Document:

<PAGE>
                                                                   Exhibit 10.12

================================================================================

                                CREDIT AGREEMENT

                            DATED AS OF JUNE 29, 2001

                                      AMONG

               NEW ENGLAND AUDIO CO., INC. AND NEA DELAWARE, INC.,
                                  AS BORROWERS,

                     TWEETER HOME ENTERTAINMENT GROUP, INC.,
            TWEETER HOME ENTERTAINMENT GROUP FINANCING COMPANY TRUST,
                                 THEG USA, L.P.,
                          TWEETER OF CALIFORNIA, INC.,
                              TWT ACQUISITION CORP.
                                       AND
                              THE VIDEO SCENE INC.,
                                  AS GUARANTORS

                            THE LENDERS PARTY HERETO

                                       AND

                              FLEET NATIONAL BANK,
                            AS AGENT FOR THE LENDERS

================================================================================
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          Page
<S>                                                                                                       <C>
ARTICLE 1 - DEFINITIONS AND ACCOUNTING TERMS...........................................................     1
         Section 1.1.      Definitions.................................................................     1
         Section 1.2.      Accounting Terms............................................................    15

ARTICLE 2 - THE REVOLVING CREDIT.......................................................................    15
         Section 2.1.      The Revolving Credit........................................................    15
         Section 2.2.      Making of Revolving Credit Advances.........................................    16
         Section 2.3.      Interest on Revolving Credit Advances.......................................    17
         Section 2.4.      Election of Eurodollar Pricing Options......................................    17
         Section 2.5.      Additional Payments.........................................................    18
         Section 2.6.      Computation of Interest, Etc................................................    18
         Section 2.7.      Fees........................................................................    18
         Section 2.8.      Set-Off.....................................................................    19
         Section 2.9.      Sharing of Payments.........................................................    19
         Section 2.10.     Reduction of Commitment by the Borrowers....................................    19
         Section 2.11.     Letters of Credit...........................................................    20
         Section 2.12.     Increased Costs, Etc........................................................    23
         Section 2.13.     Changed Circumstances.......................................................    25
         Section 2.14.     Use of Proceeds.............................................................    26
         Section 2.15.     Guaranty....................................................................    26

ARTICLE 3 - CONDITIONS TO LOANS AND ADVANCES...........................................................    27
         Section 3.1.      Conditions to First Revolving Credit Advance................................    27
         Section 3.2.      Conditions to All Revolving Credit Advances.................................    29

ARTICLE 4 - PAYMENT AND REPAYMENT......................................................................    29
         Section 4.1.      Mandatory Prepayment........................................................    29
         Section 4.2.      Voluntary Prepayments.......................................................    29
         Section 4.3.      Payment and Interest Cutoff.................................................    30
         Section 4.4.      Payment or Other Actions on Non-Business Days...............................    30
         Section 4.5.      Method, Timing and Application of Payments..................................    30
         Section 4.6.      Payments Not at End of Interest Period......................................    31
         Section 4.7.      Currency....................................................................    31

ARTICLE 5 - REPRESENTATIONS AND WARRANTIES.............................................................    31
         Section 5.1.      Corporate Existence, Charter Documents, Etc.................................    32
         Section 5.2.      Principal Place of Business; Location of Records............................    32
         Section 5.3.      Qualification...............................................................    32
         Section 5.4.      Subsidiaries................................................................    32
         Section 5.5.      Corporate Power.............................................................    32
         Section 5.6.      Valid and Binding Obligations...............................................    33
         Section 5.7.      Other Agreements............................................................    33
</TABLE>

                                      (i)
<PAGE>
<TABLE>
<S>                                                                                                        <C>
         Section 5.8.      Payment of Taxes............................................................    33
         Section 5.9.      Financial Statements........................................................    34
         Section 5.10.     Other Materials Furnished...................................................    34
         Section 5.11.     Stock.......................................................................    34
         Section 5.12.     Changes in Condition........................................................    34
         Section 5.13.     Assets, Licenses, Patents, Trademarks, Etc..................................    34
         Section 5.14.     Litigation..................................................................    35
         Section 5.15.     Pension Plans...............................................................    35
         Section 5.16.     Outstanding Indebtedness....................................................    35
         Section 5.17.     Environmental Matters.......................................................    35
         Section 5.18.     Governmental Regulations....................................................    37
         Section 5.19.     Margin Stock................................................................    37

ARTICLE 6 - REPORTS AND INFORMATION....................................................................    37
         Section 6.1.      Interim Financial Statements and Reports....................................    37
         Section 6.2.      Annual Financial Statements and Budgets.....................................    37
         Section 6.3.      Notice of Defaults, Etc.....................................................    38
         Section 6.4.      Notice of Litigation........................................................    38
         Section 6.5.      Communications with Others..................................................    38
         Section 6.6.      Reportable Events...........................................................    38
         Section 6.7.      Reports to other Creditors..................................................    39
         Section 6.8.      Communications with Independent Public Accountants..........................    39
         Section 6.9.      Environmental Reports.......................................................    39
         Section 6.10.     Notice of Permitted Acquisitions............................................    39
         Section 6.11.     THEG, TOC, TWT and Video Scene Leases.......................................    40
         Section 6.12.     Cyberian Joint Venture Financial Reports....................................    40
         Section 6.13.     Miscellaneous...............................................................    40

ARTICLE 7 - FINANCIAL COVENANTS........................................................................    41
         Section 7.1.      Ratio of Consolidated Total Funded Debt to Consolidated EBITDA..............    41
         Section 7.2.      Ratio of Consolidated Operating Cash Flow to Consolidated Debt Service......    41
         Section 7.3.      Consolidated Net Worth......................................................    41
         Section 7.4.      Ratio of Consolidated EBIT to Consolidated Interest Expense.................    41
         Section 7.5.      Consolidated Capital Expenditures...........................................    41

ARTICLE 8 - AFFIRMATIVE COVENANTS......................................................................    42
         Section 8.1.      Existence and Business......................................................    42
         Section 8.2.      Taxes and Other Obligations.................................................    42
         Section 8.3.      Maintenance of Properties and Leases........................................    42
         Section 8.4.      Insurance...................................................................    42
         Section 8.5.      Records, Accounts and Places of Business....................................    43
         Section 8.6.      Inspection..................................................................    43
         Section 8.7.      Maintenance of Accounts.....................................................    43
         Section 8.8.      Formation and Acquisition of Subsidiaries...................................    43
</TABLE>

                                      (ii)
<PAGE>
<TABLE>
<S>                                                                                                        <C>
         Section 8.9.      Limitation on THEG Indebtedness.............................................    44
         Section 8.10.     Limitation on TOC Indebtedness..............................................    44
         Section 8.11.     Limitation on Video Scene Indebtedness......................................    45
         Section 8.12.     Limitation on TWT and Sound Advice Indebtedness.............................    45

ARTICLE 9 - NEGATIVE COVENANTS.........................................................................    45
         Section 9.1.      Restrictions on Indebtedness................................................    45
         Section 9.2.      Restriction on Liens........................................................    46
         Section 9.3.      Investments.................................................................    48
         Section 9.4.      Dispositions of Assets......................................................    48
         Section 9.5.      Assumptions, Guaranties, Etc. of Indebtedness of Other Persons..............    49
         Section 9.6.      Mergers, Etc................................................................    49
         Section 9.7.      ERISA.......................................................................    49
         Section 9.8.      Restricted Payments.........................................................    50
         Section 9.9.      Sale and Leaseback..........................................................    50
         Section 9.10.     Transactions with Affiliates................................................    50
         Section 9.11.     Preferred Stock.............................................................    50

ARTICLE 10 - EVENTS OF DEFAULT AND REMEDIES............................................................    50
         Section 10.1.     Events of Default...........................................................    50
         Section 10.2.     Remedies....................................................................    52
         Section 10.3.     Letters of Credit...........................................................    53
         Section 10.4.     Distribution of Proceeds....................................................    53

ARTICLE 11 - CONSENTS; AMENDMENTS; WAIVERS; REMEDIES...................................................    54
         Section 11.1.     Actions by Lenders..........................................................    54
         Section 11.2.     Actions by Borrowers........................................................    54

ARTICLE 12 - SUCCESSORS AND ASSIGNS....................................................................    55
         Section 12.1.     General.....................................................................    55
         Section 12.2.     Assignments.................................................................    55
         Section 12.3.     Participations..............................................................    56

ARTICLE 13 - THE AGENT.................................................................................    57
         Section 13.1.     Authorization and Action....................................................    57
         Section 13.2.     Agent's Reliance, Etc.......................................................    57
         Section 13.3.     Agent as a Lender...........................................................    58
         Section 13.4.     Lender Credit Decision......................................................    58
         Section 13.5.     Indemnification of Agent....................................................    58
         Section 13.6.     Successor Agent.............................................................    59
         Section 13.7.     Amendment of Article 13.....................................................    59

ARTICLE 14 - MISCELLANEOUS.............................................................................    59
         Section 14.1.     Notices.....................................................................    59
         Section 14.2.     Merger......................................................................    60
         Section 14.3.     Governing Law; Consent to Jurisdiction......................................    60
         Section 14.4.     Counterpart; Replacement of Instruments.....................................    60
</TABLE>

                                     (iii)
<PAGE>
<TABLE>
<S>                                                                                                        <C>
         Section 14.5.     Expenses and Indemnification................................................    61
         Section 14.6.     Confidentiality.............................................................    62
         Section 14.7.     Reliance on Representations and Actions of Tweeter..........................    62
         Section 14.8.     Joint and Several Obligations...............................................    62
         Section 14.9.     Usury Limitation............................................................    63
         Section 14.10.    WAIVER OF JURY TRIAL; VENUE.................................................    63
</TABLE>

LIST OF EXHIBITS AND SCHEDULES

Exhibit A       Form of Revolving Credit Note
Exhibit B       Form of Notice of Revolving Credit Borrowing
Exhibit C       Form of Compliance Certificate
Exhibit D       Form of Eurodollar Pricing Notice
Exhibit E-1     Form of Stock Pledge Agreement (Borrower)
Exhibit E-2     Form of Stock Pledge Agreement (Guarantor)
Exhibit F-1     Form of Security Agreement (Borrowers)
Exhibit F-2     Form of Security Agreement (Guarantors)
Exhibit G       Form of Landlord Waiver
Exhibit H       Form of Opinion of Borrowers' Counsel
Exhibit I       Form of Assignment and Acceptance Agreement
Exhibit J       Form of Subsidiary Subordination Agreement
Exhibit K       Form of Intercreditor Subordination Agreement
Exhibit L       Form of Sound Advice Merger Agreement

Schedule 1      Schedule of Commitment Percentages
Schedule 2      Pricing Schedule
Schedule 2.11   Letters of Credit
Schedule 3.1    Schedule of Subordinated Indebtedness Paid in Full
Schedule 5.2    Schedule of Principal Place of Business
Schedule 5.9    Schedule of Financial Statements
Schedule 5.11   Schedule of Issued and Outstanding Stock
Schedule 5.12   Changes in Condition
Schedule 5.13   Schedule of Licenses, Patents, Copyrights and Trademarks
Schedule 5.14   Schedule of Litigation
Schedule 5.15   Schedule of Pension Plans
Schedule 5.16   Schedule of Indebtedness, Liens, Charges and Encumbrances
Schedule 5.17   Schedule of Environmental Matters
Schedule 5.20   Schedule of Application of Proceeds of Tweeter IPO
Schedule 8.4    Schedule of Insurance
Schedule 9.3    Schedule of Investments

                                      (iv)
<PAGE>
                                CREDIT AGREEMENT

      This CREDIT AGREEMENT is entered into as of June 29, 2001 by and among NEW
ENGLAND AUDIO CO., INC., a Massachusetts corporation ("New England Audio"), NEA
DELAWARE, INC., a Delaware corporation ("NEA Delaware") (New England Audio and
NEA Delaware each, a "Borrower" and collectively, the "Borrowers"), TWEETER HOME
ENTERTAINMENT GROUP, INC., a Delaware corporation ("Tweeter"), TWEETER HOME
ENTERTAINMENT GROUP FINANCING COMPANY TRUST, a Massachusetts business trust
("Tweeter Trust"), THEG USA, L.P., a Delaware limited partnership ("THEG"),
TWEETER OF CALIFORNIA, INC., a California corporation ("TOC"), TWT Acquisition
Corp., a Florida corporation ("TWT") and THE VIDEO SCENE INC., a California
corporation ("Video Scene") (Tweeter, Tweeter Trust, THEG, TOC, TWT and Video
Scene, each a "Guarantor" and collectively the "Guarantors") (each Borrower and
each Guarantor a "Loan Party" and the Borrowers and the Guarantors collectively
the "Loan Parties") the lenders from time to time party hereto (the "Lenders")
and FLEET NATIONAL BANK, a national banking association, as agent for the
Lenders from time to time party hereto.

                                    Recitals

      The Borrowers desire to establish a revolving credit facility, to finance
the working capital needs of the Borrowers and their subsidiaries, to finance
acquisitions and for general corporate purposes. The Borrowers and the
Guarantors conduct their business on a combined basis, with common management,
financial controls and marketing activities, and the Borrowers' access to the
credits established hereunder will provide direct and indirect benefits to the
Guarantors. The Lenders and the Agent are willing to enter into this Agreement,
all on the terms and conditions set forth herein.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:

                  ARTICLE 1 - DEFINITIONS AND ACCOUNTING TERMS

      SECTION 1.1 DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, agreement, certificate, report or other document
made or delivered in connection with this Agreement:

            "Account" or "Accounts Receivable" shall mean all of a Borrower's
      rights to payment for goods sold or leased or for services rendered, all
      proceeds thereof, all instruments pertaining thereto, all guarantees and
      security therefor, all goods or services which gave rise thereto and the
      rights pertaining to such goods, including rights to reclamation and
      stoppage in transit and all rights of an unpaid seller of goods or
      services, and all related insurance.

            "Affiliate" shall mean, with reference to any Person, (a) any
      director, officer or employee of that Person, (b) any other Person
      controlling, controlled by or under direct or
<PAGE>
      indirect common control of that Person, (c) any other Person directly or
      indirectly holding 10% or more of any class of the capital stock or other
      equity interests (including options, warrants, convertible securities and
      similar rights) of that Person and (d) any other Person 10% or more of any
      class of whose capital stock or other equity interests (including options,
      warrants, convertible securities and similar rights) is held directly or
      indirectly by that Person.

            "Agent" shall mean Fleet National Bank, in its capacity as agent for
      the Lenders, and its successors in that capacity.

            "Agreement" shall mean this Credit Agreement, as amended or
      supplemented from time to time. References to Articles, Sections,
      Exhibits, Schedules and the like refer to the Articles, Sections,
      Exhibits, Schedules and the like of this Agreement unless otherwise
      indicated, as amended and supplemented from time to time.

            "Applicable Base Rate" shall mean the Base Rate in effect from time
      to time.

            "Applicable Commitment Fee" shall mean a rate per annum determined
      in accordance with the Pricing Schedule.

            "Applicable Eurodollar Rate" shall mean the sum of (a) the
      Eurodollar Rate plus (b) the Eurodollar Rate Margin, as each is in effect
      from time to time.

            "Assignment and Acceptance Agreement" shall have the meaning set
      forth in Section 12.2(a) hereof.

            "Base Rate" shall mean the greater of (a) the rate of interest
      announced from time to time by the Agent at its head office located at 100
      Federal Street, Boston, Massachusetts 02110 as its "Base Rate" and (b) the
      Federal Funds Effective Rate plus -1/2 of 1% per annum (rounded upwards,
      if necessary, to the next 1/8 of 1%).

            "Base Rate Loan" shall mean any Revolving Credit Advance bearing
      interest at a fluctuating rate determined by reference to the Applicable
      Base Rate.

            "Business Day" shall mean (a) for all purposes other than as covered
      by clause (b) below, any day other than a Saturday, Sunday or legal
      holiday on which banks in Boston, Massachusetts are open for the conduct
      of a substantial part of their commercial banking business, and (b) with
      respect to all notices and determinations in connection with, and payments
      of principal and interest on, Eurodollar Rate Loans, any day that is a
      Business Day described in clause (a) and that is also a day on which
      commercial banks are open for international business (including dealing in
      U.S. dollar deposits) in London or such other Eurodollar interbank market
      as may be selected by the Agent in its sole discretion and acting in good
      faith.

            "Canton Facility" shall mean the land and improvements thereon owned
      by New England Audio and located at 10 Pequot Way, Pequot Industrial Park,
      Canton, Massachusetts 02021.

                                       2
<PAGE>
            "Canton Mortgage" shall mean the Mortgage, Security Agreement,
      Fixture Filing and Financial Statement dated as of June 29, 2001 by and
      between the Agent, as mortgagee, and New England Audio Co. Inc., as
      mortgagor.

            "Capital Expenditures" shall mean the amount of any expenditure for
      fixed assets, computer software, leasehold improvements, capital leases
      under GAAP, installment purchases of machinery and equipment, acquisitions
      of real estate and other similar expenditures which are required to be
      capitalized on a balance sheet pursuant to GAAP.

            "Capitalized Lease" shall mean any lease which is or should be
      capitalized on the balance sheet of the lessee in accordance with
      generally accepted accounting principles and Statement of Financial
      Accounting Standards No. 13.

            "Capitalized Lease Obligations" shall mean the amount of the
      liability reflecting the aggregate discounted amount of future payments
      under all Capitalized Leases calculated in accordance with generally
      accepted accounting principles and Statement of Financial Accounting
      Standards No. 13.

            "Change of Control" shall mean the occurrence of any of the
      following: (a) any Person or group of Persons, within the meaning of
      Section 13 or 14 of the Securities Exchange Act of 1934, as amended, shall
      own of record or beneficially more than 40% of the issued and outstanding
      capital stock of Tweeter; (b) Tweeter shall cease to own, directly or
      indirectly through a Subsidiary, 100% of the capital stock of New England
      Audio or 100% of the beneficial interest of Tweeter Trust or 100% of the
      equity interest of any other Subsidiary; or (c) New England Audio ceases
      to hold, directly or indirectly through a Subsidiary, 100% of the issued
      and outstanding capital stock of NEA Delaware.

            "Closing Date" shall mean the date on which all of the conditions
      set forth in Section 3.1 have been satisfied.

            "Collateral" shall mean any and all real and personal property of
      Tweeter and its Subsidiaries, whether tangible or intangible, in which the
      Agent now has, is granted by this Agreement or otherwise, or hereafter
      acquires a security interest in or any other lien (including, without
      limitation, by way of mortgage or assignment) to secure the Lender
      Obligations.

            "Commitment Percentage" shall mean as to each Lender its percentage
      interest in the Maximum Revolving Credit Amount as set forth on Schedule 1
      hereto.

            "Compliance Certificate" shall mean a certificate in the form of
      Exhibit C hereto and executed by the chief executive officer or chief
      financial officer of Tweeter.

            "Consolidated" and "consolidated" when used with reference to any
      term, mean that term (or the term "combined" and as the case may be, in
      the case of partnerships, joint ventures and Affiliates that are not
      Subsidiaries) as applied to the accounts of

                                       3
<PAGE>
      Tweeter (or other specified Person) and all of its Subsidiaries (or other
      specified Persons), or such of its Subsidiaries as may be specified,
      consolidated (or combined) in accordance with generally accepted
      accounting principles and with appropriate deductions for minority
      interests in Subsidiaries, as required by generally accepted accounting
      principles.

            "Consolidated Current Liabilities" shall mean, at any date as of
      which the amount thereof shall be determined, all liabilities of Tweeter
      and its Subsidiaries which should properly be classified as current in
      accordance with generally accepted accounting principles consistently
      applied, including, without limitation, all fixed prepayments of, and
      sinking fund payments with respect to, Indebtedness and all estimated
      taxes of Tweeter and its Subsidiaries required to be paid within one year
      from the date of determination.

            "Consolidated EBIT" shall mean, for any period, the sum of (a)
      Consolidated Net Income and (b) all amounts deducted in computing
      Consolidated Net Income in respect of (i) interest expense on Indebtedness
      and (ii) taxes based on or measured by income, in each case for the period
      under review.

            "Consolidated EBITDA" shall mean, for any period, the sum of (a)
      Consolidated EBIT plus (b) all amounts deducted in computing Consolidated
      Net Income in respect of depreciation and amortization expense for the
      period under review.

            "Consolidated Debt Service" shall mean, for any period, the sum of
      (a) Interest Charges on all Indebtedness for such period, plus (b) the
      aggregate amount of all regularly scheduled principal payments made or
      coming due during such period in respect of any Indebtedness for borrowed
      money or Capitalized Leases, but excluding any such principal payments
      required to be made hereunder on the Revolving Credit Termination Date.

            "Consolidated Leverage Ratio" shall mean the ratio of (a)
      Consolidated Total Funded Debt as of the end of any fiscal quarter to (b)
      Consolidated EBITDA for the four-quarter period ending on such date.

            "Consolidated Net Income" shall mean the net income (or deficit)
      from operations of Tweeter and its Subsidiaries, after taxes, determined
      in accordance with generally accepted accounting principles consistently
      applied.

            "Consolidated Net Worth" shall mean, at any date as of which the
      amount thereof shall be determined, the consolidated assets of Tweeter and
      its Subsidiaries less the consolidated liabilities of Tweeter and its
      Subsidiaries, determined in accordance with generally accepted accounting
      principles.

            "Consolidated Operating Cash Flow" shall mean, for any fiscal
      period, an amount equal to: (a) Consolidated EBITDA, minus (b) Capital
      Expenditures made or incurred during such period, minus (c) Taxes required
      to be paid by Tweeter and its Subsidiaries in cash during such period
      based on income of Tweeter and its Subsidiaries, minus (d)

                                       4
<PAGE>
      cash dividends or distributions of any nature to any Person holding an
      equity interest in Tweeter or any of its Subsidiaries made during such
      period.

            "Consolidated Total Funded Debt" shall mean all Indebtedness of
      Tweeter and its Subsidiaries for borrowed money, including without
      limitation, Capitalized Lease Obligations, Subordinated Indebtedness and
      the stated amount of all Letters of Credit.

            "Credit Participants" shall have the meaning set forth in Section
      12.3 hereof.

            "Cyberian Joint Venture" shall mean Tweeter@Outpost.com, LLC, a
      Delaware limited liability company owned 50/50 by Tweeter and Cyberian
      Outpost Inc., a Delaware corporation, established pursuant to an Operating
      Agreement dated as of October 4, 1999 between Tweeter and Cyberian
      Outpost, Inc. (the "Cyberian Joint Venture Agreement").

            "Cyberian Acknowledgment" shall mean the letter agreement dated on
      or about October 4, 1999 from Tweeter providing that upon the occurrence
      of any Default or Event of Default by the Loan Parties and during the
      continuance of such Default or Event of Default Tweeter authorizes and
      directs the Cyberian Joint Venture to make any distribution (otherwise
      payable to Tweeter but for such acknowledgment) to or at the direction of
      the Agent, to be held by the Agent in escrow pending any such Default or
      Event of Default.

            "Default" shall mean an Event of Default or an event or condition
      which with the passage of time or giving of notice, or both, would become
      such an Event of Default.

            "Encumbrances" shall have the meaning set forth in Section 9.2
      hereof.

            "Environmental Law" means any judgment, decree, order, law, license,
      rule or regulation pertaining to environmental matters, or any federal,
      state, county or local statute, regulation, ordinance, order or decree
      relating to public health, welfare, the environment, or to the storage,
      handling, use or generation of hazardous substances in or at the
      workplace, worker health or safety, whether now existing or hereafter
      enacted.

            "ERISA" shall mean the Employee Retirement Income Security Act of
      1974, as amended from time to time.

            "Eurodollar Pricing Notice" shall have the meaning set forth in
      Section 2.4 hereof.

            "Eurodollar Pricing Option" shall mean the option granted to the
      Borrowers pursuant to Section 2.4 hereof to have interest on all or a
      portion of the Loans computed on the basis of the Applicable Eurodollar
      Rate for an applicable Interest Period.

