on the one hand and the Company on the other, or between or among any
agents, representatives, parents, subsidiaries, affiliates, predecessors in
interest or successors in interest with respect to the subject matter hereof and
thereof are merged herein and replaced hereby.

<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.

                                          TOWN SPORTS INTERNATIONAL
                                          HOLDINGS, INC.

                                          By: /s/ Richard Pyle
                                              ----------------------------------
                                              Name: Richard Pyle
                                              Title: Chief Financial Officer

                                          DEUTSCHE BANK SECURITIES INC.,
                                          as Initial Purchaser

                                          By: /s/ Arther B. Schoen
                                              ----------------------------------
                                              Name: Arther B. Schoen
                                              Title: MD

                                          By: /s/ Catherine Madigan
                                              ----------------------------------
                                              Name: Catherine Madigan
                                              Title: MD

                                       S-1
<PAGE>

                                   Schedule 1

            SUBSIDIARIES OF TOWN SPORTS INTERNATIONAL HOLDINGS, INC.

<TABLE>
<CAPTION>
                                                                                   Jurisdiction of
             Name                                     Ownership                      Organization
             ----                                     ---------                      ------------
<S>                                   <C>                                          <C>
Town Sports International, Inc.       Town Sports International Holdings, Inc.        New York
TSI Alexandria, LLC                   TSI Holdings (VA), Inc.                         Delaware
TSI Allston, Inc.                     Town Sports International, Inc.                 Delaware
TSI Andover, Inc.                     TSI Holdings (MA), Inc.                         Massachusetts
TSI Ardmore, LLC                      TSI Holdings (PA), Inc.                         Delaware
TSI Arthro-Fitness Services, Inc.     Town Sports International, Inc.                 New York
TSI Livingston, Inc.                  Town Sports International, Inc.                 New York
TSI Battery Park, Inc.                Town Sports International, Inc.                 New York
TSI Bethesda, LLC                     TSI Holdings (MD), Inc.                         Delaware
TSI Broadway, Inc.                    Town Sports International, Inc.                 New York
TSI 217 Broadway, Inc.                Town Sports International, Inc.                 New York
TSI Brooklyn Belt, Inc.               Town Sports International, Inc.                 New York
TSI Brunswick, Inc.                   Town Sports International, Inc.                 Delaware
TSI Washington, LLC                   TSI Holdings (NJ), LLC                          Delaware
TSI Bulfinch, Inc.                    Town Sports International, Inc.                 Delaware
TSI Cash Management, Inc.             Town Sports International, Inc.                 New York
TSI Central Square, Inc.              Town Sports International, Inc.                 Delaware
TSI Centreville, LLC                  TSI Holdings (VA), Inc.                         Delaware
TSI Cherry Hill, LLC                  TSI Holdings (NJ), LLC                          Delaware
TSI Chevy Chase, Inc.                 TSI Holdings (DC), Inc.                         Delaware
TSI Clarendon, LLC                    TSI Holdings (VA), Inc.                         Delaware
TSI Cobble Hill, Inc.                 Town Sports International, Inc.                 New York
TSI Colonia, LLC                      TSI Holdings (NJ), LLC                          Delaware
TSI Commack, Inc.                     Town Sports International, Inc.                 New York
TSI Connecticut Avenue, Inc.          TSI Holdings (DC), Inc.                         Delaware
TSI Copley, Inc.                      Town Sports International, Inc.                 Delaware
TSI Court Street, Inc.                Town Sports International, Inc.                 New York
TSI Croton, Inc.                      Town Sports International, Inc.                 New York
TSI Danbury, Inc.                     Town Sports International, Inc.                 Delaware
</TABLE>