            "Eurodollar Rate" shall mean for any Interest Period for any
      Eurodollar Rate Loan, the quotient of (a) the rate of interest determined
      by the Agent, at about 10:00 a.m. (Boston time) on the Eurodollar Rate
      Fixing Day as being the rate at which deposits in

                                       5
<PAGE>
      U.S. dollars are offered to it by first-class banks in any Eurodollar
      interbank market selected by the Agent, acting in good faith, for deposit
      for such Interest Period in amounts comparable to the aggregate principal
      amount of Eurodollar Rate Loans to which such Interest Period relates,
      divided by (b) the difference between one (1) minus the Reserve
      Requirement (expressed as a decimal) applicable to that Interest Period.
      The Eurodollar Rate shall be adjusted automatically as of the effective
      date of any change in the Reserve Requirement.

            "Eurodollar Rate Fixing Day" shall mean, in the case of any
      Eurodollar Rate Loan, the second Business Day preceding the Business Day
      on which an Interest Period begins.

            "Eurodollar Rate Loan" shall mean any Loan hereunder upon which
      interest will accrue on the basis of a formula including as a component
      thereof the Eurodollar Rate. The expiration date of any Eurodollar Rate
      Loan shall be the last day of the Interest Period applicable to such
      Eurodollar Rate Loan.

            "Eurodollar Rate Margin" shall mean a rate per annum determined in
      accordance with the Pricing Schedule.

            "Event of Default" shall have the meaning set forth in Section 10.1
      hereof.

            "Fee Letters" shall have the meaning set forth in Section 2.7
      hereof.

            "Generally Accepted Accounting Principles" or "GAAP" shall mean
      generally accepted accounting principles as defined by controlling
      pronouncements of the Financial Accounting Standards Board, as from time
      to time supplemented and amended.

            "Guaranty" or "Guarantee" or "Guaranties" shall include any
      arrangement whereby a Person is or becomes liable in respect of any
      Indebtedness or other obligation of another and any other arrangement
      whereby credit is extended to another obligor on the basis of any promise
      of a guarantor, whether that promise is expressed in terms of an
      obligation to pay the Indebtedness of such obligor, or to purchase or
      lease assets under circumstances that would enable such obligor to
      discharge one or more of its obligations, or to maintain the capital, the
      working capital, solvency or general financial condition of such obligor,
      whether or not such arrangement is listed in the balance sheet of the
      guarantor or referred to in a footnote thereto.

            "Indebtedness" shall mean, as to any Person, all obligations,
      contingent and otherwise, which in accordance with generally accepted
      accounting principles consistently applied should be classified upon such
      Person's balance sheet as liabilities, but in any event including
      liabilities secured by any mortgage, pledge, security interest, lien,
      charge or other encumbrance existing on property owned or acquired by such
      Person whether or not the liability secured thereby shall have been
      assumed, letters of credit open for account, obligations under acceptance
      facilities, Capitalized Lease Obligations and all obligations on account
      of Guaranties, endorsements and any other contingent

                                       6
<PAGE>
      obligations in respect of the Indebtedness of others whether or not
      reflected on such balance sheet or in a footnote thereto.

            "Interest Charges" shall mean, for any period, without duplication,
      all interest and all amortization of debt discount and expense on any
      particular Indebtedness for which such calculations are being made, all as
      determined in accordance with GAAP. Computations of Interest Charges on a
      pro forma basis for Indebtedness having a variable interest rate shall be
      calculated at the rate in effect on the date of any determination.

            "Interest Period" shall mean with respect to each Eurodollar Rate
      Loan, the period commencing on the date of such Eurodollar Rate Loan and
      ending one, two, three or six months thereafter, as the Borrower may
      request as provided in Sections 2.1(a) or 2.5 hereof, provided, that:

            (a)   any Interest Period (other than an Interest Period determined
      pursuant to clause (c) below) that would otherwise end on a day that is
      not a Business Day shall be extended to the next succeeding Business Day
      unless such Business Day falls in the next calendar month, in which case
      such Interest Period shall end on the immediately preceding Business Day;

            (b)   any Interest Period that begins on the last Business Day of a
      calendar month (or on a day for which there is no numerically
      corresponding day in the calendar month at the end of such Interest
      Period) shall, subject to clause (c) below, end on the last Business Day
      of a calendar month;

            (c)   any Interest Period that would otherwise end after the
      Revolving Credit Termination Date shall end on the Revolving Credit
      Termination Date; and

            (d)   notwithstanding clause (c) above, no Interest Period shall
      have a duration of less than one month, and if any Interest Period
      applicable to any Eurodollar Rate Loan would be for a shorter period, such
      Interest Period shall not be available hereunder.

            "Interest Rate Protection Agreement" shall mean any interest rate
      swap agreement, interest rate cap agreement, interest rate collar
      agreement, interest rate hedging agreement, interest rate floor agreement
      or other similar agreement or arrangement.

            "Internal Revenue Code" shall mean the Internal Revenue Code of
      1986, as amended from time to time.

            "Investment" shall mean (a) any stock, evidence of Indebtedness or
      other security of another Person, (b) any loan, advance, contribution to
      capital, extension of credit (except for current trade and customer
      accounts receivable for inventory sold or services rendered in the
      ordinary course of business and payable in accordance with customary trade
      terms) to another Person, (c) any purchase of (i) stock or other
      securities of another Person or (ii) any business or undertaking of
      another Person (whether by purchase of

                                       7
<PAGE>
      assets or securities), any commitment or option to make any such purchase
      if, in the case of an option, the aggregate consideration paid for such
      option was in excess of $100 or (d) any other investment, in all cases
      whether existing on the date of this Agreement or thereafter made.

            "Issuing Bank" shall mean the Agent acting as issuer of a Letter of
      Credit or, in the event the LC Commitment is increased to an amount equal
      to or greater than $15,000,000, either the Agent or First Union National
      Bank.

            "Leases" shall mean any agreement, whether written or oral, granting
      a person the right to occupy space in a structure or real estate for any
      period of time or any capital lease or other lease of or agreement to use
      personal property.

            "Lender Agreements" shall mean this Agreement, the Revolving Credit
      Notes, the Security Documents, the Canton Mortgage, the Subsidiary
      Subordination Agreements, letter of credit applications, Interest Rate
      Protection Agreements between Tweeter or any Subsidiary and the Agent or
      any Lender, and any other present or future agreement from time to time
      entered into between Tweeter or any Subsidiary and the Agent, the Lenders
      or the Issuing Bank in which Fleet National Bank acts as Agent for the
      Lenders under this Agreement or between Tweeter or any Subsidiary and
      Fleet National Bank acting independently with respect to Tweeter or any
      Subsidiary, each as from time to time amended or supplemented, and all
      statements, reports and certificates delivered by the Borrower to the
      Agent or the Lenders in connection therewith.

            "Lender Obligations" shall mean all present and future obligations
      and Indebtedness of Tweeter and its Subsidiaries owing to the Agent, the
      Lenders or the Issuing Bank under this Agreement or any other Lender
      Agreement, including, without limitation, the obligations to pay the
      Indebtedness from time to time evidenced by the Revolving Credit Notes,
      obligations to reimburse the Issuing Bank for amounts drawn on Letters of
      Credit, obligations under Interest Rate Protection Agreements, obligations
      under foreign exchange arrangements, and obligations to pay interest,
      commitment fees, balance deficiency fees, charges, expenses and
      indemnification from time to time owed under any Lender Agreement.

            "LC Commitment" shall mean $5,000,000.

            "Lenders" shall mean (a) initially, each Lender listed on the
      signature pages hereof, (b) any other Person who becomes a Successor
      Lender hereunder in accordance with the terms of Section 12.3 hereof and
      (c) their respective successors.

            "Letter of Credit" shall mean a standby letter of credit issued by
      the Issuing Bank for the account of New England Audio in accordance with
      Section 2.11 hereof.

            "Loan" shall mean any Revolving Credit Advance outstanding hereunder
      or made to the Borrowers by the Lenders pursuant to Article 2 of this
      Agreement, and "Loans" means all of such Revolving Credit Advances,
      collectively.

                                       8
<PAGE>
            "Majority Lenders" shall mean, at any time that there are two or
      less Lenders, the Lenders having made not less than 100% of the principal
      amount of the Loans hereunder, or if no Loans are outstanding, the Lenders
      having aggregate Commitment Percentages of not less than 100%, and at any
      time that there are more than two Lenders, the Lenders having made not
      less than 67% of the outstanding principal amount of the Loans hereunder,
      or, if no Loans are outstanding, the Lenders having aggregate Commitment
      Percentages of not less than 67%.

            "Material Adverse Effect" shall mean a material adverse effect on
      the business, properties, assets or condition, financial or otherwise, of
      Tweeter and its Subsidiaries, taken as a whole.

            "Maximum Revolving Credit Amount" shall mean as of any date of
      determination, the lesser of (a) $75,000,000 or (b) the amount to which
      the Maximum Revolving Credit Amount may have been reduced pursuant to
      Section 2.10 hereof; provided that if the obligation of the Lenders to
      make further Revolving Credit Advances is terminated upon the occurrence
      of an Event of Default, the Maximum Revolving Credit Amount as of any date
      of determination thereafter shall be deemed to be $0.

            "2000 Financial Statements" shall mean the Consolidated Balance
      Sheet of New England Audio and its Subsidiaries as of September 30, 2000
      and the related Consolidated Statements of Income, Shareholders' Equity
      and Cash Flow for the year then ended and the notes to such financial
      statements.

            "Notice of Revolving Credit Borrowing" -- See Section 2.2(a)

            "Pension Plan" shall mean an employee benefit plan or other plan
      maintained for the employees of New England Audio or any Subsidiary as
      described in Section 4021(a) of ERISA.

            "Permitted Acquisitions" shall mean acquisitions by Tweeter or any
      Subsidiary of all of the stock or all or substantially all of the assets
      or a line of business of another Person, provided that the following terms
      and conditions are met:

                  (a)   The Person to be acquired or whose assets are to be
      acquired shall be a United States company in substantially the same line
      of business as New England Audio.

                  (e)   The Board of Directors or the requisite number of
      shareholders of the Person to be acquired shall have approved such
      acquisition.

                  (f)   The Person to be acquired shall have had positive
      four-quarter Target EBITDA for the most recently completed four fiscal
      quarters.

                  (g)   The Borrower shall have received the written consent of
      the Agent and the Majority Lenders for any acquisition with an aggregate
      proposed purchase price in excess of $10,000,000.

                                       9
<PAGE>
                  (h)   No Default or Event of Default shall exist at the time
      of or after giving effect to each such acquisition on a pro forma basis.

                  (i)   Perfected first security interests shall be granted to
      the Agent in all of the target company's assets subject to no other liens
      or encumbrances except as permitted by the terms of Section 9.2 hereof and
      in accordance with the terms of Section 8.8 hereof.

                  (j)   Appraisals, phase one environmental surveys, title
      insurance and evidence of proper zoning reasonably satisfactory to the
      Agent shall be provided if the target company owns any real estate.

            The Borrower shall have provided the Agent notice of each proposed
      acquisition in accordance with the terms of Section 6.10 hereof.

            "Permitted Sale Leaseback Transaction" shall mean the sale of
      certain real properties for an amount not to exceed $35,000,000 consisting
      of the Canton Facility and up to twelve (12) additional retail properties
      owned by the Loan Parties and the leasing back of such properties, upon
      terms and conditions reasonably satisfactory to the Lenders, including
      without limitation, (a) release of the Lenders' mortgages, if any, on such
      real properties, (b) execution of an intercreditor agreement granting the
      Agent a right to receive notice of and cure any defaults under agreements
      related to such transaction, providing that a payment or other default
      permitting the acceleration of Indebtedness under such documents shall
      constitute a Default, providing that Tweeter and its Subsidiaries will not
      be subject to covenants under such agreements that are more restrictive
      than corresponding covenants to which Tweeter and its Subsidiaries are
      subject hereunder, and providing that upon any default under such sale and
      leaseback agreements, any recourse against any Loan Party shall be
      reasonably acceptable to the Lenders, and (c) any and all proceeds
      received from any such sale leaseback transactions shall be applied on the
      date of receipt to the repayment of the Revolving Credit Advances (subject
      to reborrowing otherwise permitted hereunder).

            "Permitted Sound Advice Acquisitions" shall mean (a) acquisitions by
      Sound Advice of substantially all of the assets or of a line of a business
      of another Person in the State of Florida or (b) a direct investment by
      Sound Advice related to the opening of new retail store(s) in the State of
      Florida; provided, however, that, (i) the aggregate amount of outstanding
      loans made by Tweeter and its Subsidiaries to Sound Advice related to all
      Permitted Sound Advice Acquisitions does not exceed $10,000,000 and (ii)
      each such loan shall be evidenced by a promissory note of Sound Advice to
      New England Audio or Tweeter Trust, as the case may be, in a form
      reasonably satisfactory to the Agent, which note shall be pledged to the
      Agent.

            "Permitted Sound Advice Liabilities" shall mean liabilities of Sound
      Advice for (a) state franchise, income and unemployment tax liabilities,
      employee withholding, accrued liabilities for employee salaries, wages,
      and accrued vacation, personal property taxes, and sales and use taxes
      incurred in the ordinary course of business, (b) the Sound Advice Loans,
      which Indebtedness is subordinated to the payment and performance of all

                                       10
<PAGE>
      Lender Obligations pursuant to a Subsidiary Subordination Agreement and
      (c) obligations under leases for store locations made in the ordinary
      course of business.

            "Permitted THEG Acquisitions" shall mean (a) acquisitions by THEG of
      substantially all of the assets or of a line of a business of another
      Person in the State of Texas or (b) a direct investment by THEG related to
      the opening of new retail store(s) in the State of Texas; provided,
      however, that, (i) the aggregate amount of outstanding loans made by
      Tweeter and its Subsidiaries to THEG related to all Permitted THEG
      Acquisitions does not exceed $10,000,000 (exclusive of THEG's acquisition
      of Home Entertainment of Texas, Inc.) and (ii) each such loan shall be
      evidenced by a promissory note of THEG to New England Audio or Tweeter
      Trust, as the case may be, in a form reasonably satisfactory to the Agent,
      which note shall be pledged to the Agent.

            "Permitted THEG Liabilities" shall mean liabilities of THEG for (a)
      state franchise, income and unemployment tax liabilities, employee
      withholding, accrued liabilities for employee salaries, wages, and accrued
      vacation, personal property taxes, and sales and use taxes incurred in the
      ordinary course of business, (b) the THEG Loans, which Indebtedness is
      subordinated to the payment and performance of all Lender Obligations
      pursuant to a Subsidiary Subordination Agreement and (c) obligations under
      leases for store locations made in the ordinary course of business.

            "Permitted TOC Acquisitions" shall mean (a) acquisitions by TOC of
      substantially all of the assets or of a line of a business of another
      Person in the State of California or (b) a direct investment by TOC
      related to the opening of new retail store(s) in the State of California;
      provided, however, that, (i) the aggregate amount of outstanding loans
      made by Tweeter and its Subsidiaries to TOC related to all Permitted TOC
      Acquisitions does not exceed $10,000,000 and (ii) each such loan shall be
      evidenced by a promissory note of TOC to New England Audio or Tweeter
      Trust, as the case may be, in a form reasonably satisfactory to the Agent
      which note shall be pledged to the Agent.

            "Permitted TOC Liabilities" shall mean liabilities of TOC for (a)
      state franchise, income and unemployment tax liabilities, employee
      withholding, accrued liabilities for employee salaries, wages, and accrued
      vacation, personal property taxes, and sales and use taxes incurred in the
      ordinary course of business, (b) the TOC Loans, which Indebtedness is
      subordinated to the payment and performance of all Lender Obligations
      pursuant to a Subsidiary Subordination Agreement and (c) obligations under
      leases for store locations made in the ordinary course of business.

            "Permitted Video Scene Acquisitions" shall mean (a) acquisitions by
      Video Scene of substantially all of the assets or of a line of a business
      of another Person in the State of California or (b) a direct investment by
      Video Scene related to the opening of new retail store(s) in the State of
      California; provided, however, that, (i) the aggregate amount of
      outstanding loans made by Tweeter and its Subsidiaries to Video Scene
      related to all Permitted THEG Acquisitions does not exceed $10,000,000 and
      (ii) each such loan shall be evidenced by a promissory note of Video Scene
      to New England Audio or Tweeter

                                       11
<PAGE>
      Trust, as the case may be, in a form reasonably satisfactory to the Agent
      which note shall be pledged to the Agent.

            "Permitted Video Scene Liabilities" shall mean liabilities of Video
      Scene for (a) state franchise, income and unemployment tax liabilities,
      employee withholding, accrued liabilities for employee salaries, wages,
      and accrued vacation, personal property taxes, and sales and use taxes
      incurred in the ordinary course of business, (b) the Video Scene Loans,
      which Indebtedness is subordinated to the payment and performance of all
      Lender Obligations pursuant to a Subsidiary Subordination Agreement and
      (c) obligations under leases for store locations made in the ordinary
      course of business.

            "Person" shall mean an individual, corporation, partnership, joint
      venture, association, estate, joint stock company, trust, organization,
      business, or a government or agency or political subdivision thereof.

            "Pledge Agreements" shall mean (a) the Stock Pledge Agreement of
      even date herewith from New England Audio to the Agent substantially in
      the form of Exhibit E-1 hereto and (b) the Stock Pledge Agreements of even
      date herewith from certain of the Guarantors to the Agent substantially in
      the form of Exhibit E-2 hereto, pursuant to which New England Audio and
      certain of the Guarantors, respectively, have pledged to the Agent all of
      the capital stock or other equity interests in their Subsidiaries to
      secure the Lender Obligations, as the same may be modified, amended or
      supplemented from time to time.

            "Pricing Schedule" shall mean Pricing Schedule attached hereto as
      Schedule 2.

            "Reportable Event" shall mean an event reportable to the Pension
      Benefit Guaranty Corporation under Section 4043 of Title IV of ERISA.

            "Reserve Requirement" shall mean the maximum aggregate reserve
      requirement (including all basic, supplemental, marginal and other
      reserves) which is imposed under Regulation D of the Federal Reserve Board
      on the Lenders against "Euro-currency Liabilities" as defined in said
      Regulation D.

            "Restricted Payments" shall mean (a) any payment of principal of,
      interest on, fees or other amounts with respect to any Subordinated
      Indebtedness, (b) any payment on account of the redemption, retirement,
      purchase (including repurchase) or other acquisition, direct or indirect,
      of any shares of any class of capital stock or other equity interest of
      Tweeter or any of its Subsidiaries, or of any warrants, rights or options
      to acquire any such shares, except to the extent the consideration
      therefor consists of shares of common stock of Tweeter and (c) any setting
      apart or allocating any sum for the payment of any dividend or
      distribution, or for the purchase, redemption or retirement of any shares
      of capital stock of Tweeter or any of its Subsidiaries.

            "Revolving Credit Advance" shall mean any loan or advance from any
      Lender to the Borrowers pursuant to Section 2.1 of this Agreement.

                                       12
<PAGE>
            "Revolving Credit Notes" shall mean the Revolving Credit Notes
      substantially in the form of Exhibit A hereto executed by the Borrowers in
      favor of each Lender to evidence the Revolving Credit Advances to be made
      by the Lenders from time to time hereunder.

            "Revolving Credit Termination Date" shall mean July 31, 2004.

            "Security Agreements" shall mean (a) the Security Agreement of even
      date herewith from the Borrowers to the Agent substantially in the form of
      Exhibit F-1 hereto and (b) the Security Agreements of even date herewith
      from the Guarantors to the Agent substantially in the form of Exhibit F-2
      hereto, pursuant to which the Borrowers and the Guarantors have granted
      liens on and security interests in their assets in favor of the Agent to
      secure the Lender Obligations, as the same may be modified, amended or
      supplemented from time to time.

            "Security Documents" shall mean, collectively, the Pledge
      Agreements, the Security Agreements, the Canton Mortgage, and all other
      agreements, instruments or contracts under or in respect of which the
      Agent or any of its agents or representatives shall have, at such time,
      any rights or interests as security for the payment or performance of all
      or any part of the Lender Obligations.

            "Sound Advice" shall mean Sound Advice, Inc., a Florida corporation.

            "Sound Advice Acquisition" shall have the meaning set forth in
      Section 9.6 hereof.

            "Sound Advice Loans" shall mean loans made by New England Audio and
      Tweeter Trust to Sound Advice for (a) purchases of inventory in the
      ordinary course of business, (b) Permitted Sound Advice Acquisitions, (c)
      other indebtedness, other than for inventory and Permitted Sound Advice
      Acquisitions, in an amount not to exceed $250,000.

            "Sound Advice Merger Agreement" shall mean that certain Agreement
      and Plan of Merger attached hereto as Exhibit L among Tweeter, TWT and
      Sound Advice.

            "Subordinated Indebtedness" shall mean Indebtedness of any Loan
      Party which is subordinated to the Indebtedness of the Loan Parties
      hereunder and under the Revolving Credit Notes and to all other Lender
      Obligations, on terms and conditions approved in writing by the Agent.

            "Subsidiary" shall mean any Person of which Tweeter or other
      specified parent shall now or hereafter at the time own, directly or
      indirectly through one or more Subsidiaries or otherwise, sufficient
      voting stock (or other beneficial interest) to entitle it to elect at
      least a majority of the board of directors or trustees or similar managing
      body.

            "Subsidiary Subordination Agreements" shall mean (a) the
      Subordination Agreements of even date herewith from THEG, TOC and Video
      Scene to the Agent

                                       13
<PAGE>
      substantially in the form of Exhibit J hereto and (b) any similar
      Subordination Agreements entered into hereafter from a Subsidiary to the
      Agent, as any of the same may be modified, amended or supplemented from
      time to time.

            "Target EBITDA" shall mean for the most recently completed four
      fiscal quarters, (a) net income or (loss) determined in accordance with
      generally accepted accounting principles without giving effect to
      extraordinary gains and losses from sales, exchanges and other
      dispositions of property not in the ordinary course of business, and
      nonrecurring items, plus, to the extent deducted in calculating net
      income, (b) the sum of (i) depreciation and amortization expense, (ii)
      interest expense and (iii) tax expense.

            "Taxes" shall mean, any and all taxes (including, without
      limitation, income, receipts, franchise, ad valorem or excise taxes,
      transfer or gains taxes or fees, use taxes, withholding, payroll or
      minimum taxes) imposed on, or otherwise payable by, or for which
      responsibility for payment, withholding or collection lies with, Tweeter
      or any of its Subsidiaries by any governmental authority, federal, state
      or otherwise, including any taxes imposed on any Affiliates for which
      Tweeter or any of its Subsidiaries may be liable under applicable law or
      by agreement to which Tweeter or any of its Subsidiaries is a party or by
      which any of them is bound or subject to, and including, but not limited
      to, any interest, penalties or additions to tax with respect thereto.

            THEG Loans" shall mean loans made by New England Audio and Tweeter
      Trust to THEG for (a) purchases of inventory in the ordinary course of
      business, (b) Permitted THEG Acquisitions, (c) other indebtedness, other
      than for inventory and Permitted THEG Acquisitions, in an amount not to
      exceed $250,000, and (d) the acquisition of Home Entertainment of Texas,
      Inc. pursuant to the Asset Purchase Agreement of February 1, 1999 between
      THEG and Home Entertainment of Texas, Inc. in an amount not to exceed
      $10,000,000.

            "TOC Loans" shall mean loans made by New England Audio and Tweeter
      Trust to TOC for (a) purchases of inventory in the ordinary course of
      business, (b) Permitted TOC Acquisitions and (c) other indebtedness, other
      than for inventory and Permitted TOC Acquisitions, in an amount not to
      exceed $250,000.

            "Tweeter Trust Loans" shall mean loans made from time to time by
      Tweeter Trust to New England Audio and NEA Delaware.

            "UCC" shall mean the Massachusetts Uniform Commercial Code,
      Massachusetts General Laws chapter 106, as amended from time to time.

            "Uniform Customs and Practice" shall mean the Uniform Customs and
      Practice for Documentary Credits (1993 Revision) International Chamber of
      Commerce publication No. 500.

            "Video Scene Loans" shall mean loans made by New England Audio and
      Tweeter Trust to Video Scene for (a) purchases of inventory in the
      ordinary course of business, (b)

                                       14
<PAGE>
      Permitted Video Scene Acquisitions and (c) other indebtedness, other than
      for inventory and Permitted Video Scene Acquisitions, in an amount not to
      exceed $250,000.

      SECTION 1.2. ACCOUNTING TERMS. All accounting terms used and not defined
in this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data required to
be delivered hereunder shall be prepared in accordance with such principles.

                        ARTICLE 2 - THE REVOLVING CREDIT

      SECTION 2.1. THE REVOLVING CREDIT.

            (a)   Subject to the terms and conditions of this Agreement and so
long as there exists no Default, at any time prior to the Revolving Credit
Termination Date, each Lender, severally and not jointly, shall make such
Revolving Credit Advances to the Borrowers as the Borrowers may from time to
time request, by notice to the Agent in accordance with Section 2.2, in an
aggregate amount (i) as to each Lender, not to exceed at any time such Lender's
Commitment Percentage of the Maximum Revolving Credit Amount, and (ii) as to all
Lenders, not to exceed the Maximum Revolving Credit Amount minus (B) the amount
available to be drawn under all Letters of Credit. The outstanding principal
amount of the Revolving Credit Advances, together with all accrued interest and
other fees and charges related thereto, shall be repaid in full on the Revolving
Credit Termination Date. On the Closing Date, the Borrowers, jointly and
severally, shall execute and deliver to each Lender a Revolving Credit Note to
evidence the Revolving Credit Advances from time to time made by such Lender to
the Borrower hereunder.

            (b)   Subject to the foregoing limitations and the provisions of
Section 4.2, the Borrowers shall have the right to make prepayments reducing the
outstanding balance of Revolving Credit Advances and to request further
Revolving Credit Advances, all in accordance with Section 2.2, without other
restrictions hereunder; provided that the Lenders shall have the absolute right
to refuse to make any Revolving Credit Advances for so long as there exists any
Default or any other condition which would constitute a Default upon the making
of such a Revolving Credit Advance.

            (c)   Notwithstanding anything to the contrary contained herein or
in any of the Security Documents, upon the occurrence and during the continuance
of any Event of Default, Tweeter and its Subsidiaries will hold in trust for the
Agent all checks, drafts, cash and other remittances that are proceeds of the
Collateral and will deliver the same to the Agent in the form received, together
with the proper endorsement thereon. The Agent will credit all such payments
(conditional upon final collection) against interest accrued on or principal of
the Revolving Credit Advances outstanding hereunder. The order and method of
application shall be in the Agent's sole discretion and proceeds which in the
Agent's discretion are not so applied shall be credited to Tweeter's deposit
accounts with the Agent. So long as any Default exists, the Agent will at all
times have the right to require Tweeter and its Subsidiaries to enter into one
or more blocked account and lockbox arrangements with the Agent for the
collection of such remittances and payments.

                                       15
<PAGE>
            (d)   Notwithstanding anything to the contrary contained herein or
in any of the Security Documents, the Agent may (i) at any time, in its own name
or in the name of others, communicate with account debtors in order to verify
with them, to the Agent's satisfaction, the existence, amount and terms of any
Accounts Receivable and the absence of any reductions, discounts, defenses or
offsets with respect thereto, provided, however, that prior to the occurrence of
an Event of Default, the Agent shall communicate with such account debtors only
in the name of others and not in its own name and (ii) so long as any Default
exists, notify account debtors that Collateral has been assigned to the Agent
and that payments by such debtors shall be made directly to the Agent. At the
Agent's request, so long as any Default exists, Tweeter and its Subsidiaries
will notify any or all such debtors of such assignment, give instructions and/or
indicate on billings to such debtors that their Accounts Receivable shall be
paid to the Agent.

      SECTION 2.2. MAKING OF REVOLVING CREDIT ADVANCES.

            (a)   Each Revolving Credit Advance shall be made on notice given by
New England Audio to the Agent not later than 11:00 a.m. (Boston time) on the
date of the proposed Borrowing (a "Notice of Revolving Credit Borrowing");
provided, however that if the Borrowers elect a Eurodollar Pricing Option with
respect to any Revolving Credit Advance in accordance with Section 2.4 hereof,
such Notice of Revolving Credit Borrowing shall be given by New England Audio
contemporaneously with a Eurodollar Pricing Notice in the manner and within the
time specified in Section 2.4. The Agent shall give the Lenders notice of each
Notice of Revolving Credit Borrowing in accordance with the Agent's customary
practice. Each such Notice of Revolving Credit Borrowing shall be by telephone
or telecopy, in each case confirmed immediately in writing by New England Audio
in substantially the form of Exhibit B hereto, specifying therein (i) the
requested date of such Revolving Credit Advance and (ii) the amount of such
Revolving Credit Advance (which must be a minimum of $100,000). The Borrowers,
jointly and severally, agree to indemnify and hold the Lenders harmless for any
action, including the making of any Revolving Credit Advances hereunder, or loss
or expense, taken or incurred by the Agent and the Lenders in good faith
reliance upon such telephone request. At the time of the initial request for a
Revolving Credit Advance made under this Section 2.2, the Borrowers shall have
provided the Agent with a Compliance Certificate. The Borrowers, jointly and
severally, hereby agree (A) that the Lenders shall be entitled to rely upon the
Compliance Certificate most recently delivered to the Agent until it is
superseded by a more recent Compliance Certificate and (B) that each request for
a Revolving Credit Advance, whether by telephone or in writing or otherwise,
shall constitute a confirmation of the representations and warranties contained
in the most recent Compliance Certificate then in the Agent's possession.

            (b)   Subject to the terms and conditions of this Agreement, each
Lender shall make available on or before 2:00 p.m., Boston time, on the date of
each proposed Revolving Credit Advance, to the Agent at the Agent's address and
in immediately available funds, such Lender's Commitment Percentage of such
Revolving Credit Advance. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article 3, the Agent will
credit such funds to New England Audio's account on the date of the proposed
Revolving Credit Advance.

                                       16
<PAGE>
            (c)   Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Credit Advance that such Lender will not make
available to the Agent such Lender's Commitment Percentage of such Revolving
Credit Advance, the Agent may assume that such Lender has made such amount
available to the Agent on the date of such Revolving Credit Advance in
accordance with and as provided in this Section 2.2 and the Agent may, in
reliance upon such assumption, make available on such date a corresponding
amount to the Borrowers. If and to the extent such Lender shall not have so made
its Commitment Percentage of such Revolving Credit Advance available to the
Agent and the Agent shall have made available such corresponding amount to the
Borrowers, such Lender agrees to pay to the Agent forthwith on demand, and the
Borrowers, jointly and severally, agree to repay to the Agent within two
Business Days after demand (but only after demand for payment has first been
made to such Lender and such Lender has failed to make such payment), an amount
equal to such corresponding amount together with interest thereon for each day
from the date the Agent shall make such amount available to the Borrowers until
the date such amount is paid or repaid to the Agent, at an interest rate equal
to the interest rate applicable at the time to such Revolving Credit Advances.
If such Lender shall pay to the Agent such corresponding amount, such amount so
paid shall constitute such Lender's Revolving Credit Advance for purposes of
this Agreement. If the Borrowers make a repayment required by the foregoing
provisions of this Section 2.2(c) and thereafter the applicable Lender or
Lenders make the payments to the Agent required by this Section 2.2(c), the
Agent shall promptly refund the amount of the Borrowers' payment.

            (d)   The failure of any Lender to make the Revolving Credit Advance
to be made by it on any date shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Credit Advance on such date,
but no Lender shall be responsible for the failure of any other Lender to make
the Revolving Credit Advance to be made by such other Lender.

      SECTION 2.3. INTEREST ON REVOLVING CREDIT ADVANCES. Subject to the terms
of Section 2.4 relating to Eurodollar Pricing Options, the Borrowers, jointly
and severally, shall pay interest on the unpaid balance of the Revolving Credit
Advances from time to time outstanding at a per annum rate equal to the
Applicable Base Rate. Interest on the Revolving Credit Advances shall be payable
quarterly in arrears on the first day of each January, April, July and October,
commencing October 1, 2001 and continuing until all of the Indebtedness of the
Borrower to the Lenders under the Revolving Credit Notes shall have been paid in
full and the Lenders' commitments terminated.

      SECTION 2.4. ELECTION OF EURODOLLAR PRICING OPTIONS.

            (a)   Subject to all the terms and conditions hereof and so long as
there exists no Default, New England Audio may, by delivering a notice (each a
"Eurodollar Pricing Notice") to the Agent received at or before 10:00 a.m.
Boston time on the date three Business Days prior to the commencement of the
Interest Period selected in such Eurodollar Pricing Notice, elect to have all or
a portion of the outstanding Revolving Credit Advances, as New England Audio may
specify in such Eurodollar Pricing Notice, accrue and bear daily interest during
the Interest Period so selected at a per annum rate equal to the Applicable
Eurodollar Rate for such Interest Period; provided, however, that any such
election made with respect to the Revolving Credit Advances shall be in an
amount not less than $500,000 and in increments of

                                       17
<PAGE>
$100,000; and provided further that no such election will be made if it would
result in there being more than eight (8) Eurodollar Pricing Options in the
aggregate outstanding at any one time. Interest on Loans bearing interest at the
Applicable Eurodollar Rate shall be paid for the applicable Interest Period on
the last day thereof, at intervals of three months after the first day of any
Interest Period which is longer than three months, and when such Loan is due
(whether at maturity, by reason of acceleration or otherwise).

            (b)   Each Eurodollar Pricing Notice shall be substantially in the
form of Exhibit D attached hereto and shall specify: (i) the selection of a
Eurodollar Pricing Option, (ii) the effective date and amount of Revolving
Credit Advances subject to such Eurodollar Pricing Option, subject to the
limitations set forth herein, and (iii) the duration of the applicable Interest
Period. Each Eurodollar Pricing Notice shall be irrevocable.

            (c)   The Agent will promptly inform each Lender of a Eurodollar
Pricing Notice and the Interest Period specified by New England Audio therein.
Upon determination by the Agent of the Applicable Eurodollar Rate for any
Interest Period selected by New England Audio, the Agent will promptly inform
New England Audio and each Lender of such Applicable Eurodollar Rate so
determined or, if applicable, the reason why New England Audio's election will
not become effective. The Applicable Eurodollar Rate shall become effective on
the first day of the applicable Interest Period provided no Default exists at
such time.

      SECTION 2.5. ADDITIONAL PAYMENTS. During the continuance of any Event of
Default under Section 10.1(a) hereof or resulting from a violation of any
covenant contained in Article 7 or 9 hereof, the Borrowers shall, jointly and
severally, on demand, pay to the Agent for the account of the Lenders, interest
on the unpaid principal balance of the Revolving Credit Advances and, to the
extent permitted by law, on any overdue installments of interest, at a rate per
annum equal to the lesser of (i) the stated interest rates applicable thereto
plus 2% per annum and (ii) the maximum rate of interest permitted to be charged
under applicable law.

      SECTION 2.6. COMPUTATION OF INTEREST, ETC. Interest hereunder and under
the Revolving Credit Advances shall be computed on the basis of a 360-day year
and the actual number of days elapsed. Any increase or decrease in the interest
rate on the Revolving Credit Advances resulting from a change in the Base Rate
shall be effective immediately from the date of such change, without notice or
demand of any kind. No interest payment or interest rate charged hereunder shall
exceed the maximum rate authorized from time to time by applicable law. The
outstanding balance of the Revolving Credit Notes as reflected on the Agent's
records from time to time, if made in good faith, shall be considered correct
and binding on the Borrowers and the Lenders (absent manifest error) unless
within ninety (90) days after receipt of any notice by the Agent or any Lender
of such outstanding amount, New England Audio or a Lender notifies the Agent to
the contrary.

      SECTION 2.7. FEES

            (a)   The Borrowers, jointly and severally, shall pay to the Agent,
for the accounts of the Lenders in accordance with their respective Commitment
Percentages, a commitment fee (the "Revolving Commitment Fee") computed at a
rate equal to the Applicable Commitment Fee on the average daily unused amount
of the Maximum Revolving Credit

                                       18
<PAGE>
Amount from time to time in effect from the date hereof to and including the
Revolving Credit Termination Date. The Revolving Commitment Fee shall be payable
quarterly in arrears on the first day of each January, April, July and October,
commencing October 1, 2001, for the quarter then ended.

            (b)   The Borrowers, jointly and severally, shall pay to the Agent,
for the Agent's and the Lenders' accounts, such closing and agency fees as are
provided in letter agreements dated June 28, 2001 between the Borrowers and the
Agent and the Lenders as such letter agreements may from time to time be amended
or supplemented, the "Fee Letters").

      SECTION 2.8. SET-OFF. To the extent not prohibited by applicable law, each
Loan Party hereby grants the Agent and each Lender, a continuing lien, security
interest and right of setoff as security for all liabilities and obligations to
the Agent and the Lenders and all other Lender Obligations, whether now existing
or hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
the Agent and each Lender or any entity under the control of FleetBoston
Financial Corporation and its successors and assigns or in transit to any of
them. At any time, without demand or notice (any such notice being expressly
waived by the Loan Parties), the Agent and each Lender may setoff the same or
any part thereof and apply the same to any liability or obligation of any Loan
Party even though unmatured and regardless of the adequacy of any other
collateral securing the Lender Obligations. ANY AND ALL RIGHTS TO REQUIRE THE
AGENT OR ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE LENDER OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT
OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE LOAN
PARTIES, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

      SECTION 2.9. SHARING OF PAYMENTS. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it in excess of its ratable share
(according to the then outstanding principal amount of the Loans) of payments on
account of the Loans obtained by all the Lenders, such Lender shall purchase
from the other Lenders such participations in the Loans held by such other
Lenders as shall cause such purchasing Lender to share such payment ratably
according to the then outstanding principal amount of the Loans with each of
such other Lenders; provided, however, that if all or any portion of such
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
with interest at an interest rate per annum equal to the Applicable Base Rate.
The Borrowers agree that any Lender so purchasing a participation in the Loans
from another Lender pursuant to this Section 2.9 may, to the fullest extent
permitted by law, exercise all its rights of payment with respect to such
participation as fully as if such Lender were the direct creditor of each
Borrower in the amount of such participation.

      SECTION 2.10. REDUCTION OF COMMITMENT BY THE BORROWERS. New England Audio,
as agent for the Borrowers, at its option may, at any time and from time to
time, irrevocably reduce in part (in an amount not less than $1,000,000 and in
integral multiples of $1,000,000) the unused portion of the Maximum Revolving
Credit Amount on not less than seven (7) days' prior written notice to the
Agent. No such reduction, may be reinstated by the Borrowers.

                                       19
<PAGE>
      SECTION 2.11. LETTERS OF CREDIT.

            (a)   Subject to the terms and conditions hereof, including
satisfaction of the conditions set forth in Sections 3.1 and 3.2 hereof, and
provided no Default exists and that the Issuing Bank is then generally issuing
letters of credit for its banking customers, the Issuing Bank shall at any time
prior to the Revolving Credit Termination Date, upon the request of New England
Audio pursuant to paragraph (b) below, issue Letters of Credit for the account
of New England Audio, provided that the aggregate face amount of all outstanding
Letters of Credit shall not at any time exceed the LC Commitment.

            (b)   New England Audio may request that the Issuing Bank issue a
Letter of Credit by written notice (the "Letter of Credit Notice") given by New
England Audio to the Issuing Bank and the Agent not less than five (5) Business
Days prior to the proposed date of issuance of such Letter of Credit. The Letter
of Credit Notice shall (i) specify the proposed date of issuance, the
beneficiary and amount of such Letter of Credit and (ii) be accompanied by a
completed letter of credit application furnished by the Issuing Bank.

            (c)   The Borrowers hereby agree, jointly and severally, to pay to
the Issuing Bank on the date on which the Issuing Bank shall be required to pay
any draft presented under any Letter of Credit, a sum (the "Reimbursement
Amount") equal to: (i) the amount so paid under such Letter of Credit, plus (ii)
interest on any amount remaining unpaid by the Borrowers to the Issuing Bank
under clause (i) from and including the date on which such amount becomes
payable pursuant to clause (i) until payment in full, payable on demand, at a
per annum rate of interest equal to the rate applicable to the Revolving Credit
Advances under Section 2.3. If the Borrowers shall fail to pay to the Issuing
Bank the Reimbursement Amount on the date on which the Issuing Bank shall be
required to pay any draft presented under any Letter of Credit, the Issuing Bank
shall, to the extent the Borrowers have availability to request a Revolving
Credit Advance, consider such failure to be a request for a Revolving Credit
Advance in the amount of the unpaid Reimbursement Amount (which request shall be
deemed a confirmation that the conditions set forth in Section 3.2 have been
satisfied), and the Agent shall apply the proceeds of such Revolving Credit
Advance to reimburse the Issuing Bank for the Reimbursement Amount.

            (d)   The Borrowers shall, jointly and severally, pay a fee (in each
case, a "Letter of Credit Fee") to the Agent in respect of each Letter of Credit
outstanding in an amount per annum equal to the then applicable Eurodollar Rate
Margin multiplied by the average daily amount available to be drawn under such
Letter of Credit payable on the first day of each January, April, July and
October, for the calendar quarter or portion thereof ending immediately prior
thereto. The Agent shall, in turn, remit to each Lender its pro rata portion of
such Letter of Credit Fee. In addition, if there is more than one Lender
hereunder, the Borrowers, jointly and severally, shall pay to the Issuing Bank,
for its own account, on the date of issuance, or any extension or renewal of any
Letter of Credit and at such other time or times as such charges are customarily
made by the Issuing Bank, a fronting fee equal to one-eighth percent (-1/8%) of
the face amount of such Letter of Credit and, from time to time, the Issuing
Bank's standard issuance, processing, negotiation, amendment and administrative
fees, determined in accordance with customary fees and charges for similar
facilities.

                                       20
<PAGE>
            (e)   Each payment by the Borrowers under this Section 2.11 shall be
made to the Issuing Bank at the Issuing Bank's head office in immediately
available funds. Interest on any and all amounts remaining unpaid by the
Borrowers under this Section 2.11 at any time from the date such amounts become
due and payable (whether as stated in this Section 2.11, by acceleration or
otherwise) until payment in full (whether before or after judgment) shall be
payable to the Issuing Bank on demand at the rate specified in Section 2.5(a)
for the overdue principal on the Loans.

            (f)   The obligations of the Borrowers with respect to the Letters
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including,
without limitation, the following circumstances:

                  (i)   any lack of validity or enforceability of the Letters of
      Credit;

                  (ii)  any amendment or waiver of or any consent to or actual
      departure from this Agreement;

                  (iii) the existence of any claim, set-off, defense or other
      right which the Borrowers may have at any time against any beneficiary or
      any transferee of a Letter of Credit (or any Persons or entities for which
      any such beneficiary or any such transferee may be acting), the Issuing
      Bank or any other Person or entity, whether in connection with this
      Agreement, the transactions contemplated herein or in any other agreements
      or any unrelated transaction;

                  (iv)  any statement or any other document presented under a
      Letter of Credit proving to be forged, fraudulent, invalid or insufficient
      in any respect or any statement therein being untrue or inaccurate in any
      respect;

                  (v)   payment by the Issuing Bank under a Letter of Credit
      against presentation by the beneficiary thereof of a draft or certificate
      which does not comply with the terms of such Letter of Credit; or

                  (vi)  any other circumstance or happening whatsoever, whether
      or not similar to any of the foregoing.

            (g)   The Uniform Customs and Practice shall be binding on the
Borrowers, the Lenders and the Issuing Bank. The Borrowers assume all risks of
the acts or omissions of the beneficiary of each Letter of Credit with respect
to such Letter of Credit. In furtherance of, and not in limitation of the
Issuing Bank's rights and powers under the Uniform Customs and Practice, but
subject to all other provisions of this paragraph (g), it is understood and
agreed that the Issuing Bank shall not have any liability for, and that the
Borrowers assume all responsibility for: (i) the genuineness of any signature;
(ii) the form, correctness, validity, sufficiency, genuineness, falsification
and legal effect of any draft, certification or other document required by a
Letter of Credit or the authority of the Person signing the same; (iii) the
failure of any instrument to bear any reference or adequate reference to a
Letter of Credit or the failure of any Persons to note the amount of any
instrument on the reverse of a Letter of Credit or to surrender a Letter of
Credit or otherwise to comply with the terms and condition of a Letter of
Credit; (iv)

                                       21
<PAGE>
the good faith or acts of any Person other than the Issuing Bank and its agents
and employees; (v) the existence, form or sufficiency or breach or default under
any agreement or instrument of any nature whatsoever; (vi) any delay in giving
or failure to give any notice, demand or protest; and (vii) any error, omission,
delay in or nondelivery of any notice or other communication, however sent. The
determination as to whether the required documents are presented prior to the
expiration of a Letter of Credit and whether such other documents are in proper
and sufficient form for compliance with a Letter of Credit shall be made by the
Issuing Bank in its discretion in accordance with the Uniform Customs and
Practice, which determination shall be conclusive and binding upon the Borrower
absent manifest error. It is agreed that the Issuing Bank may honor, as
complying with the terms of a Letter of Credit and this Agreement, any documents
otherwise in order and signed or issued by the beneficiary thereof. Any action,
inaction or omission on the part of the Issuing Bank under or in connection with
the Letters of Credit or any related instruments or documents, if in good faith
and in conformity with such laws, regulations or commercial or banking customs
as the Issuing Bank may reasonably deem to be applicable, shall be binding upon
the Borrowers, shall not place the Issuing Bank under any liability to the
Borrowers, and shall not affect, impair or prevent the vesting of any of the
Issuing Bank's rights or powers hereunder or the Borrowers' obligation to make
full reimbursement of amounts drawn under the Letters of Credit.

            (h)   If New England Audio, either in writing or orally, requests or
consents to any modification or extension of a Letter of Credit or waives
failure of any draft, certificate or other documents to comply with the terms of
a Letter of Credit, the Issuing Bank shall be entitled to rely and shall be
deemed to have relied on such request, consent or waiver with respect to any
action taken or omitted by the Issuing Bank pursuant to any such request,
consent or waiver, and such extension, modification or waiver shall be binding
upon the Borrowers.

            (i)   Each Lender severally agrees that it shall be absolutely
liable, without regard to the occurrence of any Default or Event of Default or
any other condition precedent whatsoever, to the extent of such Lender's
Commitment Percentage, to reimburse the Issuing Bank on demand for the amount of
each draft paid by the Issuing Bank under each Letter of Credit to the extent
that such amount is not reimbursed by the Borrowers pursuant to paragraph (c)
above (such agreement for a Lender being called herein the "Letter of Credit
Participation" of such Lender); provided, however, that no Lender shall be
required to reimburse Issuing Bank for Letters of Credit issued during a Default
or without fulfillment of a condition precedent.

            (j)   If any draft shall be presented or other demand for payment
shall be made under any Letter of Credit, the Issuing Bank shall notify New
England Audio and the Agent of the date and amount of the draft presented or
demand for payment and of the date and time when it expects to pay such draft or
honor such demand for payment. If the Borrowers fail to reimburse the Issuing
Bank as provided in paragraph (c) above on or before the date that such draft is
paid or other payment is made by the Issuing Bank, the Issuing Bank may at any
time thereafter notify the Lenders of the amount of any such unpaid
Reimbursement Amount. No later than 3:00 p.m. (Boston time) on the Business Day
next following the receipt of such notice, each Lender shall make available to
the Issuing Bank, at its head office located at 100 Federal Street, Boston,
Massachusetts, in immediately available funds, such Lender's Commitment
Percentage of such unpaid Reimbursement Amount, together with an amount equal to
the

                                       22
<PAGE>
product of (i) the average, computed for the period referred to in clause (iii)
below, of the weighted average interest rate paid by the Issuing Bank for
federal funds acquired by the Issuing Bank during each day included in such
period, times (ii) the amount equal to such Lender's Commitment Percentage of
such unpaid Reimbursement Amount, times (iii) a fraction, the numerator of which
is the number of days that elapse from and including the date the Issuing Bank
paid the draft presented for honor or otherwise made payment to the date on
which such Lender's Commitment Percentage of such unpaid Reimbursement Amount
shall become immediately available to the Issuing Bank, and the denominator of
which is 360.