                                        1
<PAGE>

<TABLE>
<CAPTION>
                                                                                   Jurisdiction of
         Name                                  Ownership                             Organization
         ----                                  ---------                             ------------
<S>                                   <C>                                          <C>
TSI Danvers, Inc.                     TSI Holdings (MA), Inc.                         Massachusetts
TSI Downtown Crossing, Inc.           Town Sports International, Inc.                 Delaware
TSI Dupont Circle, Inc.               TSI Holdings (DC), Inc.                         Delaware
TSI Dupont II, Inc.                   TSI Holdings (DC), Inc.                         Delaware
TSI East Cambridge, Inc.              Town Sports International, Inc.                 Delaware
TSI East Meadow, Inc.                 Town Sports International, Inc.                 New York
TSI East 23, Inc.                     Town Sports International, Inc.                 New York
TSI East 31, Inc.                     Town Sports International, Inc.                 New York
TSI East 34, Inc.                     Town Sports International, Inc.                 New York
TSI East 36, Inc.                     Town Sports International, Inc.                 New York
TSI East 41, Inc.                     Town Sports International, Inc.                 New York
TSI East 51, Inc.                     Town Sports International, Inc.                 New York
TSI East 59, Inc.                     Town Sports International, Inc.                 New York
TSI East 76, Inc.                     Town Sports International, Inc.                 New York
TSI East 86, LLC                      Town Sports International, Inc.                 New York
TSI East 91, Inc.                     Town Sports International, Inc.                 New York
TSI F Street, Inc.                    TSI Holdings (DC), Inc.                         Delaware
TSI Fairfax, LLC                      TSI Holdings (VA), Inc.                         Delaware
TSI Fenway, Inc.                      Town Sports International, Inc.                 Delaware
TSI Fifth Avenue, Inc.                Town Sports International, Inc.                 New York
TSI First Avenue, Inc.                Town Sports International, Inc.                 New York
TSI Forest Hills, Inc.                Town Sports International, Inc.                 New York
TSI Fort Lee, LLC                     TSI Holdings (NJ), LLC                          Delaware
TSI Framingham, Inc.                  TSI Holdings (MA), Inc.                         Massachusetts
TSI Franklin (MA), Inc.               TSI Holdings (MA), Inc.                         Massachusetts
TSI Franklin Park, LLC                TSI Holdings (NJ), LLC                          Delaware
TSI Freehold, LLC                     TSI Holdings (NJ), LLC                          Delaware
TSI Gallery Place, Inc.               TSI Holdings (DC), Inc.                         Delaware
TSI Garden City, Inc.                 Town Sports International, Inc.                 New York
TSI Germantown, LLC                   TSI Holdings (MD), Inc.                         Delaware
TSI Glover, Inc.                      TSI Holdings (DC), Inc.                         Delaware
TSI Grand Central, Inc.               Town Sports International, Inc.                 New York
</TABLE>

                                        2

<PAGE>

<TABLE>
<CAPTION>
                                                                                   Jurisdiction of
         Name                                  Ownership                             Organization
         ----                                  ---------                             ------------
<S>                                   <C>                                          <C>
TSI Great Neck, Inc.                  Town Sports International, Inc.                 New York
TSI Greenwich, Inc.                   Town Sports International, Inc.                 Delaware
TSI Herald, Inc.                      Town Sports International, Inc.                 New York
TSI Highpoint, LLC                    TSI Holdings (PA), Inc.                         Delaware
TSI Hoboken, LLC                      TSI Holdings (NJ), LLC                          Delaware
TSI Holdings (CIP), Inc.              Town Sports International, Inc.                 Delaware
TSI Holdings (DC), Inc.               Town Sports International, Inc.                 Delaware
TSI Holdings (IP), LLC                TSI Insurance, Inc.                             Delaware
TSI Holdings (MA), Inc.               Town Sports International, Inc.                 Massachusetts
TSI Holdings (MD), Inc.               Town Sports International, Inc.                 Delaware
TSI Holdings (NJ), LLC                Town Sports International, Inc.                 Delaware
TSI Holdings (PA), Inc.               Town Sports International, Inc.                 Delaware
TSI Holdings (VA), Inc.               Town Sports International, Inc.                 Delaware
TSI Huntington, Inc.                  Town Sports International, Inc.                 New York
TSI Insurance, Inc.                   Town Sports International, Inc.                 New York
TSI International, Inc.               Town Sports International, Inc.                 Delaware
TSI Irving Place, Inc.                Town Sports International, Inc.                 New York
TSI Jersey City, LLC                  TSI Holdings (NJ), LLC                          Delaware
TSI Larchmont, Inc.                   Town Sports International, Inc.                 New York
TSI Lexington (MA), Inc.              TSI Holdings (MA), Inc.                         Massachusetts
TSI Lincoln, Inc.                     Town Sports International, Inc.                 New York
TSI Long Beach, Inc.                  Town Sports International, Inc.                 New York
TSI Lynnfield, Inc.                   TSI Holdings (MA), Inc.                         Massachusetts
TSI M Street, Inc.                    TSI Holdings (DC), Inc.                         Delaware
TSI Madison, Inc.                     Town Sports International, Inc.                 New York
TSI Mahwah, LLC                       TSI Holdings (NJ), LLC                          Delaware
TSI Mamaroneck, Inc.                  Town Sports International, Inc.                 New York
TSI Market Street, LLC                TSI Holdings (PA), Inc.                         Delaware
TSI Marlboro, LLC                     TSI Holdings (NJ), LLC                          Delaware
TSI Matawan, LLC                      TSI Holdings (NJ), LLC                          Delaware
TSI K Street                          TSI Holdings (DC), Inc.                         Delaware
TSI Montclair, LLC                    TSI Holdings (NJ), LLC                          Delaware
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>
                                                                                   Jurisdiction of
         Name                                  Ownership                             Organization
         ----                                  ---------                             ------------
<S>                                   <C>                                          <C>
TSI Murray Hill, Inc.                 Town Sports International, Inc.                 New York
TSI Nanuet, Inc.                      Town Sports International, Inc.                 New York
TSI Nashua, LLC                       TSI Holdings (MA), Inc.                         Delaware
TSI Natick, Inc.                      Town Sports International, Inc.                 Delaware
TSI Newark, LLC                       TSI Holdings (NJ), LLC                          Delaware
TSI Newbury Street, Inc.              Town Sports International, Inc.                 Delaware
TSI North Bethesda, LLC               TSI Holdings (MD), Inc.                         Delaware
TSI Norwalk, Inc.                     Town Sports International, Inc.                 Delaware
TSI Oceanside, Inc.                   Town Sports International, Inc.                 New York
TSI Old Bridge, LLC                   TSI Holdings (NJ), LLC                          Delaware
TSI Parsippany, LLC                   TSI Holdings (NJ), LLC                          Delaware
TSI Plainsboro, LLC                   TSI Holdings (NJ), LLC                          Delaware
TSI Princeton, LLC                    TSI Brunswick, Inc.                             Delaware
TSI Ramsey, LLC                       TSI Holdings (NJ), LLC                          Delaware
TSI Reade Street, Inc.                Town Sports International, Inc.                 New York
TSI Ridgewood, LLC                    TSI Holdings (NJ), LLC                          Delaware
TSI Rittenhouse, LLC                  TSI Holdings (PA), Inc.                         Delaware
TSI Rodin Place, LLC                  TSI Holdings (PA), Inc.                         Delaware
TSI Rye, Inc.                         Town Sports International, Inc.                 New York
TSI Scarsdale, Inc.                   Town Sports International, Inc.                 New York
TSI Seaport, Inc.                     Town Sports International, Inc.                 New York
TSI Sheridan, Inc.                    Town Sports International, Inc.                 New York
TSI Silver Spring, LLC                TSI Holdings (MD), Inc.                         Delaware
TSI Society Hill, LLC                 TSI Holdings (PA), Inc.                         Delaware
TSI Soho, Inc.                        Town Sports International, Inc.                 New York
TSI Somerset, LLC                     TSI Holdings (NJ), LLC                          Delaware
TSI South Park Slope, Inc.            Town Sports International, Inc.                 New York
TSI Springfield, LLC                  TSI Holdings (NJ), LLC                          Delaware
TSI Stamford Downtown, Inc.           Town Sports International, Inc.                 Delaware
TSI Stamford Post, Inc.               Town Sports International, Inc.                 Delaware
TSI Stamford Rinks, Inc.              Town Sports International, Inc.                 Delaware
TSI Staten Island, Inc.               Town Sports International, Inc.                 New York
</TABLE>