            (k)   Neither the Issuing Bank nor any of its officers, directors or
employees shall be liable or responsible for: (i) the use which may be made of
any Letter of Credit or any acts or omissions of any beneficiary or transferee
in connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should prove to
be in any or all respects invalid, insufficient, fraudulent or forged; (iii)
payment by the Issuing Bank against presentation of documents which do not
comply with the terms of a Letter of Credit, including failure of any documents
to bear any reference or adequate reference to a Letter of Credit; or (iv) any
other circumstances whatsoever in making or failure to make payment under a
Letter of Credit; provided, that, notwithstanding anything in this Section 2.11
to the contrary, New England Audio shall have a claim against the Issuing Bank,
and the Issuing Bank shall be liable to New England Audio, to the extent, but
only to the extent, of any direct, as opposed to consequential, damages suffered
by New England Audio which were caused by the Issuing Bank's failure to conform
to the standards of the Uniform Customs and Practice. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.

            (l)   Existing Letters of Credit. Reference is made to the letters
of credit issued by Fleet National Bank on behalf of New England Audio prior to
the date of this Agreement, the face amount, beneficiary and number of which are
listed on Schedule 2.11 hereto (the "Existing Letters of Credit"). The Borrowers
and the Lenders hereby agree that as of the date of this Agreement, all such
Existing Letters of Credit shall hereinafter be deemed Letters of Credit, as if
originally issued hereunder, and shall be subject to the terms of this
Agreement; provided, however, that the Borrowers shall not be obligated to pay
any additional issuance fees in connection with such Existing Letters of Credit
which are deemed to be Letters of Credit hereunder.

            (m)   Notice to Agent. An Issuing Bank shall provide to the Agent
within two (2) Business Days thereof notice of any requests for the issuance of
Letters of Credit hereunder or any rescissions, waivers, amendments or
modifications of any of the terms or provisions of any Letter of Credit issued
by such Issuing Bank.

      SECTION 2.12. INCREASED COSTS, ETC.

            (a)   Anything herein to the contrary notwithstanding, if any
changes in present or future applicable law (which term "applicable law," as
used in this Agreement, includes statutes and rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or

                                       23
<PAGE>
the interpretation thereof and requests, directives, instructions and notices at
any time or from time to time heretofore or hereafter made upon or otherwise
issued to any Lender by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law), including without limitation
any change according to a prescribed schedule of increasing requirements,
whether or not known or in effect as of the date hereof, shall (i) subject such
Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding of
any nature with respect to this Agreement or the payment to such Lender of any
amounts due to it hereunder, or (ii) materially change the basis of taxation of
payments to such Lender of the principal of or the interest on the Revolving
Credit Advances or any other amounts payable to such Lender hereunder, or (iii)
impose or increase or render applicable any special or supplemental deposit or
reserve or similar requirements or assessment against assets held by, or
deposits in or for the account of, or any liabilities of, or loans by an office
of such Lender in respect of the transactions contemplated herein, or (iv)
impose on such Lender any other condition or requirement with respect to this
Agreement, any Revolving Credit Advance or any Letter of Credit, and the result
of any of the foregoing is (A) to increase the cost to such Lender of making,
funding or maintaining all or any part of the Revolving Credit Advances, the
Letters of Credit or its commitments hereunder, or (B) to reduce the amount of
principal, interest or other amount payable to such Lender hereunder, or (C) to
require such Lender to make any payment or to forego any interest or other sum
payable hereunder, the amount of which payment or foregone interest or other sum
is calculated by reference to the gross amount of any sum receivable or deemed
received by such Lender from the Borrowers hereunder, then, and in each such
case not otherwise provided for hereunder, the Borrowers, jointly and severally,
will upon demand made by such Lender promptly following such Lender's receipt of
notice pertaining to such matters accompanied by calculations thereof in
reasonable detail, pay to such Lender such additional amounts as will be
sufficient to compensate such Lender for such additional cost, reduction,
payment or foregone interest or other sum; provided that the foregoing
provisions of this sentence shall not apply in the case of any additional cost,
reduction, payment or foregone interest or other sum resulting from any taxes
charged upon or by reference to the overall net income, profits or gains of any
Lender. In determining the additional amounts payable hereunder, the Lenders may
use any reasonable method of averaging, allocating or attributing such
additional costs, reductions, payments, foregone interest or other sums among
their respective customers.

            (b)   Anything herein to the contrary notwithstanding, if, after the
date hereof, any Lender shall have determined that any present or future
applicable law, rule, regulation, guideline, directive or request (whether or
not having force of law), including without limitation any change according to a
prescribed schedule of increasing requirements, whether or not known or in
effect as of the date hereof, regarding capital requirements for banks or bank
holding companies generally, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any of the foregoing, either imposes a requirement upon such
Lender to allocate additional capital resources or increases such Lender's
requirement to allocate capital resources or such Lender's commitment to make,
or to such Lender's maintenance of, the Revolving Credit Advances or the Letters
of Credit hereunder, which has or would have the effect of reducing the return
on such Lender's capital to a level below that which such Lender could have
achieved (taking into consideration such

                                       24
<PAGE>
Lender's then existing policies with respect to capital adequacy and assuming
full utilization of such Lender's capital) but for such applicability, change,
interpretation, administration or compliance, by any amount deemed by such
Lender to be material, such Lender shall promptly after its determination of
such occurrence give notice thereof to the Borrowers. The Borrowers and such
Lender shall thereafter attempt to negotiate in good faith an adjustment to the
compensation payable hereunder which will adequately compensate such Lender for
such reduction. If the Borrowers and such Lender are unable to agree to such
adjustment within thirty (30) days of the day on which the Borrowers receive
such notice, then commencing on the date of such notice (but not earlier than
the effective date of any such applicability, change, interpretation,
administration or compliance), the fees payable hereunder shall increase by an
amount which will, in such Lender's reasonable determination, evidenced by
calculations in reasonable detail furnished to the Borrowers, compensate such
Lender for such reduction, such Lender's determination of such amount, if made
in good faith, to be conclusive and binding upon the Borrowers, absent manifest
error. In determining such amount, such Lender may use any reasonable methods of
averaging, allocating or attributing such reduction among its customers.

      SECTION 2.13. CHANGED CIRCUMSTANCES. In the event that:

            (a)   on any date on which the Applicable Eurodollar Rate would
otherwise be set, the Agent or any Lender shall have determined in good faith
(which determination shall be final and conclusive) that adequate and fair means
do not exist for ascertaining the Eurodollar Rate, as applicable; or

            (b)   at any time the Agent or any Lender shall have determined in
good faith (which determination shall be final and conclusive) that

                  (i)   the implementation of the Eurodollar Pricing Option has
      been made impracticable or unlawful by (A) the occurrence of a contingency
      that materially and adversely affects the London interbank market or (B)
      compliance by any Lender in good faith with any applicable law or
      governmental regulation, guideline or order or interpretation or change
      thereof by any governmental authority charged with the interpretation or
      administration thereof or with any request or directive of any such
      governmental authority (whether or not having the force of law); or

                  (ii)  the Eurodollar Rate shall no longer represent the
      effective cost to the Lenders for U.S. dollar deposits in the London
      interbank market, as applicable for deposits in which they regularly
      participate;

then, and in such event, the Agent shall forthwith so notify the Borrowers
thereof. Until the Agent notifies the Borrowers that the circumstances giving
rise to such notice no longer apply, the obligation of the Lenders and the Agent
to allow election by the Borrowers of a Eurodollar Pricing Option shall be
suspended. If at the time the Agent so notifies the Borrowers, New England Audio
has previously given the Agent a Eurodollar Pricing Notice with respect to a
Eurodollar Pricing Option, but the Eurodollar Pricing Option requested therein
has not yet gone into effect, such Eurodollar Pricing Notice shall automatically
be deemed to be withdrawn and be of no force or effect. Upon such date as shall
be specified in such notice (which shall not be earlier than the date such
notice is given), the Eurodollar Pricing Option with respect to all

                                       25
<PAGE>
Eurodollar Rate Loans shall be terminated and the Borrowers, jointly and
severally, shall pay all interest due on such Eurodollar Rate Loans and any
amounts required to be paid pursuant to Section 4.3.

      SECTION 2.14. USE OF PROCEEDS. The proceeds of the first Revolving Credit
Advance shall be applied to repay in full all outstanding principal, accrued
interest and all other fees and expenses due to the agent and the lenders under
the Amended and Restated Credit Agreement dated as of July 20, 1998, as amended
(the "1998 Credit Agreement"), by and among certain of the Loan Parties, Fleet
National Bank, as agent, and the lenders party thereto. The proceeds of all
other Revolving Credit Advances shall be used by the Borrowers for general
working capital and other corporate purposes including capital expenditures and
Permitted Acquisitions permitted hereunder. The Borrowers will not, directly or
indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any Person for
the purpose of purchasing or carrying any such margin stock.

      SECTION 2.15. GUARANTY. The Guarantors, jointly and severally, hereby
unconditionally guaranty to the Agent and the Lenders the full and punctual
payment when due (whether at maturity, by acceleration or otherwise), and the
performance of (a) all liabilities, agreements, obligations and Indebtedness,
direct or indirect, matured or unmatured, primary or secondary, certain or
contingent, secured or unsecured of the Borrowers or the Guarantors to the Agent
and the Lenders (including without limitation, costs and expenses incurred by
the Agent and the Lenders in attempting to collect or enforce any of the
foregoing), including without limitation the Lender Obligations, accrued in each
case to the date of payment and (b) the performance of all other agreements,
covenants and conditions of the Borrowers and the Guarantors with respect
thereto set forth in this Agreement and all other Lender Agreements. The
responsibilities and obligations of the Borrowers to the Agent and the Lenders
described in the preceding sentence are hereinafter referred to collectively as
the "Guaranteed Obligations." The guaranty pursuant to this Section 2.15 is an
absolute, unconditional, joint and several, and continuing guaranty of the full
and punctual payment and performance by the Borrowers of the Guaranteed
Obligations and not of collectability of the Guaranteed Obligations, and is in
no way conditioned upon any requirement that the Agent or the Lenders first
attempt to collect any of the Guaranteed Obligations from the Borrowers or
resort to any security or other means of obtaining payment of any of the
Guaranteed Obligations which the Agent or the Lenders now has or may acquire
after the date hereof, or upon any other contingency whatsoever. Upon any
default by the Borrowers in respect of the full and punctual payment and
performance of the Guaranteed Obligations which constitutes an Event of Default,
the liabilities and obligations of each Guarantor hereunder shall, at the option
of the Agent, become forthwith due and payable to the Agent and the Lenders
without demand or notice of any nature, all of which are expressly waived by
each Guarantor. Payments by each Guarantor under this Section 2.15 may be
required by the Agent or the Lenders on any number of occasions. Each Guarantor
waives presentment, demand, protest, notice of acceptance, notice of Guaranteed
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshaling of assets of
the Borrowers and all suretyship defenses generally. Without limiting the
generality of the foregoing, each Guarantor agrees to the provisions of any
instrument evidencing, securing or

                                       26
<PAGE>
otherwise executed in connection with any Guaranteed Obligations and agrees that
the obligations of each Guarantor hereunder shall not be released or discharged,
in whole or in part, or otherwise affected by any rescissions, waivers,
amendments or modifications of any of the terms or provisions of any agreement
evidencing securing or otherwise executed in connection with any Guaranteed
Obligation. Until the payment and performance in full of all Guaranteed
Obligations and any and all obligations of the Borrowers to any affiliate of the
Agent or the Lenders, no Guarantor shall exercise any rights against the
Borrowers arising as a result of payment by any Guarantor hereunder, by way of
subrogation or otherwise. The payment of any amounts due with respect to any
indebtedness of the Borrowers now or hereafter held by each Guarantor is hereby
subordinated to the prior payment in full of the Guaranteed Obligations.

                  ARTICLE 3 - CONDITIONS TO LOANS AND ADVANCES

      SECTION 3.1. CONDITIONS TO FIRST REVOLVING CREDIT ADVANCE. The Lenders'
obligations to make the first Revolving Credit Advance shall be subject to
compliance by the Loan Parties with their agreements contained in this
Agreement, and to the condition precedent that the Lenders shall have received
each of the following, in form and substance satisfactory to the Agent and its
counsel or in the form attached hereto as an Exhibit, as the case may be:

            (a)   Notes. The Revolving Credit Notes duly executed by the
Borrowers.

            (b)   Security Documents. Each of the Security Documents duly
executed by the Loan Party thereto and, accompanying the Pledge Agreements, the
certificates representing all of the capital stock or other equity interests of
all Subsidiaries together with stock powers executed in blank.

            (c)   Resolutions. Copies of the resolutions of the Boards of
Directors of the Loan Parties authorizing the execution, delivery and
performance of this Agreement, the Revolving Credit Notes, the Security
Documents and the other Lender Agreements to which any Loan Party is a party,
certified by the Secretary or an Assistant Secretary (or Clerk or Assistant
Clerk or in the case of the Tweeter Trust, trustee) of each Loan Party (which
certificate shall state that such resolutions are in full force and effect).

            (d)   Incumbency. Certificates of the Secretary or an Assistant
Secretary (or Clerk or Assistant Clerk or in the case of the Tweeter Trust,
trustee) of each Loan Party certifying the name and signatures of the officers
of the Borrowers authorized to sign this Agreement, the Revolving Credit Notes,
the Security Documents and the other Lender Agreements to which any Loan Party
is a party and the other documents to be delivered by any Loan Party hereunder.

            (e)   Existence, Qualification and Good Standing Certificates.
Certificates of legal existence, foreign qualification and corporate good
standing, as applicable, for each Loan Party of recent date issued by the
appropriate Alabama, California, Connecticut, Delaware, Florida, Georgia,
Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey,
Pennsylvania, Rhode Island and Texas governmental authorities.

                                       27
<PAGE>
            (f)   Repayment and Termination of 1998 Credit Agreement. Evidence
satisfactory to the Agent that all outstanding principal, accrued interest and
all other fees and expenses due to the agent and the lenders under the 1998
Credit Agreement have been paid in full and the 1998 Credit Agreement has been
terminated.

            (g)   Key Man Life Insurance. The Borrowers shall have assigned
collaterally to the Agent one or more life insurance policies on the life of
Jeffrey Stone representing total coverage of $5,000,000, together with the
consent of the insurer to such assignment, all in form and issued by an insurer
reasonably acceptable to the Agent.

            (h)   UCC Financing Statements and Other Perfection Issues. Receipt
by the Agent of evidence that (a) Uniform Commercial Code financing statements
naming the Loan Parties as debtor and Agent as secured party have been filed in
all locations where any of the Loan Parties' assets are located and (b) the
Agent has a perfected security interest in all other assets of the Loan Parties.

            (i)   Landlord Waivers. Receipt by the Agent of acknowledgments by
the landlords of each location in which any of the Loan Parties' assets are
located, substantially in the form of Exhibit G hereto.

            (j)   Insurance Certificates. Receipt by the Agent of certificates
of insurance naming the Agent as loss payee and evidencing the Loan Parties'
compliance with the requirements of this Agreement and the Security Documents to
maintain insurance coverage.

            (k)   Opinion of Counsel. The opinion of Goulston & Storrs, a
professional corporation, counsel to the Loan Parties, dated the date of
execution of this Agreement, in substantially the form of Exhibit H attached
hereto.

            (l)   Closing Certificate. Certificates of duly authorized officers
(or in the case of the Tweeter Trust, the trustee) of the Loan Parties, dated
the date of the first Revolving Credit Advances, to the effect that all
conditions precedent on the part of the Loan Parties to the execution and
delivery hereof and the making of the first Revolving Credit Advances have been
satisfied.

            (m)   Fees and Expenses. Payment of all fees and expenses of the
Agent and the Lenders then due and payable.

            (n)   Subsidiary Loans. The Borrowers, Tweeter Trust, THEG, TOC and
Video Scene shall have entered into certain Subsidiary Subordination Agreements.

            (o)   Vendor Intercreditor Subordination Agreements. Evidence
satisfactory to the Agent, that certain vendors of the Loan Parties have entered
into an intercreditor subordination agreement, on terms and conditions
satisfactory to the Agent.

            (p)   Collateral Certificate. Receipt by the Agent of a collateral
certificate in form and substance reasonably satisfactory to the Agent.

                                       28
<PAGE>
            (q)   Other Conditions. Such other documents, certificates and
opinions as the Agent or the Lenders may reasonably request.

      SECTION 3.2. CONDITIONS TO ALL REVOLVING CREDIT ADVANCES. The Lenders'
obligations to make any Revolving Credit Advance pursuant to this Agreement
shall be subject to compliance by the Loan Parties with their agreements
contained in this Agreement and each other Lender Agreement, and to the
satisfaction, at or before the making of each Revolving Credit Advance, of all
of the following conditions precedent:

            (a)   The representations and warranties herein and those made by or
on behalf of the Loan Parties in any other Lender Agreement shall be correct as
of the date on which any Revolving Credit Advance is made, with the same effect
as if made at and as of such time (except as to transactions permitted hereunder
and described in a Compliance Certificate previously delivered to the Agent and
except that the references in Article 5 to the 2000 Financial Statements shall
be deemed to refer to the most recent annual audited consolidated financial
statements of Tweeter and its Subsidiaries furnished to the Agent).

            (b)   On the date of any Revolving Credit Advances hereunder, there
shall exist no Default.

            (c)   The making of the requested Revolving Credit Advances shall
not be prohibited by any law or governmental order or regulation applicable to
the Lenders or to the Borrowers, and all necessary consents, approvals and
authorizations of any Person for any such Revolving Credit Advances shall have
been obtained.

                       ARTICLE 4 - PAYMENT AND REPAYMENT

      SECTION 4.1. MANDATORY PREPAYMENT.

            (a)   If at any time the aggregate outstanding principal balance of
all Revolving Credit Advances made hereunder exceeds the Maximum Revolving
Credit Amount, the Borrowers, jointly and severally, shall immediately repay to
the Agent for the ratable accounts of the Lenders an amount equal to such
excess.

            (b)   The Borrowers, jointly and severally, shall repay all
outstanding Revolving Credit Advances on the Revolving Credit Termination Date.

      SECTION 4.2. VOLUNTARY PREPAYMENTS.

            (a)   The Borrowers, jointly and severally, may make prepayments to
the Agent for the ratable accounts of the Lenders of any outstanding principal
amount of the Revolving Credit Advances equal to $50,000 or an integral multiple
thereof which are Base Rate Loans in accordance with Section 4.3 at any time
prior to 11:00 a.m. (Boston time) on any Business Day without premium or
penalty.

            (b)   The Borrowers, jointly and severally, may make prepayments to
the Agent for the ratable accounts of the Lenders of any Revolving Credit
Advances equal to $500,000 or

                                       29
<PAGE>
any integral multiple of $100,000 thereof which are Eurodollar Rate Loans in
accordance with Section 4.3 at any time prior to 11:00 a.m. (Boston time) on any
Business Day subject, however, to the premiums and penalties set forth in
Section 4.6.

      SECTION 4.3. PAYMENT AND INTEREST CUTOFF. Notice of each prepayment
pursuant to Section 4.2 shall be given to the Agent (a) in the case of
prepayment of Base Rate Loans, not later than 11:00 a.m. (Boston time) on the
date of payment and (b) in the case of prepayment of Eurodollar Rate Loans on
any day other than the last day of the Interest Period applicable thereto, not
later than 11:00 a.m. (Boston time) two (2) Business Days prior to the proposed
date of payment, and, in each case, shall specify the total principal amount of
the Revolving Credit Advances to be paid on such date. Notice of prepayment
having been given in compliance with this Section 4.3, the amount specified to
be prepaid shall become due and payable on the date specified for prepayment and
from and after said date (unless the Borrowers shall default in the payment
thereof) interest thereon shall cease to accrue. Unpaid interest on the
principal amount of any Revolving Credit Advances so prepaid accrued to the date
of prepayment shall be due on the date of prepayment.

      SECTION 4.4. PAYMENT OR OTHER ACTIONS ON NON-BUSINESS DAYS. Whenever any
payment to be made hereunder shall be stated to be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be. In the case of any other action
the last day for performance of which shall be a day other than a Business Day,
the date for performance shall be extended to the next succeeding Business Day.

      SECTION 4.5. METHOD, TIMING AND APPLICATION OF PAYMENTS.

            (a)   All payments required to be made pursuant to the provisions of
this Agreement and any other Lender Agreement, and all prepayments pursuant to
Section 4.1, may be charged by the Agent for the benefit of the Lenders against
any Loan Party's accounts with the Agent. Each Loan Party hereby authorizes the
Agent and the Lenders, without notice to such Loan Party, to charge against any
account of such Loan Party with the Agent or such Lender an amount equal to the
accrued interest, principal and other amounts from time to time due and payable
to the Agent and the Lenders hereunder and under all other Lender Agreements.

            (b)   The Borrowers shall make each payment to be made by them
hereunder not later than 12:00 noon (Boston time) on the day when due in lawful
currency of the United States to the Agent at its address set forth in Section
14.1 in immediately available funds, without counterclaim or setoff and free and
clear of, and without deduction or withholding for, any taxes or other payments.
The Agent will, on the same date after its receipt thereof, distribute like
funds relating to the payment of principal, interest or any other amounts
payable hereunder ratably to the Lenders in accordance with their respective
Commitment Percentages. Any payment made by the Borrowers to the Agent under
this Agreement or under the Notes in the manner provided in this Agreement shall
be deemed to be a payment to each of the respective Lenders, unless the
provisions of this Agreement expressly provide that any such payment shall be
solely for the account of the Agent or any specific Lender.

                                       30
<PAGE>
            (c)   All payments shall be applied first to the payment of all
fees, expenses and other amounts due to the Agent and the Lenders (excluding
principal and interest), then to accrued interest, and the balance on account of
outstanding principal; provided, however, that after an Event of Default
payments will be applied to the obligations of the Borrowers to Agent and the
Lenders as provided in Section 10.3 or otherwise as the Agent and the Lenders
determine in their sole discretion.

      SECTION 4.6. PAYMENTS NOT AT END OF INTEREST PERIOD. The Borrowers may
prepay a Eurodollar Rate Loan only upon at least three (3) Business Days prior
written notice to the Agent (which notice shall be irrevocable), and any such
prepayment shall occur only on the last day of the Interest Period for such
Eurodollar Rate Loan. The Borrowers, jointly and severally, shall pay to the
Agent, for the account of the Lenders, upon request of the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of the Agent) to
compensate for any loss, cost, or expense incurred as a result of: (i) any
payment of a Eurodollar Rate Loan on a date other than the last day of the
Interest Period for such Eurodollar Rate Loan; (ii) any failure by the Borrowers
to borrow a Eurodollar Rate Loan on the date specified by the Borrowers' written
notice; and (iii) any failure by the Borrowers to pay a Eurodollar Rate Loan on
the date for payment specified in the Borrowers' written notice. Without
limiting the foregoing, the Borrowers, jointly and severally, shall pay to the
Agent, for the account of the Lenders, a "yield maintenance fee" in an amount
computed as follows: The current rate for United States Treasury securities
(bills on a discounted basis shall be converted to a bond equivalent) with a
maturity date closest to the term of such Eurodollar Rate Loan as to which the
prepayment is made, shall be subtracted from the Eurodollar Rate in effect at
the time of prepayment. If the result is zero or a negative number, there shall
be no yield maintenance fee. If the result is a positive number, then the
resulting percentage shall be multiplied by the amount of the principal balance
being repaid. The resulting amount shall be divided by 360 and multiplied by the
number of days remaining in the term for such Eurodollar Rate Loan as to which
the prepayment is made. Said amount shall be reduced to present value calculated
by using the above referenced United States Treasury securities rate and the
number of days remaining in the term for such Eurodollar Rate Loan as to which
prepayment is made. The resulting amount shall be the yield maintenance fee due
to the Agent, for the account of the Lenders, upon the prepayment of a
Eurodollar Rate Loan. If by reason of an Event of Default, any of the Lender
Obligations are declared to be immediately due and payable, then any yield
maintenance fee with respect to a Eurodollar Rate Loan shall become due and
payable in the same manner as though the Borrowers had exercised such right of
prepayment.

      SECTION 4.7. CURRENCY. All payments and prepayments provided for under
this Agreement shall be made in lawful currency of the United States of America
in immediately available funds.

                   ARTICLE 5 - REPRESENTATIONS AND WARRANTIES

      In order to induce the Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make the Revolving Credit Advances as contemplated
hereby, the Loan Parties hereby make the following representations and
warranties:

                                       31
<PAGE>
      SECTION 5.1. CORPORATE EXISTENCE, CHARTER DOCUMENTS, ETC.

            (a)   Tweeter and each Subsidiary which is a corporation is a
corporation validly organized, legally existing and in good standing under the
laws of the jurisdiction in which it is organized and has corporate power to own
its properties and conduct its business as now conducted and as proposed to be
conducted by it. Certified copies of the charter documents and By-Laws of
Tweeter and each such Subsidiary have been delivered to the Lenders and are
true, accurate and complete as of the date hereof.

            (b)   Each Subsidiary which is a Massachusetts business trust is a
Massachusetts business trust validly organized, legally existing and in good
standing under the laws of the jurisdiction in which it is organized and has
power as a Massachusetts business trust to own its properties and conduct its
business as now conducted and as proposed to be conducted by it. Certified
copies of the declaration of trust and each such Subsidiary have been delivered
to the Lenders and are true, accurate and complete as of the date hereof.

            (c)   Each Subsidiary which is a partnership is a partnership
validly organized, legally existing and in good standing under the laws of the
jurisdiction in which it is organized and has partnership power to own its
properties and conduct its business as now conducted and as proposed to be
conducted by it. Certified copies of the partnership agreement of each such
Subsidiary have been delivered to the Lenders and are true, accurate and
complete as of the date hereof.

      SECTION 5.2. PRINCIPAL PLACE OF BUSINESS; LOCATION OF RECORDS. The chief
executive office and principal place of business of Tweeter and each Subsidiary
is located at 10 Pequot Way, Pequot Industrial Park, Canton, Massachusetts
02021, and except as disclosed on Schedule 5.2, Tweeter and its Subsidiaries
have had no other principal place of business during the last six months. All of
the books and records or true and complete copies thereof relating to the
accounts and contracts of Tweeter and each Subsidiary are and will be kept at
their chief executive office.

      SECTION 5.3. QUALIFICATION. Tweeter and each Subsidiary is duly qualified,
licensed and authorized to do business and is in good standing as a foreign
corporation (or Massachusetts business trust as the case may be) in each
jurisdiction where its failure to be so qualified would have a Material Adverse
Effect.

      SECTION 5.4. SUBSIDIARIES. Tweeter has no Subsidiaries except for Tweeter
Trust and TWT (and after consummation of the Sound Advice Acquisition, Sound
Advice) and New England Audio. New England Audio has no Subsidiaries except for
NEA Delaware, THEG, TOC and Video Scene. All of the issued and outstanding
capital stock or other equity interests of such Subsidiaries of Tweeter and New
England Audio are owned of record and beneficially as described in Schedule 5.11
hereto.

      SECTION 5.5. CORPORATE POWER. The execution, delivery and performance of
this Agreement, the Revolving Credit Notes, the Security Documents and all other
Lender Agreements and other documents delivered or to be delivered by Tweeter or
any Subsidiary to the Agent or the Lenders, and the incurrence of Indebtedness
to the Lenders hereunder or thereunder, now or hereafter owing:

                                       32
<PAGE>
            (a)   are within the corporate powers of Tweeter and each
Subsidiary, as the case may be, having been duly authorized by its Board of
Directors or other similar governing body, and, if required by law, by its
charter documents or by its By-Laws, by its stockholders;

            (b)   do not require any approval or consent of, or filing with, any
governmental agency or other Person (or such approvals and consents have been
obtained and delivered to the Lenders) and are not in contravention of law or
the terms of the charter documents or By-Laws of Tweeter and each Subsidiary or
any amendment thereof;

            (c)   do not and will not

                  (i)   result in a breach of or constitute a default under any
      indenture or loan or credit agreement or any other agreement, lease or
      instrument to which Tweeter or any Subsidiary is a party or by which
      Tweeter, any Subsidiary or any of their respective properties are bound or
      affected,

                  (ii)  result in, or require, the creation or imposition of any
      mortgage, deed of trust, pledge, lien, security interest or other charge
      or encumbrance of any nature on any property now owned or hereafter
      acquired by Tweeter or any Subsidiary, except as provided in the Lender
      Agreements, or

                  (iii) result in a violation of or default under any law, rule,
      regulation, order, writ, judgment, injunction, decree, determination or
      award having applicability to Tweeter or any Subsidiary, or to any of
      their respective properties.

      SECTION 5.6. VALID AND BINDING OBLIGATIONS. This Agreement, the Revolving
Credit Notes, the Security Documents and all the other Lender Agreements
executed in connection herewith and therewith constitute, or will constitute
when delivered, the valid and binding obligations of Tweeter and its
Subsidiaries, as the case may be, enforceable in accordance with their
respective terms, except as the enforceability thereof may be subject to
bankruptcy, insolvency, moratorium and other laws affecting the rights and
remedies of creditors and secured parties and to the exercise of judicial
discretion in accordance with general equitable principles.

      SECTION 5.7. OTHER AGREEMENTS. Neither Tweeter nor any Subsidiary is a
party to any indenture, loan or credit agreement, or any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which the Borrower reasonably believes will have a Material Adverse Effect, or
which restricts the ability of Tweeter or any Subsidiary to carry out any of the
provisions of this Agreement, the Revolving Credit Notes, the Security Documents
or any of the Lender Agreements executed in connection herewith and therewith.

      SECTION 5.8. PAYMENT OF TAXES. Tweeter and its Subsidiaries have filed all
tax returns which are required to be filed by them and have paid, or made
adequate provision for the payment of, all taxes which have or may become due
pursuant to said returns or to assessments received. All federal tax returns of
New England Audio and its Subsidiaries through their fiscal year ended in 1994
have been audited by the Internal Revenue Service or taxes for such periods are
not subject to a valid action for collection by reason of the expiration of the
applicable statute of limitation, and the results of such audits are fully
reflected in the balance sheet contained in

                                       33
<PAGE>
the 2000 Financial Statements. Tweeter knows of no material additional
assessments since such date for which adequate reserves appearing in the balance
sheet contained in the 2000 Financial Statements have not been established.
Tweeter and its Subsidiaries have made adequate provision for all current taxes,
and to the best of Tweeter's knowledge there will not be any additional
assessments for any fiscal periods prior to and including that which ended on
the date of said balance sheet in excess of the amounts reserved therefor.

      SECTION 5.9. FINANCIAL STATEMENTS. All balance sheets, statements and
other financial information furnished to the Lenders in connection with this
Agreement and the transactions contemplated hereby (each of which is listed on
Schedule 5.9), including, without limitation, the 2000 Financial Statements,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except for normal year-end
adjustments and for the absence of footnotes with interim statements) and
present fairly the consolidated financial condition of Tweeter and its
Subsidiaries and all such information so furnished was true, correct and
complete as of the date thereof (it being recognized by the Lenders that
projections as to future results are not to be viewed as facts and that the
actual results for the period or periods covered by the projections may differ
from the projected results).

      SECTION 5.10. OTHER MATERIALS FURNISHED. No written information, exhibits,
memoranda or reports furnished to the Lenders by or on behalf of Tweeter or any
Subsidiary in connection with the negotiation of this Agreement contains any
material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein not misleading.

      SECTION 5.11. STOCK. There are presently issued by Tweeter and its
Subsidiaries and outstanding the shares of capital stock or other equity
interests indicated on Schedule 5.11. Tweeter and its Subsidiaries have received
the consideration for which such stock was authorized to be issued and have
otherwise complied with all legal requirements relating to the authorization and
issuance of shares of stock and all such shares are validly issued, fully paid
and non-assessable. Tweeter and its Subsidiaries have no other capital stock of
any class outstanding.

      SECTION 5.12. CHANGES IN CONDITION. Since the date of the balance sheet
contained in the 2000 Financial Statements and except as described on Schedule
5.12, there has been no material adverse change in the business or assets or in
the condition, financial or otherwise, of Tweeter or any Subsidiary, and neither
Tweeter nor any Subsidiary has entered into any transaction outside of the
ordinary course of business which is material to Tweeter or any Subsidiary.
Neither Tweeter nor any Subsidiary has any contingent liabilities of any
material amount which are not referred to in the 2000 Financial Statements.

      SECTION 5.13. ASSETS, LICENSES, PATENTS, TRADEMARKS, ETC.

            (a)   Tweeter and its Subsidiaries have good and marketable title
to, or valid leasehold interests in, all of their material assets, real and
personal, including the assets carried on their books and reflected in the 2000
Financial Statements, subject to no liens, charges or encumbrances, except for
(i) liens, charges and encumbrances described in Schedule 5.16 and permitted by
Section 9.2 hereof, (ii) assets sold, abandoned or otherwise disposed of in the
ordinary course of business and (iii) insubstantial and immaterial defects in
title.

                                       34
<PAGE>
            (b)   Except as disclosed on Schedule 5.13, Tweeter and its
Subsidiaries own all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, and trade names
necessary to continue to conduct their business as heretofore conducted by them,
now conducted by them and proposed to be conducted by them, each of which is
listed, together with Patent and Trademark Office application or registration
numbers, where applicable, on Schedule 5.13 hereto. Tweeter and its Subsidiaries
conduct their respective businesses without infringement or claim of
infringement of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
others. To the best knowledge of Tweeter, there is no infringement or claim of
infringement by others of any material license, patent, copyright, service mark,
trademark, trade name, trade secret or other intellectual property right of
Tweeter and its Subsidiaries.

      SECTION 5.14. LITIGATION. Except as set forth in Schedule 5.14, there is
no litigation, at law or in equity, or any proceeding before any federal, state,
provincial or municipal board or other governmental or administrative agency
pending or, to the knowledge of Tweeter, threatened, or any basis therefor,
which involves a risk of any judgment or liability which, if adversely
determined, would have a Material Adverse Effect, and no judgment, decree, or
order of any federal, state, provincial or municipal court, board or other
governmental or administrative agency has been issued against Tweeter or any
Subsidiary which has or may have a Material Adverse Effect.

      SECTION 5.15. PENSION PLANS. No employee benefit plan established or
maintained by Tweeter or any Subsidiary or any other Person a member of the same
"control group," as the Borrower (a "Pension Affiliate"), within the meaning of
Section 302(f)(6)(b) of ERISA, (including any multi-employer plan to which
Tweeter or any Subsidiary contributes) which is subject to Part 3 of Subtitle B
of Title I of the ERISA, had a material accumulated funding deficiency (as such
term is defined in Section 302 of ERISA) as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, or would have had an
accumulated funding deficiency (as so defined) on such day if such year were the
first year of such plan to which Part 3 of Subtitle B of Title I of ERISA
applied, and no material liability under Title IV of ERISA has been, or is
expected by Tweeter or any Subsidiary to be, incurred with respect to any such
plan by Tweeter or any Subsidiary or any Pension Affiliate. The execution,
delivery and performance by Tweeter of this Agreement and the other Lender
Agreements executed on the date hereof will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Internal Revenue
Code. Tweeter and its Subsidiaries have no Pension Plan other than those
described on Schedule 5.15.

      SECTION 5.16. OUTSTANDING INDEBTEDNESS. The outstanding amount of
Indebtedness for borrowed money, including Capitalized Lease Obligations and
Guaranties of borrowed money, of Tweeter and its Subsidiaries as of the date
hereof, is correctly set forth in Schedule 5.16 hereto, and said Schedule
correctly describes the credit agreements, guaranties, leases and other
instruments pursuant to which such Indebtedness has been incurred and all liens,
charges and encumbrances securing such Indebtedness. Said schedule also
describes all agreements and other arrangements pursuant to which Tweeter or any
Subsidiary may borrow any money.

      SECTION 5.17. ENVIRONMENTAL MATTERS. Except as set forth in the documents
described in Schedule 5.17, copies of which have been provided to the Agent:

                                       35
<PAGE>
            (a)   None of Tweeter, any Subsidiary or any operator of any of
their respective properties is in violation, or to the knowledge of Tweeter is
in alleged violation, of any Environmental Law, which violation would have a
Material Adverse Effect.

            (b)   None of Tweeter, any Subsidiary or any operator of any of
their respective properties has received written notice from any third party,
including, without limitation, any federal, state, county, or local governmental
authority, (i) that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980 as amended ("CERCLA") or any equivalent state law, with respect to any
site or location; (ii) that any hazardous waste, as defined in 42 U.S.C.
Section 6903(5), any hazardous substances, as defined in 42 U.S.C.
Section 9601(14), any pollutant or contaminant, as defined in 42 U.S.C.
Section 9601(33), or any toxic substance, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of, has been found
at any site at which a federal, state, county, or local agency or other third
party has conducted or has ordered Tweeter, any Subsidiary or another third
party or parties (e.g. a committee of potentially responsible parties) to
conduct a remedial investigation, removal or other response action pursuant to
any Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint (contingent or otherwise) or legal or
administrative proceeding arising out of any actual or alleged release or
threatened release of Hazardous Substances. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping of Hazardous Substances into the environment.

            (c)   (i) Tweeter, each Subsidiary and each operator of any real
property owned or operated by Tweeter is in compliance, in all material
respects, with all provisions of the Environmental Laws relating to the
handling, manufacturing, processing, generation, storage or disposal of any
Hazardous Substances; (ii) to the best knowledge of Tweeter, no portion of
property owned, operated or controlled by Tweeter or any Subsidiary has been
used for the handling, manufacturing, processing, generation, storage or
disposal of Hazardous Substances except in the course of normal day-to-day
operations and in accordance with applicable Environmental Laws; (iii) to the
best knowledge of Tweeter, there have been no releases or threatened releases of
Hazardous Substances on, upon, into or from any property owned, operated or
controlled by Tweeter or any Subsidiary, which releases could have a Material
Adverse Effect; (iv) to the best knowledge of Tweeter, there have been no
releases of Hazardous Substances on, upon, from or into any real property in the
vicinity of the real properties owned, operated or controlled by Tweeter or any
Subsidiary which, through soil or groundwater contamination, may have come to be
located on the properties of Tweeter or any Subsidiary; (v) to the best
knowledge of Tweeter, there have been no releases of Hazardous Substances on,
upon, from or into any real property formerly but no longer owned, operated or
controlled by Tweeter or any Subsidiary.

            (d)   None of the properties owned or leased by Tweeter or any
Subsidiary is or shall be subject to any applicable environmental cleanup
responsibility law or environmental restrictive transfer law or regulation by
virtue of the transactions set forth herein and contemplated hereby.

                                       36
<PAGE>
      SECTION 5.18. GOVERNMENTAL REGULATIONS. None of Tweeter, any Subsidiary or
any other Affiliate of Tweeter is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940, or is a common carrier under the Interstate Commerce Act, or is engaged
in a business or activity subject to any statute or regulation which regulates
the incurring by the Borrowers of Indebtedness for borrowed money, including
statutes or regulations relating to common or contract carriers or to the sale
of electricity, gas, steam, water, telephone or telegraph or other public
utility services.

      SECTION 5.19. MARGIN STOCK. Neither Tweeter nor any Subsidiary owns any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, or any regulations, interpretations or rulings
thereunder, nor is Tweeter or any Subsidiary engaged principally or as one of
its important activities in extending credit which is used for the purpose of
purchasing or carrying margin stock.

                      ARTICLE 6 - REPORTS AND INFORMATION

      SECTION 6.1. INTERIM FINANCIAL STATEMENTS AND REPORTS.

            (a)   As soon as available, and in any event within forty-five (45)
days after the end of each of the first three quarters of each fiscal year of
Tweeter, Tweeter shall furnish to the Agent: (i) consolidated and consolidating
balance sheets of Tweeter and its Subsidiaries as of the end of such quarter and
consolidated and consolidating statements of income, shareholders' equity and
cash flow of Tweeter and its Subsidiaries for such quarter and for the period
commencing at the end of the previous fiscal year and ending with the end of
such quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and (ii) a Compliance Certificate.

            (b)   Concurrently with each delivery of financial statements
pursuant to subsection (a) above, Tweeter will deliver a management report,
certified by its chief financial officer, (i) describing the operations and
financial condition of Tweeter and its Subsidiaries for the month or quarter
then ended and the portion of the current fiscal year then elapsed (or for the
fiscal year then ended in the case of year-end financials), (ii) setting forth
in comparative form the corresponding figures for the corresponding periods of
the previous fiscal year and the corresponding figures from the most recent
projections for the current fiscal year, (iii) discussing the reasons for any
significant variations, (iv) stating that such officer has no knowledge of any
Default or Event of Default except as specified in such certificate and (v)
setting forth in reasonable detail information sufficient to show that Tweeter
and its Subsidiaries are in compliance with the financial maintenance covenants
referred to in Article 7.

      SECTION 6.2. ANNUAL FINANCIAL STATEMENTS AND BUDGETS.

            (a)   As soon as available, but in any event within ninety (90) days
after the end of each fiscal year of Tweeter, Tweeter shall furnish to the Agent
and each Lender: (a) consolidated and consolidating balance sheets of Tweeter
and its Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income, shareholders' equity and cash flow of
Tweeter and its Subsidiaries for such fiscal year, in each case (other than the
consolidating statements) reported on by Deloitte & Touche LLP (or another "big
six"

                                       37
<PAGE>
accounting firm), or other independent certified public accountants of
recognized national standing acceptable to the Lenders, which report shall
express, without reliance upon others, a positive opinion regarding the fairness
of the presentation of such financial statements in accordance with generally
accepted accounting principles consistently applied, said report to be without
qualification, except in cases of unresolved litigation and accounting changes
with which such accountants concur, together with the statement of such
accountants that they have caused the provisions of this Agreement to be
reviewed and that nothing has come to their attention to lead them to believe
that any Default exists hereunder or specifying any Default and the nature
thereof and (b) a Compliance Certificate.

            (b)   As soon as available, but in any event prior to the
commencement of each fiscal year, beginning with the fiscal year commencing
October 1, 2001, Tweeter shall furnish to the Agent a copy of the income
statement budget, the cash flow budget and the projected balance sheets of
Tweeter and its Subsidiaries for the succeeding fiscal year, prepared by month
and in accordance with GAAP (to the extent such budgets and projections may be
prepared in accordance with GAAP), and detailing the assumptions upon which such
projections have been made, such projections to be accompanied by a certificate
of the chief financial officer to the effect that such projections have been
prepared on the basis of sound financial planning practice, and that the chief
financial officer has no reason to believe they are incorrect or misleading in
any material respect. Such items shall be delivered prior to their final
approval by Tweeter's Board of Directors and in sufficient time for the Lenders
to comment on them before Board approval is obtained, and copies of such items
as finally approved by the Board shall also be delivered to the Lenders.

      SECTION 6.3. NOTICE OF DEFAULTS, ETC. As soon as possible, and in any
event within five (5) days after obtaining knowledge of the occurrence of each
Default, Tweeter shall furnish to the Agent the statement of its chief executive
officer or chief financial officer setting forth details of such Default and the
action which Tweeter and its Subsidiaries have taken or propose to take with
respect thereto. Promptly after becoming aware thereof, Tweeter shall give the
Agent notice of any event or condition which is likely to have a Material
Adverse Effect.

      SECTION 6.4. NOTICE OF LITIGATION. Promptly after obtaining knowledge of
the commencement thereof, Tweeter shall furnish to the Agent written notice of
all actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting Tweeter or any Subsidiary, which, if adversely determined, would have
a Material Adverse Effect.

      SECTION 6.5. COMMUNICATIONS WITH OTHERS. At all times that the stock of
Tweeter is or is proposed to be traded publicly, Tweeter shall furnish to the
Agent copies of all regular, periodic and special reports and all registration
statements which Tweeter files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national or regional securities exchange.

      SECTION 6.6. REPORTABLE EVENTS. At any time that Tweeter or any Subsidiary
has a Pension Plan, Tweeter shall furnish to the Agent, as soon as possible, but
in any event within thirty (30) days after Tweeter or any Subsidiary obtains
knowledge that any Reportable Event with respect to any Pension Plan has
occurred, the statement of its chief executive officer or

                                       38
<PAGE>
chief financial officer setting forth the details of such Reportable Event and
the action which Tweeter or any Subsidiary has taken or proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation.

      SECTION 6.7. REPORTS TO OTHER CREDITORS. Promptly after filing the same,
Tweeter shall furnish to the Agent copies of any compliance certificate and
other information furnished to any other holder of the securities (including
debt obligations) of Tweeter or any Subsidiary pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Agent or the Lenders pursuant to any other provision of this
Agreement.

      SECTION 6.8. COMMUNICATIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS. At any
reasonable time and from time to time, Tweeter shall use its best efforts to
provide the Agent and the Lenders and any agents or representatives of the
Lenders access to the independent public accountants of Tweeter to discuss the
financial condition of Tweeter and its Subsidiaries, including, without
limitation, any recommendations of such independent public accountants
concerning the management, finances, financial controls or operations of Tweeter
and its Subsidiaries. Promptly after the receipt thereof, Tweeter shall furnish
to the Agent copies of (a) any management letter or other written
recommendations concerning the management, finances, financial controls, or
operations of Tweeter or any Subsidiary received from Tweeter's independent
public accountants and (b) any written responses of Tweeter or any Subsidiary in
response thereto.

      SECTION 6.9. ENVIRONMENTAL REPORTS. Tweeter shall furnish to the Agent and
each Lender: (a) not later than seven (7) days after notice thereof, notice of
any enforcement actions, or, to the knowledge of Tweeter, threatened enforcement
actions affecting Tweeter or any Subsidiary by any Governmental Agency related
to Environmental Laws; (b) copies, within seven (7) days after they are
received, of all orders, notices of responsibility, notices of violation,
notices of enforcement actions, and assessments, and other written
communications pertaining to any such orders, notices, claims and assessments
received by Tweeter or any Subsidiary from any Governmental Agency; (c) not
later than seven (7) days after notice thereof, notice of any civil claims or
threatened civil claims affecting Tweeter or any Subsidiary by any third party
alleging any violation of Environmental Laws or harm to human health or the
environment; and (d) copies of all cleanup plans, site assessment reports,
response plans, remedial proposals, or other submissions of Tweeter or any
Subsidiary, submitted to a Governmental Agency in response to any communication
referenced in subsections (a) and (b) herein simultaneously with their
submission to such Governmental Agency.

      SECTION 6.10. NOTICE OF PERMITTED ACQUISITIONS. At least fifteen (15)
Business Days prior to the consummation of any Permitted Acquisition, Tweeter
shall furnish to the Agent (a) copies of the most recent audited and, if later,
or, if audited statements are not available, unaudited financial statements of
the Person which is the subject of such Permitted Acquisition, (b) a description
of such proposed Permitted Acquisition in such detail as the Agent may
reasonably request, including copies of letters of intent and draft purchase
agreements or other acquisition documents executed or to be executed by Tweeter
or any of its Subsidiaries in connection with the Permitted Acquisition, (c) an
unaudited pro forma consolidated balance sheet and income statement of the
Tweeter and its Subsidiaries as at the end of the most recent fiscal quarter but
prepared as though the closing of such Permitted Acquisition had occurred on

                                       39
<PAGE>
or prior to such date and related pro forma calculations, based on trailing
four-quarter operating performance, pro forma debt and pro forma debt service
based on scheduled principal payments and pro forma interest on total debt at
then prevailing borrowing rates, indicating compliance on a pro forma basis as
at such date and for the periods then ended with the financial covenants set
forth in Section 7 and (d) unaudited projections of balance sheets and income
statements and related calculations for the following four quarters, assuming
the Permitted Acquisition has closed and indicating compliance, on a projected
basis, for such periods with the financial covenants set forth in Section 7.