                                        4
<PAGE>

<TABLE>
<CAPTION>
                                                                                   Jurisdiction of
         Name                                  Ownership                             Organization
         ----                                  ---------                             ------------
<S>                                   <C>                                          <C>
TSI Sterling, LLC                     TSI Holdings (VA), Inc.                         Delaware
TSI Supplements, Inc.                 Town Sports International, Inc.                 Delaware
TSI Syosset, Inc.                     Town Sports International, Inc.                 New York
TSI Wall Street, Inc.                 Town Sports International, Inc.                 New York
TSI Waltham, LLC                      TSI Holdings (MA), Inc.                         Delaware
TSI Washington, Inc.                  TSI Holdings (DC), Inc.                         Delaware
TSI Water Street, Inc.                Town Sports International, Inc.                 New York
TSI Wellesley, Inc.                   TSI Holdings (MA), Inc.                         Massachusetts
TSI West Caldwell, LLC                TSI Holdings (NJ), Inc.                         Delaware
TSI West Newton, Inc.                 Town Sports International, Inc.                 Delaware
TSI West Nyack, Inc.                  Town Sports International, Inc.                 New York
TSI West Springfield, LLC             TSI Holdings (VA), Inc.                         Delaware
TSI West 14, Inc.                     Town Sports International, Inc.                 New York
TSI West 16, Inc.                     Town Sports International, Inc.                 New York
TSI West 23, Inc.                     Town Sports International, Inc.                 New York
TSI West 38, Inc.                     Town Sports International, Inc.                 New York
TSI West 41, Inc.                     Town Sports International, Inc.                 New York
TSI West 44, Inc.                     Town Sports International, Inc.                 New York
TSI West 48, Inc.                     Town Sports International, Inc.                 New York
TSI West 52, Inc.                     Town Sports International, Inc.                 New York
TSI West 73, Inc.                     Town Sports International, Inc.                 New York
TSI West 76, Inc.                     Town Sports International, Inc.                 New York
TSI West 80, Inc.                     Town Sports International, Inc.                 New York
TSI West 94, Inc.                     Town Sports International, Inc.                 New York
TSI West 125, Inc.                    Town Sports International, Inc.                 New York
TSI Westport, Inc.                    Town Sports International, Inc.                 Delaware
TSI Westwood, LLC                     TSI Holdings (NJ), Inc.                         Delaware
TSI Weymouth, Inc.                    Town Sports International, Inc.                 Delaware
TSI White Plains, Inc.                Town Sports International, Inc.                 New York
TSI Whitestone, Inc.                  Town Sports International, Inc.                 New York
TSI Woodmere, Inc.                    Town Sports International, Inc.                 New York
</TABLE>

                                        5

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