      SECTION 6.11. THEG, TOC, TWT AND VIDEO SCENE LEASES. THEG, TOC, TWT (and
after consummation of the Sound Advice Acquisition, Sound Advice) and Video
Scene will provide notice to the Agent, promptly after receipt thereof, of any
notice of default received by THEG, TOC, TWT or Video Scene under any lease to
which THEG, TOC, TWT (and after consummation of the Sound Advice Acquisition,
Sound Advice) or Video Scene, respectively, is a party.

      SECTION 6.12. CYBERIAN JOINT VENTURE FINANCIAL REPORTS.

            (a)   As soon as available, and in any event within forty-five (45)
days after the end of each of the first three quarters of each fiscal year of
the Cyberian Joint Venture, Tweeter shall furnish to the Agent a balance sheet
of the Cyberian Joint Venture as of the end of such quarter and statements of
income, shareholders' equity and cash flow of the Cyberian Joint Venture for
such quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding period of the
preceding fiscal year, all in reasonable detail.

            (b)   As soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Cyberian Joint Venture, Tweeter shall
furnish to the Agent and each Lender a balance sheet of the Cyberian Joint
Venture as of the end of such fiscal year and statements of income,
shareholders' equity and cash flow of Tweeter and its Subsidiaries for such
fiscal year, in each case (other than the consolidating statements) reported on
by Deloitte & Touche LLP (or another "big six" accounting firm), or other
independent certified public accountants of recognized national standing
acceptable to the Lenders, which report shall express, without reliance upon
others, a positive opinion regarding the fairness of the presentation of such
financial statements in accordance with generally accepted accounting principles
consistently applied, said report to be without qualification, except in cases
of unresolved litigation and accounting changes with which such accountants
concur.

      SECTION 6.13. MISCELLANEOUS. Tweeter shall provide the Agent and the
Lenders with such other information as the Agent or the Lenders may from time to
time reasonably request, including Borrowing Base Reports and other information
respecting the business, properties, prospects, condition or operations,
financial or otherwise, of Tweeter and its Subsidiaries.

                                       40
<PAGE>
                        ARTICLE 7 - FINANCIAL COVENANTS

      On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder,
Tweeter and its Subsidiaries shall observe the following covenants:

      SECTION 7.1. RATIO OF CONSOLIDATED TOTAL FUNDED DEBT TO CONSOLIDATED
EBITDA. Tweeter and its Subsidiaries shall not permit the ratio of Consolidated
Total Funded Debt, as of the end of any fiscal quarter, to Consolidated EBITDA
for the four-quarter period ending on such date, commencing with the quarter
ending June 30, 2001, to be greater than 3.00-to-1.00.

      SECTION 7.2. RATIO OF CONSOLIDATED OPERATING CASH FLOW TO CONSOLIDATED
DEBT SERVICE. Tweeter and its Subsidiaries shall not permit, for any period of
four consecutive fiscal quarters, commencing with the four-quarter period ending
June 30, 2001, the ratio of Consolidated Operating Cash Flow to Consolidated
Debt Service, to be less than 1.50-to-1.00.

      SECTION 7.3. CONSOLIDATED NET WORTH. Tweeter and its Subsidiaries shall,
at all times, maintain a Consolidated Net Worth equal to or greater than the sum
of (a)(i) prior to the Sound Advice Acquisition being consummated, One Hundred
Ninety Million Five Hundred Thousand Dollars ($190,500,000) or (ii) after the
Sound Advice Acquisition has been consummated, Two Hundred Twenty Million
Dollars ($220,000,000) plus (b) 50% of cumulative Consolidated Net Income
(without deduction for any losses) after March 31, 2001 for each quarter plus
(c) all amounts received by Tweeter and its Subsidiaries after March 31, 2001
from the issuance of equity interests.

      SECTION 7.4. RATIO OF CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE.
Tweeter and its Subsidiaries shall not permit, for any period of four
consecutive fiscal quarters, commencing with the four-quarter period ending June
30, 2001, the ratio of Consolidated EBIT to Consolidated Interest Expense to be
less than 3.50-to-1.00.

      SECTION 7.5. CONSOLIDATED CAPITAL EXPENDITURES. Tweeter and its
Subsidiaries shall not make or incur any expenditure for fixed or capital
assets, including assets financed under Capitalized Leases, but excluding
capital expenditures incurred in Permitted Acquisitions, if, after giving effect
thereto, the aggregate of all such expenditures made by Tweeter and its
Subsidiaries would exceed the amounts set forth below for the corresponding
fiscal years:

<TABLE>
<CAPTION>
           FISCAL YEAR ENDING             CONSOLIDATED CAPITAL EXPENDITURES
           ------------------             ---------------------------------
<S>                                       <C>
           September 30, 2001                        $40,000,000
           September 30, 2002                        $55,000,000
           September 30, 2003 and                    $65,000,000
           Thereafter
</TABLE>

Notwithstanding the foregoing, if Tweeter and its Subsidiaries do not expend the
entire permitted Capital Expenditures in any fiscal year, Tweeter and its
Subsidiaries may carry forward to the immediately succeeding fiscal year, and
only to the immediately succeeding fiscal year, 100% of

                                       41
<PAGE>
the unutilized portion of the permitted Capital Expenditures. All Capital
Expenditures made by Tweeter and its Subsidiaries in such succeeding fiscal year
shall first be applied to reduce the permitted Capital Expenditures for such
succeeding fiscal year and then to reduce the carry forward from the previous
fiscal year, if any.

                       ARTICLE 8 - AFFIRMATIVE COVENANTS

      On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitment hereunder, the
Loan Parties covenant that Tweeter will, and will cause each of its Subsidiaries
to, comply with the following covenants and provisions:

      SECTION 8.1. EXISTENCE AND BUSINESS. Tweeter and each Subsidiary will (a)
subject to Section 9.6, preserve and maintain its corporate existence and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which the failure to maintain such qualification would, individually or in the
aggregate, have a Material Adverse Effect, (b) preserve and maintain in full
force and effect all material rights, licenses, patents and franchises, (c)
comply in all material respects with all valid and applicable statutes, rules
and regulations necessary for the conduct of business and (d) engage only in the
businesses which it is conducting on the date of this Agreement.

      SECTION 8.2. TAXES AND OTHER OBLIGATIONS. Tweeter and each Subsidiary (a)
will duly pay and discharge, or cause to be paid and discharged, before the same
shall become in arrears, all material taxes, assessments and other governmental
charges, imposed upon it and its properties, sales and activities, or upon the
income or profits therefrom, as well as the claims for labor, materials, or
supplies which if unpaid might by law result in a lien or charge upon any of its
properties; provided, however, that Tweeter and any Subsidiary may contest any
such charges or claims in good faith so long as (i) an adequate reserve therefor
has been established and is maintained if and as required by generally accepted
accounting principles and (ii) no action to foreclose any such lien has been
commenced and (b) will promptly pay or cause to be paid when due, or in
conformance with customary trade terms (but not later than sixty (60) days from
the due date in the case of trade debt), all material lease obligations, trade
debt and all other material Indebtedness incident to its operations. Tweeter and
each Subsidiary shall cause all applicable tax returns and all amounts due
thereunder to be filed and paid (except to the extent contested in accordance
with the terms of Section 8.2), as the case may be, in order to maintain its
good standing with the Internal Revenue Service and state, local and foreign tax
authorities.

      SECTION 8.3. MAINTENANCE OF PROPERTIES AND LEASES. Tweeter and each
Subsidiary shall maintain, keep and preserve all of its properties (tangible and
intangible) in good repair and working order, ordinary wear and tear excepted.
Tweeter and each Subsidiary shall replace and improve its properties as
necessary for the conduct of its business. Tweeter and each Subsidiary shall
comply in all material respects with all leases naming it as lessee.

      SECTION 8.4. INSURANCE. Tweeter and each Subsidiary (a) will keep its
principal assets which are of an insurable character insured by financially
sound and reputable insurers against loss or damage by fire, explosion or
hazards, by extended coverage in an amount sufficient to avoid co-insurance
liability and (b) will maintain with financially sound and reputable insurers

                                       42
<PAGE>
insurance against other hazards and risks and liability to persons and property
to the extent and in a manner reasonably satisfactory to the Lenders, and in any
event as customary for companies in similar businesses similarly situated;
provided, however, that on prior notice to the Agent it may effect workmen's
compensation insurance through an insurance fund operated by such state or
jurisdiction and may also be a self-insurer with respect to workmen's
compensation and with respect to group medical benefits under any medical
benefit plan. The provisions of the Security Documents relating to insurance
shall not be limited by the provisions of this Section 8.4. On request of the
Agent from time to time, Tweeter will render to the Agent a statement in
reasonable detail as to all insurance coverage required by this Section 8.4. A
description of the material elements of insurance coverage of Tweeter and its
Subsidiaries as of the date hereof is set forth on Schedule 8.4.

      SECTION 8.5. RECORDS, ACCOUNTS AND PLACES OF BUSINESS. Tweeter and each
Subsidiary shall maintain comprehensive and accurate records and accounts in
accordance with generally accepted accounting principles consistently applied.
Tweeter and each Subsidiary shall maintain adequate and proper reserves. Tweeter
and its Subsidiaries shall not change their method of accounting with respect to
any aspects of their business unless required due to a change in GAAP. Tweeter
and its Subsidiaries shall not change their fiscal year without the prior
written consent of the Agent, which will not be unreasonably withheld. Tweeter
and each Subsidiary shall promptly notify the Agent of (a) any changes in the
places of business of Tweeter or its Subsidiaries and (b) any additional places
of business which may arise hereafter.

      SECTION 8.6. INSPECTION. At any reasonable time and from time to time, and
unless a Default exists upon reasonable prior notice and only during normal
business hours, the Loan Parties shall permit the Agent and the Lenders and any
of the Lenders' agents or representatives to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
Tweeter and its Subsidiaries and to discuss the affairs, finances and accounts
of Tweeter and its Subsidiaries with any of their officers or directors and with
Tweeter's independent accountants. Additionally, Tweeter at its own expense,
shall permit the Agent and any of the Agent's agents or representatives (a) to
conduct field exams once each year and (b) to perform inventory appraisals once
a year; provided, however that if an Event of Default exists, there shall be no
restriction as to the frequency of such exams and appraisals. Information
obtained pursuant to this Section 8.6 shall be subject to the provisions of
Section 14.6.

      SECTION 8.7. MAINTENANCE OF ACCOUNTS. Tweeter and its Subsidiaries shall
maintain their primary operating, concentration and disbursement accounts with
the Agent and may maintain additional cash management and concentration accounts
with First Union National Bank. No less frequently than once each week, Tweeter
and its Subsidiaries will cause all deposits in other depository accounts to be
transferred and deposited in the concentration account maintained with the
Agent. From time to time upon request of the Agent, Tweeter and its Subsidiaries
will cause each institution in which it maintains deposits to enter into a
blocked account agreement reasonably acceptable to the Agent.

      SECTION 8.8. FORMATION AND ACQUISITION OF SUBSIDIARIES. Upon the
acquisition of a Subsidiary in connection with a Permitted Acquisition or upon
the consummation of any other Permitted Acquisition, Tweeter shall execute and
deliver or cause to be executed and delivered to the Agent (a) a pledge
amendment with respect to the pledge of all of the capital stock or other

                                       43
<PAGE>
ownership interests of such new Subsidiary, in form and substance reasonably
satisfactory to the Agent, together with evidence in form and substance
reasonably satisfactory to the Agent that all deliveries, filings, recordings,
registrations and other actions, including, without limitation, the delivery of
any certificates representing such capital stock, together, in the case of stock
certificates, with an undated transfer power, in form and substance reasonably
satisfactory to the Agent, for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof, and evidence of the filing of duly
executed financing statements on form UCC-1, necessary or, in the reasonable
opinion of the Agent, desirable to perfect the liens created by such pledge
amendment; provided, however, that with respect to any such acquisition or
series of related acquisitions as to which the aggregate purchase price is less
than $2,000,000, the filing of such UCC-1 financing statements shall be made by
the Loan Parties to the reasonable satisfaction of the Agent within 120 days of
the closing of such acquisition, (b) a guaranty of all Lender Obligations by
such Subsidiary and a security agreement of such Subsidiary, and legal opinions
reasonably satisfactory to the Agent relating to such Subsidiary and the
Permitted Acquisition, all in form and substance reasonably satisfactory to the
Agent, together with evidence of the filing of duly executed financing
statements on form UCC-1, necessary or, in the reasonable opinion of the Agent,
desirable to perfect the liens created by such security agreement or the liens
on the assets so acquired in connection with such Permitted Acquisition;
provided, however, that with respect to any such acquisition or series of
related acquisitions as to which the aggregate purchase price is less than
$2,000,000, the filing of such UCC-1 financing statements shall be made by the
Loan Parties to the reasonable satisfaction of the Agent within 120 days of the
closing of such acquisition, (c) if the Permitted Acquisition includes any real
property and if requested by the Agent, a mortgage of such real property and a
title insurance policy insuring the lien of such mortgage in form and substance
reasonably satisfactory to the Agent, and (d) such other documents, certificates
and legal opinions with respect to such Subsidiary, the Permitted Acquisition,
pledge amendment, guaranty, security agreement and related matters as the Agent
may reasonably request.

      SECTION 8.9. LIMITATION ON THEG INDEBTEDNESS. THEG shall not (a) create,
incur or suffer to exist any indebtedness, liabilities or other obligations of
any kind, direct or contingent, whether required to be reflected on a balance
sheet or not, other than Permitted THEG Liabilities; provided, however, that
after the occurrence and during the continuance of an Event of Default THEG
shall not create or incur Indebtedness in an aggregate amount greater than
$250,000 and such Indebtedness shall only be incurred to its Affiliates without
the Agent's prior written consent, or (b) without the prior written consent of
the Agent, enter into any contract, agreement or undertaking with any Person
other than for the purchase of inventory in the ordinary course of business from
New England Audio, except for the Lender Agreements, contracts, agreements or
undertakings with respect to Permitted THEG Liabilities.

      SECTION 8.10. LIMITATION ON TOC INDEBTEDNESS. TOC shall not (a) create,
incur or suffer to exist any indebtedness, liabilities or other obligations of
any kind, direct or contingent, whether required to be reflected on a balance
sheet or not, other than Permitted TOC Liabilities; provided, however, that
after the occurrence and during the continuance of an Event of Default TOC shall
not create or incur Indebtedness in an aggregate amount greater than $250,000
and such Indebtedness shall only be incurred to its Affiliates without the
Agent's prior written consent, or (b) without the prior written consent of the
Agent, enter into any contract, agreement

                                       44
<PAGE>
or undertaking with any Person other than for the purchase of inventory in the
ordinary course of business from New England Audio, except for the Lender
Agreements, contracts, agreements or undertakings with respect to Permitted TOC
Liabilities.

      SECTION 8.11. LIMITATION ON VIDEO SCENE INDEBTEDNESS. Video Scene shall
not (a) create, incur or suffer to exist any indebtedness, liabilities or other
obligations of any kind, direct or contingent, whether required to be reflected
on a balance sheet or not, other than Permitted Video Scene Liabilities;
provided, however, that after the occurrence and during the continuance of an
Event of Default Video Scene shall not create or incur Indebtedness in an
aggregate amount greater than $250,000 and such Indebtedness shall only be
incurred to its Affiliates without the Agent's prior written consent, or (b)
without the prior written consent of the Agent, enter into any contract,
agreement or undertaking with any Person other than for the purchase of
inventory in the ordinary course of business from New England Audio, except for
the Lender Agreements, contracts, agreements or undertakings with respect to
Permitted Video Scene Liabilities.

      SECTION 8.12. LIMITATION ON TWT AND SOUND ADVICE INDEBTEDNESS. TWT and,
following the consummation of the South Advice Acquisition, Sound Advice shall
not (a) create, incur or suffer to exist any indebtedness, liabilities or other
obligations of any kind, direct or contingent, whether required to be reflected
on a balance sheet or not, other than Permitted Sound Advice Liabilities;
provided, however, that after the occurrence and during the continuance of an
Event of Default Sound Advice shall not create or incur Indebtedness in an
aggregate amount greater than $250,000 and such Indebtedness shall only be
incurred to its Affiliates without the Agent's prior written consent, or (b)
without the prior written consent of the Agent, enter into any contract,
agreement or undertaking with any Person other than for the purchase of
inventory in the ordinary course of business from New England Audio, except for
the Lender Agreements, contracts, agreements or undertakings with respect to
Permitted Sound Advice Liabilities.

                         ARTICLE 9 - NEGATIVE COVENANTS

      On and after the date hereof, until all of the Lender Obligations shall
have been paid in full and the Lenders shall have no commitments, the Borrowers
covenant that neither Tweeter nor any of its Subsidiaries will:

      SECTION 9.1. RESTRICTIONS ON INDEBTEDNESS. Create, incur, suffer or permit
to exist, or assume or guarantee, either directly or indirectly, or otherwise
become or remain liable with respect to, any Indebtedness, except the following:

            (a)   Indebtedness outstanding at the date of this Agreement as set
forth on Schedule 5.16 but no refinancings thereof.

            (b)   Indebtedness on account of Consolidated Current Liabilities
(other than for money borrowed) incurred in the normal and ordinary course of
business.

            (c)   Indebtedness in respect of (i) taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment thereof shall not at

                                       45
<PAGE>
the time be required to be made in accordance with the provisions of Section 8.2
hereof, (ii) judgments or awards which have been in force for less than the
applicable appeal period so long as execution is not levied thereunder or in
respect of which Tweeter or any Subsidiary shall at the time in good faith be
prosecuting an appeal or proceedings for review in a manner reasonably
satisfactory to the Lenders and in respect of which a stay of execution shall
have been obtained pending such appeal or review and for which adequate reserves
have been established in accordance with generally accepted accounting
principles and (iii) endorsements made in connection with the deposit of items
for credit or collection in the ordinary course of business.

            (d)   Indebtedness in an amount not to exceed $1,000,000 in respect
of purchase money security interests permitted under Section 9.2(b) hereof.

            (e)   Indebtedness to the Lenders.

            (f)   Unsecured Indebtedness in addition to the Indebtedness
otherwise permitted hereunder not to exceed $500,000 in the aggregate.

            (g)   Indebtedness in an amount not to exceed $5,000,000 in
connection with the long-term mortgage financing including any refinancing
thereof for the acquisition cost of the Canton Facility with recourse only to
the Canton Facility and not to any other asset of New England Audio, Tweeter or
any Subsidiary, and on such other terms and conditions reasonably approved by
the Agent.

            (h)   The THEG Loans, TOC Loans, Tweeter Trust Loans and Video Scene
Loans so long as the obligations of THEG, TOC, the Borrowers and Video Scene
thereunder, are subordinated to the Lender Obligations pursuant to the
Subsidiary Subordination Agreements.

            (i)   The Sound Advice Loans so long as (i) the Sound Advice
Acquisition has been consummated and (ii) the obligations of Sound Advice
thereunder are subordinated to the Lender Obligations pursuant to the Subsidiary
Subordination Agreements.

            (j)   Indebtedness of a Subsidiary in an amount not to exceed
$2,000,000 which is assumed in connection with a Permitted Acquisition, provided
that such Indebtedness shall not have been incurred in contemplation of such
Permitted Acquisition and shall not remain outstanding for period of more than
one hundred and twenty (120) days after the date of such Permitted Acquisition.

      SECTION 9.2. RESTRICTION ON LIENS. Create or incur or suffer to be created
or incurred or to exist any encumbrance, mortgage, pledge, lien, charge or other
security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement (including Capitalized Leases) or suffer to exist for a
period of more than thirty (30) days after the same shall have been incurred any
Indebtedness against it which if unpaid might by law or upon bankruptcy or
insolvency, or

                                       46
<PAGE>
otherwise, be given any priority whatsoever over the claims of its general
creditors, or sell, assign, pledge or otherwise transfer for security any of its
accounts, contract rights, general intangibles, or chattel paper (as those terms
are defined in the UCC) with or without recourse (collectively, "Encumbrances");
provided, however, that Tweeter or any Subsidiary may create or incur or suffer
to be created or incurred or to exist:

            (a)   Existing liens and security interests described in Schedule
5.16 securing presently outstanding Indebtedness permitted by Section 9.1(a).

            (b)   Purchase money security interests (which term shall include
mortgages, conditional sale contracts, Capitalized Leases and all other title
retention or deferred purchase devices) to secure the purchase price of property
acquired hereafter by Tweeter or a Subsidiary, or to secure Indebtedness
incurred solely for the purpose of financing such acquisitions; provided,
however, that no such purchase money security interests shall extend to or cover
any property other than the property the purchase price of which is secured by
it, and that the principal amount of Indebtedness (whether or not assumed) with
respect to each item of property subject to such a security interest shall not
exceed the fair value of such item on the date of its acquisition.

            (c)   Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgments or awards to the extent
such judgments or awards are permitted as Indebtedness by the provisions of
Section 9.1(c); and liens for taxes, assessments or governmental charges or
levies and liens to secure claims for labor, material or supplies to the extent
that payment thereof shall not at the time be required to be made in accordance
with Section 8.2.

            (d)   Encumbrances in the nature of zoning restrictions, easements,
and rights or restrictions of record on the use of real property which do not
materially detract from the value of such property or impair its use in the
business of Tweeter and its Subsidiaries.

            (e)   Liens (other than judgments and awards) created by or
resulting from any litigation or legal proceeding, provided the execution or
other enforcement thereof is effectively stayed and the claims secured thereby
are being actively contested in good faith by appropriate proceedings reasonably
satisfactory to the Agent.

            (f)   Liens arising by operation of law to secure landlords, lessors
or renters under leases or rental agreements made in the ordinary course of
business and confined to the premises or property rented.

            (g)   Liens in favor of the Agent for the benefit of the Lenders.

                  (h)   Liens securing Indebtedness permitted by Section 9.1(j)
which were not granted in contemplation of the applicable Permitted Acquisition
and which are terminated not more than one hundred twenty (120) days after the
date of such Permitted Acquisition.

                                       47
<PAGE>
Nothing contained in this Section 9.2 shall permit Tweeter to incur any
Indebtedness or take any other action or permit to exist any other condition
which would be in contravention of any other provision of this Agreement.

      SECTION 9.3. INVESTMENTS. Have outstanding or hold or acquire or make or
commit itself to acquire or make any Investment except the following:

            (a)   Investments having a maturity of less than one year from the
date thereof by the Borrower in: (i) obligations of the Agent or any of the
Lenders; (ii) obligations of the United States of America or any agency or
instrumentality thereof; (iii) repurchase agreements involving securities
described in clauses (i) and (ii) with the Agent or any of the Lenders; and (iv)
commercial paper which is rated not less than prime-one or A-1 or their
equivalents by Moody's Investor Service, Inc. or Standard & Poor's Rating
Service, a division of The McGraw-Hill Companies , respectively, or their
successors.

            (b)   Existing Investments of Tweeter in its Subsidiaries and other
Investments, as described on Schedule 9.3, and Investments in wholly-owned
Subsidiaries pursuant to Permitted Acquisitions.

            (c)   Investments consisting of normal travel and similar advances
to employees of Tweeter and its Subsidiaries not exceeding $200,000 in the
aggregate at any one time outstanding.

            (d)   Investments in addition to the Investments otherwise permitted
hereunder not to exceed $500,000 in the aggregate at any time.

            (e)   Investments permitted under Section 9.6.

            (f)   Investments consisting of Tweeter Trust Loans.

            (g)   Investments consisting of the THEG Loans, the TOC Loans and
the Video Scene Loans.

            (h)   Investments consisting of a contribution of up to $4,500,000
in the aggregate to the Cyberian Joint Venture after the date of formation
thereof in accordance with the Cyberian Joint Venture Agreement.

            (i)   Investments consisting of the Sound Advice Loans after the
Sound Advice Acquisition has been consummated.

      SECTION 9.4. DISPOSITIONS OF ASSETS. Sell, lease or otherwise dispose of
any assets except for the sale, lease or other disposition of inventory or other
property (not including receivables) in the ordinary course of business;
provided that from and after the date hereof, Tweeter and its Subsidiaries may
sell, lease or otherwise dispose of fixed assets no longer necessary for the
Borrowers' business and having fair market value, in the aggregate, of not more
than $250,000; and provided further that New England Audio may enter into the
Canton Sale-Leaseback Transaction.

                                       48
<PAGE>
      SECTION 9.5. ASSUMPTIONS, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. Assume, guarantee, endorse or otherwise be or become directly or
contingently liable (including, without limitation, by way of agreement,
contingent or otherwise, to purchase, provide funds for payment, supply funds to
or otherwise invest in any Person or otherwise assure the creditors of any such
Person against loss) in connection with any Indebtedness of any other Person,
except for (a) Guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business, (b)
contingent liabilities under surety bonds or similar instruments incurred in the
ordinary course of business in connection with the construction or improvement
of stores in an aggregate amount not to exceed $2,000,000 and (c) Guaranties by
Tweeter of the obligations of any Subsidiary, and guaranties by any Subsidiary
of the obligations of any other Subsidiary or Tweeter, in each case to the
extent such primary obligations are permitted hereunder.

      SECTION 9.6. MERGERS, ETC. Enter into any merger or consolidation with or
acquire all or substantially all of the assets of any Person, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, except that (a) any Subsidiary may merge into
Tweeter or any other Subsidiary and (b) Tweeter and its Subsidiaries may
undertake Permitted Acquisitions; provided, however, the Lenders and the Agent
hereby consent to the merger of TWT with and into Sound Advice substantially in
accordance with the terms and conditions set forth in the Sound Advice Merger
Agreement (the "Sound Advice Acquisition") and waive any violation of Sections
5.4, 9.3 and 9.10 of this Agreement as a result of the Sound Advice Acquisition;
provided that effective with the Sound Advice Acquisition, the Loan Parties
shall execute and deliver an amendment to this Agreement whereby Sound Advice
(a) confirms that it has become a Guarantor of all Lender Obligations and grants
to the Agent a security interest in all of its assets to secure the Lender
Obligations, (b) the Agent shall have received a certificate from an officer of
the Loan Parties certifying that (i) the Sound Advice Acquisition has been
consummated, (ii) the representations and warranties of the Loan Parties
contained in the Lender Agreements and in the Sound Advice Merger Agreement are
true and correct as of the date thereof and (iii) attached thereto are updated
schedules to this Agreement which incorporate the addition of Sound Advice as a
Guarantor hereunder and (c) Sound Advice and the Loan Parties execute and
deliver such additional documents, certificates, opinions and consents as the
Agent may reasonably request in connection with the Sound Advice Acquisition.

      SECTION 9.7. ERISA. At any time while Tweeter or any Subsidiary has a
Pension Plan, permit any accumulated funding deficiency to occur with respect to
any Pension Plan or other employee benefit plans established or maintained by
Tweeter or any Subsidiary or to which contributions are made by Tweeter or any
Subsidiary (the "Plans"), and which are subject to the "Pension Reform Act" and
the rules and regulations thereunder or to Section 412 of the Internal Revenue
Code, and at all times comply in all material respects with the provisions of
the Pension Reform Act and Internal Revenue Code which are applicable to the
Plans. Tweeter will not permit the Pension Benefit Guaranty Corporation to cause
the termination of any Pension Plan under circumstances which would cause the
lien provided for in Section 4068 of the Pension Reform Act to attach to the
assets of Tweeter or any Subsidiary.

                                       49
<PAGE>
      SECTION 9.8. RESTRICTED PAYMENTS. Directly or indirectly (through any
Affiliate or otherwise), declare, pay or make any Restricted Payment, other than
(a) payments to be made to employees or directors of Tweeter upon termination of
their employment pursuant to Tweeter's Stock Option Plan (and agreements entered
into thereunder), provided that such payments under this clause (a) do not
exceed $400,000 in the aggregate in any given fiscal year and (b) payments not
to exceed $75,000 in any fiscal year to be made to repurchase shares of Tweeter
capital stock from employees in connection with termination of their employment
with Tweeter; or (b) payments of principal and interest on the Tweeter Trust
Loan to the extent permitted under the Subsidiary Subordination Agreement.

      SECTION 9.9. SALE AND LEASEBACK. Sell or transfer any of its properties
other than the sale of the Canton Facility and up to twelve (12) additional
retail properties owned by the Loan Parties in connection with the Permitted
Sale Leaseback Transaction with the intention of taking back a lease of the same
property or leasing other property for substantially the same use as the
property being sold or transferred.

      SECTION 9.10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate, except that (a) Tweeter and its
Subsidiaries may pay salaries, fees and bonuses to its directors, officers and
employees as are usual and customary in Tweeter's or its Subsidiaries' business,
(b) Tweeter Trust, New England Audio and NEA Delaware may enter into and perform
their obligations under the Tweeter Trust Loans, (c) Tweeter Trust, New England
Audio, THEG, TOC and Video Scene may enter into and perform their obligations
under the THEG Loans, the TOC Loans and the Video Scene Loans and after the
consummation of the Sound Advice Acquisition, Tweeter Trust, New England Audio
and Sound Advice may enter into and perform its obligations under the Sound
Advice Loans, (d) Tweeter and its Subsidiaries may enter into licensing
agreement with NEA Delaware for the licensing and use of intellectual property,
(e) Tweeter and its Subsidiaries may enter into an Inventory Procurement and
Services Agreement (the "Cyberian Purchasing Agreement") with the Cyberian Joint
Venture, and may hereafter enter into amendments to the Cyberian Purchasing
Agreement with the written consent of the Agent, which consent shall not be
unreasonably withheld or delayed, and (f) Tweeter and its Subsidiaries may enter
into other transactions with Affiliates on terms that are no less favorable to
Tweeter or any Subsidiary than those which could be obtained at the time from
Persons who are not Affiliates.

      SECTION 9.11. PREFERRED STOCK. No Loan Party shall, without the Agent's
prior consent, issue any preferred stock except in accordance with the
Shareholders' Rights Agreement between Tweeter Home Entertainment Group, Inc.
and Fleet National Bank to be effective immediately prior to the closing of the
Tweeter IPO.

                  ARTICLE 10 - EVENTS OF DEFAULT AND REMEDIES

      SECTION 10.1. EVENTS OF DEFAULT. Each of the following events shall be
deemed to be Events of Default hereunder:

            (a)   The Loan Parties shall fail to make any payment in respect of
(i) the principal of any of the Lender Obligations as the same shall become due,
whether at the stated

                                       50
<PAGE>
payment dates, required prepayment or by acceleration, demand or otherwise or
(ii) interest or commitment fees on or any other amount due in respect of any of
the Lender Obligations as the same shall become due, and such failure shall
continue for a period of five (5) days.

            (b)   Tweeter or any Subsidiary shall fail to perform or observe any
of the terms, covenants, conditions or provisions of Section 6.1, 6.2 or 6.3,
Article 7 or Article 9 (excluding Sections 9.7 and 9.10 and excluding failure to
perform or observe the provisions of Section 9.5 if the aggregate principal
amount of the Indebtedness involved is less than $50,000) hereof.

            (c)   Tweeter or any Subsidiary shall fail to perform or observe any
other term, covenant, condition or provision not described in clauses (a) or (b)
above to be performed or observed by Tweeter or such Subsidiary under this
Agreement or any other Lender Agreement, and such failure shall not be rectified
or cured to the Agent's satisfaction within thirty (30) days after the earlier
of the date on which Tweeter or any Subsidiary shall have first known of such
failure or the Agent shall have first notified Tweeter of such failure.

            (d)   Any representation or warranty of Tweeter or any Subsidiary
herein or in any other Lender Agreement or any amendment to any thereof shall
have been materially false or misleading at the time made or intended to be
effective.

            (e)   Tweeter or any Subsidiary shall fail to make any payment of
principal of or interest on Indebtedness for money borrowed by it or any
Guaranty of money borrowed, in either case an outstanding principal amount
greater than $250,000, when such payment is due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) or shall fail to perform
or observe any provision of any agreement or instrument relating to such
Indebtedness, and such failure shall permit the holder thereof to accelerate
such Indebtedness.

            (f)   Tweeter or any Subsidiary shall be involved in financial
difficulties as evidenced:

                  (i)   by its commencement of a voluntary case under Title 11
      of the United States Code as from time to time in effect, or by its
      authorizing, by appropriate proceedings of its board of directors or other
      governing body, the commencement of such a voluntary case;

                  (ii)  by its filing an answer or other pleading admitting or
      failing to deny the material allegations of a petition filed against it
      commencing an involuntary case under said Title 11, or seeking, consenting
      to or acquiescing in the relief therein provided, or by its failing to
      controvert timely the material allegations of any such petition;

                  (iii) by the entry of an order for relief in any involuntary
      case commenced under said Title 11 and such order shall not have been
      vacated or stayed on appeal or otherwise stayed within 90 days;

                                       51
<PAGE>
                  (iv)  by its seeking relief as a debtor under any applicable
      law, other than said Title 11, of any jurisdiction relating to the
      liquidation or reorganization of debtors or to the modification or
      alteration of the rights of creditors, or by its consenting to or
      acquiescing in such relief;

                  (v)   by the entry of an order by a court of competent
      jurisdiction (A) by finding it to be bankrupt or insolvent, (B) ordering
      or approving its liquidation, reorganization or any modification or
      alteration of the rights of its creditors or (C) assuming custody of, or
      appointing a receiver or other custodian for all or a substantial part of
      its property and such order shall not be vacated or stayed on appeal or
      otherwise stayed within 90 days;

                  (vi)  by the filing of a petition against Tweeter or any
      Subsidiary said Title 11 which shall not be vacated within 90 days; or

                  (vii) by its making an assignment for the benefit of, or
      entering into a composition with, its creditors, or appointing or
      consenting to the appointment of a receiver or other custodian for all or
      a substantial part of its property.

            (g)   There shall have occurred a judgment against Tweeter or any
Subsidiary in any court (i) for an amount in excess of $250,000 not covered by
insurance, and from which no appeal has been taken or with respect to which all
appeal periods have expired, or (ii) which shall have a materially adverse
effect upon the assets, properties or condition, financial or otherwise, of
Tweeter and its Subsidiaries on a consolidated basis.

            (h)   A Change of Control shall have occurred.

                  (i)   Any "Event of Default" under any other Lender Agreement
shall have occurred.

      SECTION 10.2. REMEDIES. Upon the occurrence of an Event of Default, in
each and every case, the Agent may, with the consent of the Majority Lenders,
and upon the request of the Majority Lenders, shall proceed to protect and
enforce the rights of the Agent and the Lenders by suit in equity, action at law
and/or other appropriate proceeding either for specific performance of any
covenant or condition contained in this Agreement or any other Lender Agreement
(other than Interest Rate Protection Agreements which shall be governed by the
terms thereof) or in any instrument delivered to the Agent or the Lenders
pursuant hereto or thereto, or in aid of the exercise of any power granted in
this Agreement, any Lender Agreement (other than Interest Rate Protection
Agreements which shall be governed by the terms thereof) or any such instrument,
and (unless there shall have occurred an Event of Default under Section 10.1(f),
in which case the unpaid balance of Lender Obligations (other than Lender
Obligations arising under Interest Rate Protection Agreements which shall be
governed by the terms thereof), shall automatically become due and payable
without notice or demand) by notice in writing to the Borrowers declare (a) the
obligations of the Lenders to make Revolving Credit Advances to be terminated,
whereupon such obligations shall be terminated, and (b) all or any part of the
unpaid balance of the Lender Obligations (other than Lender Obligations arising
under Interest Rate Protection Agreements which shall be governed by the terms
thereof) then outstanding to be

                                       52
<PAGE>
forthwith due and payable, whereupon such unpaid balance or part thereof shall
become so due and payable without presentation, protest or further demand or
notice of any kind, all of which are hereby expressly waived, and the Agent may
proceed to enforce payment of such balance or part thereof in such manner as the
Agent may elect, and the Agent and each Lender may offset and apply toward the
payment of such balance or part thereof any Indebtedness of the Agent or any
Lender to any Loan Party or to any Subsidiary, or to any obligor of the Lender
Obligations, including any Indebtedness represented by deposits in any general
or special account maintained with the Agent or any Lender or with any other
Person controlling, controlled by or under common control with the Agent or any
Lender.

      SECTION 10.3. LETTERS OF CREDIT. With respect to all Letters of Credit
with respect to which presentment for honor shall not have occurred at the time
of an acceleration pursuant to the preceding paragraph, the Agent may require
the Borrowers at such time to deposit in a cash collateral account opened by the
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Agent to the payment of drafts drawn under such Letters of Credit, and
the unused portion thereof after all such Letters of Credit shall have expired
or been fully drawn upon, if any, shall be applied to repay the other Lender
Obligations. After all such Letters of Credit shall have expired or been fully
drawn upon, the Reimbursement Amount shall have been satisfied and all other
Lender Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrowers.

      SECTION 10.4. DISTRIBUTION OF PROCEEDS. Notwithstanding anything to the
contrary contained herein, in the event that following the occurrence or during
the continuance of any Event of Default, the Agent or any Lender receives any
monies on account of the Lender Obligations from any Loan Party or otherwise,
such monies shall be distributed for application as follows:

            (a)   First, to the payment of or the reimbursement of, the Agent
for or in respect of all costs, expenses, disbursements and losses which shall
have been incurred or sustained by the Agent in connection with the collection
of such monies by the Agent, or in connection with the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent or the Lenders under this Agreement or any other Lender
Agreement;

            (b)   Second, to the payment of all interest, including interest on
overdue amounts, and late charges, then due and payable with respect to the
Loans, allocated among the Lenders in proportion to their respective Commitment
Percentages;

            (c)   Third, to the payment of the outstanding principal balance of
the Loans, allocated among the Lenders in proportion to their respective
Commitment Percentages;

            (d)   Fourth, to any other outstanding Lender Obligations, allocated
among the Lenders in proportion to their respective Commitment Percentages; and

            (e)   Fifth, the excess, if any, shall be returned to the Loan
Parties or to such other Persons as are entitled thereto.

                                       53
<PAGE>

              ARTICLE 11 - CONSENTS; AMENDMENTS; WAIVERS; REMEDIES

         SECTION 11.1. ACTIONS BY LENDERS. Except as otherwise expressly set
forth in any particular provision of this Agreement, any consent or approval
required or permitted by this Agreement to be given by the Lenders, including
without limitation under Section 11.2, may be given, and any term of this
Agreement or of any other instrument related hereto or mentioned herein may be
amended, and the performance or observance by the Loan Parties of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written consent
of the Loan Parties and the Majority Lenders; provided, however, that without
the written consent of all Lenders:

                  (a) no reduction in the interest rates on or any fees relating
to the Revolving Credit Advances shall be made;

                  (b) no extension or postponement shall be made of the stated
time of payment of the principal amount of, interest on, or fees payable to the
Lenders relating to the Revolving Credit Advances;

                  (c) no increase in the Maximum Revolving Credit Amount, or
extension of the Revolving Credit Termination Date shall be made;

                  (d) no release of all or substantially all of the collateral
security for, or any guarantor of, the Lender Obligations shall be made;

                  (e) no change in the definition of the term "Majority Lenders"
shall be made; and

                  (f) no change in the provisions of this Section 11.1 shall be
made.

         SECTION 11.2. ACTIONS BY BORROWERS. No delay or omission on the Agent's
or the Lenders' part in exercising their rights and remedies against the Loan
Parties or any other interested party shall constitute a waiver. A breach by the
Loan Parties of their obligations under this Agreement may be waived only by a
written waiver executed by the Agent and the Lenders in accordance with Section
11.1. The Agent's and the Lenders' waiver of the Loan Parties' breach in one or
more instances shall not constitute or otherwise be an implicit waiver of
subsequent breaches. To the extent permitted by applicable law, the Loan Parties
hereby agree to waive, and do hereby absolutely and irrevocably waive (a) all
presentments, demands for performance, notices of protest and notices of
dishonor in connection with any of the Indebtedness evidenced by the Revolving
Credit Notes, (b) any requirement of diligence or promptness on the Agent's or
the Lenders' part in the enforcement of its rights under the provisions of this
Agreement or any Lender Agreement and (c) any and all notices of every kind and
description which may be required to be given by any statute or rule of law with
respect to its liability (i) under this Agreement or in respect of the
Indebtedness evidenced by the Revolving Credit Notes or any other Lender
Obligation or (ii) under any other Lender Agreement. No course of dealing
between the Loan Parties and the Agent or the Lenders shall operate as a waiver
of any of the Agent's or the Lenders' rights under this Agreement or any Lender
Agreement or with respect to any of the Lender Obligations. This Agreement shall
be

                                       54
<PAGE>

amended only by a written instrument executed by the Agent and the Lenders in
accordance with Section 11.1 making explicit reference to this Agreement. The
Agent's and the Lenders' rights and remedies under this Agreement and under all
subsequent agreements between the Agent, the Lenders and the Loan Parties shall
be cumulative and any rights and remedies expressly set forth herein shall be in
addition to, and not in limitation of, any other rights and remedies which may
be applicable to the Agent and the Lenders in law or at equity.

                      ARTICLE 12 - SUCCESSORS AND ASSIGNS

         SECTION 12.1. GENERAL. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors
(which shall include in the case of the Agent or any Lender any entity resulting
from a merger or consolidation) and assigns, except that (a) the Loan Parties
may not assign their rights or obligations under this Agreement and (b) each
Lender may assign its rights in this Agreement only as set forth below in this
Article 12.

         SECTION 12.2. ASSIGNMENTS.

                  (a) Assignments. In compliance with applicable laws with
respect to such assignment and with the consent of Tweeter (provided that if
there shall exist a Default, the consent of Tweeter shall not be required for
any such assignment) and the Agent (which consents in all cases shall not be
unreasonably withheld), a Lender may assign to one or more financial
institutions (each a "Successor Lender") a proportionate part of its rights and
obligations in connection with this Agreement, its Revolving Credit Note and the
related Lender Agreements and each such Successor Lender shall assume such
rights and obligations pursuant to an Assignment and Acceptance Agreement
("Assignment and Acceptance Agreement") duly executed by such Successor Lender
and such assigning Lender and acknowledged and consented to by the Loan Parties
and the Agent, substantially in the form of Exhibit N attached hereto. Any
assignment under this Section 12.2(a) shall be in a minimum amount of $5,000,000
with respect to the Commitment Percentage of the Maximum Revolving Credit
Amount. In connection with any assignment under this Section 12.2(a) there shall
be paid to the Agent by the assigning Lender or the Successor Lender an
administrative processing fee in the amount of $3,000. The Lenders recognize
that the proposed assignment hereunder to a foreign bank that would trigger any
tax withholding requirement pertaining to payments to be made to such foreign
bank shall constitute a reasonable ground for New England Audio or its
Subsidiaries to withhold consent to the proposed assignment pursuant to this
Section 12.2.

                  (b) Assignment Procedures. In the event of an assignment in
accordance with Section 12.2(a), upon execution and delivery of such an
assignment at least five (5) Business Days prior to the proposed assignment
date, and payment by such Successor Lender to the assigning Lender of an amount
equal to the purchase price agreed between such assigning Lender and such
Successor Lender, such Successor Lender shall become party to this Agreement as
a signatory hereto and shall have all the rights and obligations of a Lender
under this Agreement and the other Lender Agreements with an interest therein as
set forth in such assignment, and such assignor making such assignment shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any such assignment, the assigning Lender, the Successor

                                       55
<PAGE>

Lender and the Borrowers shall make appropriate arrangements so that, if
required, a new Revolving Credit Note is issued to the Successor Lender and a
replacement Revolving Credit Note is issued to the assigning Lender in principal
amounts reflecting their respective revised interests.

                  (c) Register. The Agent shall maintain a register (the
"Register") for the recordation of (i) the names and addresses of all Successor
Lenders that enter into Assignment and Acceptance Agreements, (ii) the interests
of each Lender and (iii) the amounts of the Revolving Credit Advances owing to
each Lender from time to time. The entries in the Register shall, if made in
good faith, be conclusive, in the absence of manifest error, and the Loan
Parties, the Agent and the Lenders may treat each Person whose name is
registered therein for all purposes as a party to this Agreement. The Register
shall be available for inspection by the Loan Parties or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

                  (d) Further Assurances. The Loan Parties shall sign such
documents and take such other actions from time to time reasonably requested by
the Agent or a Lender to enable any Successor Lender to share in the benefits
and rights created by the Lender Agreements.

                  (e) Assignments to Federal Reserve Bank. Any Lender may at any
time pledge or assign all or any portion of its rights under the Lender
Agreements, including any portion of its Revolving Credit Notes, to any of the
twelve (12) Federal Reserve Banks organized under Section 4 of the Federal
Reserve Act, 12 U.S.C. Section 341. No such pledge or assignment or enforcement
thereof shall release such Lender from its obligations under any of the Lender
Agreements.

         SECTION 12.3. PARTICIPATIONS. Any Lender may, without the consent of
the Loan Parties or the Agent, at any time grant or offer to grant to one or
more financial institutions ("Credit Participants") participating interests in
such Lender's rights and obligations in this Agreement, its Revolving Credit
Note and the related Lender Agreements, and each such Credit Participant shall
acquire such participation subject to the terms set forth below.

                  (a) Amount. Each such participation shall be in a minimum
amount of at least $2,500,000.

                  (b) Procedure. Each Lender granting such participation shall
comply with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the obligations of the Borrowers hereunder and under
the other Lender Agreements, including the right to consent to any amendment,
modification or waiver of any provision of any Lender Agreement, except for
those matters referred to in Section 11.1 which require the consent of all
Lenders and which may also require the consent of each Credit Participant.

                  (c) Dealing with Lenders. The Loan Parties shall continue to
deal solely and directly with the Lenders in connection with their rights and
obligations under this Agreement and the other Lender Agreements.

                                       56
<PAGE>

                  (d) Rights of Credit Participants. The Loan Parties agree that
each Credit Participant shall, to the extent provided in its participation
instrument, be entitled to the benefits of Sections 2.7, 2.8, 2.9, 2.11, 2.12
and 14.5, and the set-off rights in Section 10.2 with respect to its
participating interest; provided, however, that no Credit Participant shall be
entitled to receive any greater payment under such Sections than the Lender
granting such participation would have been entitled to receive with respect to
the interests transferred.

                  (e) Notice. At the time of granting any participation, the
Lender granting such participation shall notify the Agent.

                             ARTICLE 13 - THE AGENT

         SECTION 13.1. AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Revolving Credit Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Lenders, and such
instructions shall be binding upon all Lenders; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
liability or which is contrary to this Agreement or the other Lender Agreements
or applicable law. Subject to the foregoing provisions and to the other
provisions of this Article 13, the Agent shall, on behalf of the Lenders: (a)
execute any documents on behalf of the Lenders providing collateral for or
guarantees of the Lender Obligations; (b) hold and apply any collateral for the
Lender Obligations, and the proceeds thereof, at any time received by it, in
accordance with the provisions of this Agreement and the other Lender
Agreements; (c) exercise any and all rights, powers and remedies of the Lenders
under this Agreement or any of the other Lender Agreements, including the giving
of any consent or waiver or the entering into of any amendment, subject to the
provisions of Section 11.1; (d) at the direction of the Lenders, execute,
deliver and file UCC financing statements, mortgages, deeds of trust, lease
assignments and such other agreements in respect of any collateral for the
Lender Obligations, and possess instruments included in the collateral on behalf
of the Lenders; and (e) in the event of acceleration of the Borrowers'
Indebtedness hereunder, act at the direction of the Majority Lenders to exercise
the rights of the Lenders hereunder and under the other Lender Agreements.

         SECTION 13.2. AGENT'S RELIANCE, ETC. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Revolving Credit Note as
the holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form required under Article 12
hereof; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such

                                       57
<PAGE>

counsel, accountants or experts; (c) makes no warranty or representations to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Lender Agreements; (d) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Agreement or the other Lender Agreements on the part of the Loan Parties or
any other Person or to inspect the property (including the books and records) of
the Loan Parties or any other Person; (e) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Lender Agreements or any
other instrument or document furnished pursuant hereto or thereto; and (f) shall
incur no liability under or in respect of this Agreement or the other Lender
Agreements by acting upon any notice, consent, certificate or other instrument
or writing (which may be by telecopy or telegram) believed by the Agent to be
genuine and signed or sent by the proper party or parties.

         SECTION 13.3. AGENT AS A LENDER. With respect to its Revolving Credit
Commitment Percentage of the Revolving Credit Advances hereunder, Fleet National
Bank shall have the same rights and powers under this Agreement and the other
Lender Agreements as any other Lender and may exercise the same as though it
were not the Agent; and the term "Lender" or "Lender(s)" shall, unless otherwise
expressly indicated, include Fleet National Bank in its individual capacity.
Fleet National Bank and its affiliates may lend money to, and generally engage
in any kind of business with, the Loan Parties, any of the Loan Parties'
Affiliates and any Person who may do business with or own securities of the Loan
Parties or any such Affiliate of the Loan Parties, all as if Fleet National Bank
were not the Agent and without any duty to account therefor to the Lenders.

         SECTION 13.4. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements referred to in Section 5.9 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.

         SECTION 13.5. INDEMNIFICATION OF AGENT. Each Lender agrees to indemnify
the Agent and its directors, officers, employees and agents (to the extent that
the Agent is not reimbursed by the Loan Parties), ratably according to each
Lender's Commitment Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent or its directors, officers,
employees or agents in any way relating to or arising out of this Agreement or
any other Lender Agreement or any action taken or omitted by the Agent in such
capacity under this Agreement; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including

                                       58
<PAGE>

counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and each
other Lender Agreement, to the extent that the Agent is not reimbursed for such
expenses by the Loan Parties.

         SECTION 13.6. SUCCESSOR AGENT. Except as provided below, the Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrowers. Upon any such resignation, the Lenders shall have the right to
appoint a successor Agent which shall be reasonably acceptable to Tweeter. If no
successor Agent shall have been so appointed by the Lenders (other than the
resigning Agent), and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a
commercial bank or financial institution organized under the laws of the United
States of America or of any state thereof and having a combined capital and
surplus of at least $50,000,000 and which shall be reasonably acceptable to
Tweeter. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Lender Agreements. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article 13 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Lender Agreements.

         SECTION 13.7. AMENDMENT OF ARTICLE 13. The Loan Parties hereby agree
that the foregoing provisions of this Article 13 constitute an agreement among
the Agent and the Lenders (and the Agent and the Lenders acknowledge that except
for the provisions of Section 13.6, the Loan Parties are not parties to or bound
by such foregoing provisions) and that any and all of the provisions of this
Article 13 may be amended at any time by the Lenders without the consent or
approval of, or notice to, the Loan Parties (other than the requirement of
notice to the Tweeter of the resignation of the Agent and the appointment of a
successor Agent).

                           ARTICLE 14 - MISCELLANEOUS

         SECTION 14.1. NOTICES. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing and shall be
mailed by United States mail, postage prepaid, or sent by hand, by telecopy or
by nationally-recognized overnight carrier service, addressed as follows:

                  (a) If to the Agent, at 100 Federal Street, Boston,
Massachusetts 02110, Telecopier No. (617) 434-8102, Attention: Mr. Michael J.
Bassick, Vice President, with a copy to: Goodwin Procter LLP, Exchange Place,
Boston, MA 02109, Telecopier No. 617-523-1231, Attention: Edward Matson Sibble,
Jr., P.C., or at such other address(es) or to the attention of such other
Person(s) as the Agent shall from time to time designate in writing to Tweeter
and the Lenders.

                  (b) If to any of the Loan Parties, c/o Tweeter Home
Entertainment Group, Inc. at 10 Pequot Road, Pequot Industrial Park, Canton,
Massachusetts 02021, Telecopier No. (617)

                                       59
<PAGE>

821-9956, Attention: Joseph McGuire, Chief Financial Officer, with a copy to
Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston, MA 02110-3333, Telecopier
No. (617) 574-4112, Attention: Kitt Sawitsky, Esq. and Daniel Avery, Esq., or at
such other address(es) or to the attention of such other Person(s) as New
England Audio shall from time to time designate in writing to the Agent and the
Lenders.

                  (c) If to any Lender, at the address(es) and to the attention
of the Person(s) specified below such Lender's name on the execution page of
this Agreement (or in the case of a Successor Lender, at the address(es) and to
the attention of the Person(s) specified in the Assignment and Acceptance
Agreement executed by such Successor Lender), or at such other address(es) and
to the attention of such other Person(s) as any Lender shall from time to time
designate in writing to the Agent and the Borrowers.

         Any notice so addressed and mailed by registered or certified mail
shall be deemed to have been given three (3) days after deposit in the mails.
Any notice so addressed and sent by hand, by telecopy or by overnight carrier
service shall be deemed to have been given when received.

         A notice from the Agent stating that it has been given on behalf of the
Lenders shall be relied upon by the Borrowers as having been given by the
Lenders.

         SECTION 14.2. MERGER. This Agreement and the other Lender Agreements
and documents contemplated hereby constitute the entire agreement of the Loan
Parties and the Agent and the Lenders and express their entire understanding
with respect to credit advanced or to be advanced by the Lenders to the Loan
Parties.

         SECTION 14.3. GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed by and construed and enforced under the laws of The
Commonwealth of Massachusetts without regard to principles governing choice of
law. Each Loan Party and each Subsidiary hereby irrevocably submits itself to
the non-exclusive jurisdiction of the courts of The Commonwealth of
Massachusetts and to the non-exclusive jurisdiction of any Federal court of the
United States located in the District of Massachusetts for the purpose of any
suit, action or other proceeding arising out of this Agreement or any other
Lender Agreement or any of the transactions contemplated hereby or thereby.

         SECTION 14.4. COUNTERPART; REPLACEMENT OF INSTRUMENTS. This Agreement
and all amendments to this Agreement may be executed in several counterparts,
each of which shall be an original. The several counterparts shall constitute a
single Agreement. Upon receipt of an affidavit of an officer of and customary
indemnity from the Agent or any Lender as to the loss, theft, destruction or
mutilation of a Revolving Credit Note or any other Lender Agreement which is not
of public record, and, in the case of any such loss, theft, destruction or
mutilation, upon cancellation of such Revolving Credit Note or other Lender
Agreement, the Loan Parties will issue, in lieu thereof, a replacement Revolving
Credit Note or other Lender Agreement in the same principal amount thereof and
otherwise of like tenor.

                                       60
<PAGE>

         SECTION 14.5. EXPENSES AND INDEMNIFICATION.

                  (a) The Borrowers agree to pay, jointly and severally, on
demand, all of the Agent's and the Lenders' reasonable expenses in connection
with the preparation, administration, waiver or amendment of this Agreement, the
Lender Agreements and all related instruments and documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of the Agent's
special counsel, Goodwin Procter LLP and solely with respect to the preparation
of this Agreement First Union National Bank's special counsel, Pepper Hamilton
LLP, allocated costs of in-house legal counsel, accounting, consulting,
brokerage and other similar professional fees or expenses, any fees or expenses
associated with travel and other costs relating to any appraisals, audits or
examinations conducted in connection with the credits extended hereunder or any
collateral therefor. The Borrowers also agree to pay, jointly and severally, on
demand, all reasonable out-of-pocket expenses incurred by the Agent and the
Lenders, including, without limitation, reasonable legal and accounting fees, in
connection with the collection of amounts due hereunder and under all other
Lender Agreements upon the occurrence of an Event of Default hereunder, the
exercise, revision, preservation, protection or enforcement of any of the
Agent's or the Lenders' rights against the Loan Parties or other options under
this Agreement, the Revolving Credit Notes and all other Lender Agreements and
the administration of special problems that may arise under this Agreement or
any other Lender Agreement. The Borrowers also agree, jointly and severally, to
pay all stamp and other similar taxes in connection with the execution and
delivery of this Agreement and related instruments and documents. The Loan
Parties also agree to pay all stamp and other taxes in connection with the
execution and delivery of this Agreement and related instruments and documents.

                  (b) Without limitation of any other obligation or liability of
the Loan Parties or right or remedy of the Agent or the Lenders contained
herein, the Loan Parties hereby covenant and agree, jointly and severally, to
indemnify and hold the Agent, the Lenders, and the directors, officers,
subsidiaries, shareholders, agents, affiliates and Persons controlling the Agent
and the Lenders, harmless from and against any and all damages, losses,
settlement payments, obligations, liabilities, claims, including, without
limitation, claims for finder's or broker's fees, actions or causes of action,
and reasonable costs and expenses incurred, suffered, sustained or required to
be paid by any such indemnified party in each case by reason of or resulting
from any claim relating to the transactions contemplated hereby, other than any
such claims which are determined by a final, non-appealable judgment or order of
a court of competent jurisdiction to be the result of the gross negligence or
willful misconduct of such indemnified party. Promptly upon receipt by any
indemnified party hereunder of notice of the commencement of any action against
such indemnified party for which a claim is to be made against the Loan Parties
hereunder, such indemnified party shall notify the Loan Parties in writing of
the commencement thereof, although the failure to provide such notice shall not
affect the indemnification rights of any such indemnified party hereunder unless
and only to the extent the Loan Parties demonstrate to the reasonable
satisfaction of such party that such failure to provide notice prejudiced the
Loan Parties in their defense of such claim. The Loan Parties shall have the
right, at their option upon notice to the indemnified parties, to defend any
such matter at their own expense and with their own counsel, except as provided
below, which counsel must be reasonably acceptable to the indemnified parties.
The indemnified party shall cooperate with the Loan Parties in the defense of
such matter. The indemnified party shall have the right to employ separate
counsel and to

                                       61
<PAGE>

participate in the defense of such matter at its own expense. In the event that
(a) the employment of separate counsel by an indemnified party has been
authorized in writing by the Loan Parties, (b) the Loan Parties have failed to
assume the defense of such matter within fifteen (15) days of notice thereof
from the indemnified party, or (c) the named parties to any such action
(including impleaded parties) include any indemnified party who has been advised
by counsel that there may be one or more legal defenses available to it or
prospective bases for liability against it, which are different from those
available to or against the Loan Parties, then the Loan Parties shall not have
the right to assume the defense of such matter with respect to such indemnified
party. The Loan Parties shall not compromise or settle any such matter against
an indemnified party without the written consent of the indemnified party, which
consent may not be unreasonably withheld or delayed.

         SECTION 14.6. CONFIDENTIALITY. The Agent and the Lenders agree to use,
and to cause their officers, directors and employees to use, commercially
reasonable efforts to keep in confidence all financial data and other
information relative to the affairs of Tweeter and its Subsidiaries heretofore
furnished or which may hereafter be furnished to them pursuant to the provisions
of this Agreement; provided, however, that this Section 14.6 shall not be
applicable to information otherwise disseminated to the public by Tweeter or any
of its Affiliates; and provided further, that such obligation of the Agent and
the Lenders shall be subject to the Agent's or the Lenders', as the case may be,
(a) obligation to disclose such information pursuant to a request or order under
applicable laws and regulations or pursuant to a subpoena or other legal
process, (b) right to disclose any such information to bank examiners,
affiliates, auditors, accountants and counsel who agree to keep such information
confidential and (c) right to disclose any such information (i) in connection
with the transactions set forth herein including assignments or the sale of
participation interests pursuant to Article 12, so long as such potential
assignees or participants shall agree in writing to be bound by the terms of
this Section 14.6 or (ii) in connection with any litigation or dispute involving
the Agent or any transfer or other disposition by the Agent or the Lenders, as
the case may be, of any of the Lender Obligations; provided that information
disclosed pursuant to this provision shall be so disclosed subject to such
procedures as are reasonably calculated to maintain the confidentiality thereof.

         SECTION 14.7. RELIANCE ON REPRESENTATIONS AND ACTIONS OF TWEETER. The
Loan Parties hereby appoint New England Audio as the Loan Parties' agent to
execute, deliver and perform, on behalf of the Loan Parties, any and all
notices, certificates, documents and actions to be executed, delivered or
performed hereunder or under any of the other Lender Agreements, and the Loan
Parties hereby agree that the Agent and the Lenders may rely upon any
representation, warranty, certificate, notice, document or telephone request
which purports to be executed or made or which the Agent or the Lenders in good
faith believe to have been executed or made by New England Audio or Tweeter on
its behalf or any of their executive officers, and the Loan Parties hereby
further, jointly and severally, agree to indemnify and hold the Agent and the
Lenders harmless for any action, including the making of Revolving Credit
Advances hereunder, and any loss or expense, taken or incurred by any of them as
a result of their good faith reliance upon any such representation, warranty,
certificate, notice, document or telephone request.

         SECTION 14.8. JOINT AND SEVERAL OBLIGATIONS. All obligations of any
Borrowers hereunder, under the Revolving Credit Notes and under all other Lender
Agreements shall be

                                       62
<PAGE>

joint and several obligations of the Borrowers, and all obligations of the
Guarantors hereunder and under all other Lender Agreements shall be joint and
several obligations of the Guarantors.

         SECTION 14.9. USURY LIMITATION. All agreements between the Loan Parties
and the Lenders are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the
Lenders for the use or the forbearance of the Lender Obligations exceed the
maximum permissible under applicable law. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof; provided, however, that
in the event there is a change in the law which results in a higher permissible
rate of interest, then this provision shall be governed by such new law as of
its effective date. In this regard, it is expressly agreed that it is the intent
of the Loan Parties and the Lenders in the execution, delivery and acceptance of
this Agreement and the other Lender Agreements to contract in strict compliance
with the laws of the Commonwealth of Massachusetts from time to time in effect.
If, under or from any circumstances whatsoever, fulfillment of any provision
hereof or of any of the Lender Agreements at the time of performance of such
provision shall be due, shall involve transcending the limit of such validity
prescribed by applicable law, then the obligation to be fulfilled shall
automatically be reduced to the limits of such validity, and if under or from
any circumstances whatsoever the Lenders should ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance of
the Lender Obligations and not to the payment of interest. This provision shall
control every other provision of all Lender Agreements.

         SECTION 14.10. WAIVER OF JURY TRIAL; VENUE. EACH LOAN PARTY, THE AGENT
AND THE LENDERS MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR
ANY OTHER LENDER AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS OR ACTIONS OF THE AGENT OR ANY LENDER RELATING TO THE
ADMINISTRATION OF THE CREDITS HEREUNDER OR ENFORCEMENT OF THIS AGREEMENT OR ANY
OF THE OTHER LENDER AGREEMENTS, AND AGREE THAT NO PARTY WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, EACH LOAN PARTY HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH LOAN PARTY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT IT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS TO ENTER INTO THIS AGREEMENT AND PROVIDE THE CREDITS HEREUNDER. EACH

                                       63
<PAGE>

LOAN PARTY AND LENDER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT
OR ANY OF THE OTHER LENDER AGREEMENTS MAY BE BROUGHT IN THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY
SUCH SUIT BEING MADE UPON ANY LOAN PARTY OR LENDER BY MAIL AT THE ADDRESS SET
FORTH IN SECTION 14.1. EACH LOAN PARTY AND LENDER HEREBY WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH
COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.

                           [INTENTIONALLY LEFT BLANK]

                                       64
<PAGE>

         IN WITNESS WHEREOF, the Loan Parties, the Agent and the Lenders have
caused this Credit Agreement to be executed by their duly authorized officers as
of the date set forth above.

                                       NEW ENGLAND AUDIO CO., INC.

                                       By: _____________________________
                                              Name: Joseph McGuire
                                              Title:   Vice President and Chief
                                                       Financial Officer

                                       NEA DELAWARE, INC.

                                       By:_______________________________
                                             Name: Joseph McGuire
                                             Title:   Vice President and Chief
                                                      Financial Officer

                                       TWEETER HOME ENTERTAINMENT GROUP, INC.

                                       By: _______________________________
                                              Name: Joseph McGuire
                                              Title:   Vice President and Chief
                                                          Financial Officer

                                       TWEETER HOME ENTERTAINMENT GROUP
                                       FINANCING COMPANY TRUST

                                       By: ________________________________
                                             Name: Joseph McGuire
                                             Title:   Vice President and Chief
                                                      Financial Officer

                                       THEG USA, L.P

                                       By:  New England Audio Co., Inc.,
                                            General Partner

                                       By:_________________________________
                                              Name: Joseph McGuire
                                              Title:   Vice President and Chief
                                                          Financial Officer

                                       65
<PAGE>

                                       TWEETER OF CALIFORNIA, INC.

                                       By:_________________________________
                                               Name: Joseph McGuire
                                               Title:   Vice President and Chief
                                                           Financial Officer

                                       THE VIDEO SCENE INC.

                                       By:_________________________________
                                              Name: Joseph McGuire
                                              Title:   Vice President and Chief
                                                          Financial Officer

                                       TWT ACQUISITION CORP.

                                       By: ________________________________
                                              Name: Joseph McGuire
                                              Title:   President

                                       FLEET NATIONAL BANK, as Agent

                                       By:_________________________________
                                              Name: Michael J. Bassick
                                              Title:   Vice President

                                       FLEET NATIONAL BANK

                                       By: ________________________________
                                             Name: Michael J. Bassick
                                             Title:   Vice President

                                       FIRST UNION NATIONAL BANK

                                       By: ________________________________
                                              Name
                                              Title:

                                       66
<PAGE>

                                   SCHEDULE 1

                             Commitment Percentages

<TABLE>
<CAPTION>
                                                      Commitment                           Maximum Amount
           Lender                                     Percentage                   of Revolving Credit Advances
           ------                                     ----------                   ----------------------------
<S>                                                   <C>                          <C>
Fleet National Bank                                     66.67%                             $50,000,000.00
First Union National Bank                               33.33%                             $25,000,000.00
</TABLE>

<PAGE>

                                   SCHEDULE 2

                                Pricing Schedule

         The Eurodollar Rate Margin, the Base Rate Margin and the Applicable
Commitment Fee on any day are the respective percentages set forth below in the
applicable row under the column corresponding to the Status that exists on such
day:

<TABLE>
<CAPTION>
                   STATUS                         LEVEL I           LEVEL II         LEVEL III         LEVEL IV
                   ------                         -------           --------         ---------         --------
<S>                                               <C>               <C>              <C>               <C>
Eurodollar Rate Margin                              1.25              1.50             1.75              2.00
Commitment Fee                                      0.25              0.25             0.375            0.375
</TABLE>

         For purposes of this Schedule, the following terms have the following
meanings:

                  "Level I Status" exists at any date if, at such date, the
         Applicable Leverage Ratio is less than 1.50-to-1.00 and no Default
         exists.

                  "Level II Status" exists at any date if, at such date, the
         Applicable Leverage Ratio is equal to or greater than 1.50-to-1.00 and
         less than 2.00-to-1.00 and no Default exists.

                  "Level III Status" exists at any date if, at such date, the
         Applicable Leverage Ratio is equal to or greater than 2.00-to-1.00 and
         less than 2.50-to-1.00 and no Default exists.

                  "Level IV Status" exists at any date if, at such date, no
         other Status exists.

                  "Status" refers to the determination of which of Level I
         Status, Level II Status, Level III Status or Level IV Status exists at
         any date.

         For the period from the Closing Date through the date five Business
Days following the Agent's receipt of the financial statements of Tweeter and
its Subsidiaries for the period ended June 30, 2001, the Status shall be deemed
to be Level I so long as no Default exists. Thereafter, the "Applicable Leverage
Ratio" shall be determined on the date five Business Days following the Agent's
receipt of the financial statements of Tweeter and its Subsidiaries for the
previous fiscal quarter certified by the chief financial officer of Tweeter,
commencing with receipt of the financial statements for the fiscal quarter
ending June 30, 2001, and shall be equal to the Consolidated Leverage Ratio in
effect as of the end of such previous fiscal quarter as reflected on such
financial statements.

<PAGE>

                                    EXHIBIT A

                          FORM OF REVOLVING CREDIT NOTE

$_____________                                                            [Date]
                                                           Boston, Massachusetts

         FOR VALUE RECEIVED, the undersigned, NEW ENGLAND AUDIO CO., INC., a
Massachusetts corporation, and NEA DELAWARE, INC., a Delaware corporation (the
"Borrowers"), jointly and severally, HEREBY PROMISE TO PAY to the order of
______________________________________ (the "Lender") the principal sum of
[___________________________________] DOLLARS ($____________) (or, if less, the
aggregate unpaid principal amount of all Revolving Credit Advances made by the
Lender to the Borrowers pursuant to the Credit Agreement as hereinafter
defined), together with interest on the unpaid principal from time to time
outstanding at the rate or rates and computed and payable at the times as
described in the Credit Agreement. The entire balance of outstanding principal
and accrued and unpaid interest shall be paid in full on the Revolving Credit
Termination Date (as defined in the Credit Agreement).

         This note represents indebtedness for one or more Revolving Credit
Advances made by the Lender to the Borrowers under the Credit Agreement dated as
of June __, 2001 (as the same may be amended, modified or supplemented from time
to time, the "Credit Agreement") by and among the Borrowers, the Guarantors, the
Lenders from time to time parties thereto and Fleet National Bank, as Agent for
the Lenders (the "Agent"). Capitalized terms used herein and not otherwise
defined shall have the meaning set forth in the Credit Agreement.

         The Borrowers shall have the right, at any time, to voluntarily prepay
all or any part of the outstanding principal amount of this note subject to the
provisions of the Credit Agreement.

         In addition to the payment of interest as provided above, the Borrowers
shall, jointly and severally, on demand, pay interest on any overdue
installments of principal and, to the extent permitted by applicable law, on
overdue installments of interest at the rate set forth in the Credit Agreement.

         The holder of this note is entitled to all the benefits and rights of a
Lender under the Credit Agreement to which reference is hereby made for a
statement of the terms and conditions under which the entire unpaid balance of
this note, or any portion hereof, shall become immediately due and payable. Any
capitalized term used in this note which is not otherwise expressly defined
herein shall have the meaning ascribed thereto in the Credit Agreement.

         The Borrowers hereby waive presentment, demand, notice, protest and
other demands and notices in connection with the delivery, acceptance or
enforcement of this note.

         No delay or omission on the part of the holder of this note in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this note, and a waiver, delay or omission on any one occasion
shall not be construed as a bar to or waiver of any such right on any future
occasion.

<PAGE>

         The Borrowers, jointly and severally, hereby agree to pay on demand all
reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incurred or paid by the holder of this note
in enforcing this note on default.

         THE LENDER AND THE BORROWERS AGREE THAT NEITHER OF THEM NOR ANY OF
THEIR ASSIGNEES OR SUCCESSORS SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON OR ARISING OUT OF, THIS
NOTE, THE CREDIT AGREEMENT, ANY LENDER AGREEMENT, ANY DOCUMENT, INSTRUMENT OR
AGREEMENT EXECUTED IN CONNECTION WITH ANY OF THE FOREGOING, ANY COLLATERAL
SECURING ALL OR ANY PART OF THE LENDER OBLIGATIONS OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY EACH OF
THE LENDER AND THE BORROWERS WITH THEIR RESPECTIVE COUNSEL, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR ANY BORROWER HAS
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

         This note shall be deemed to be under seal, and all rights and
obligations hereunder shall be governed by the laws of The Commonwealth of
Massachusetts (without giving effect to any conflicts of law provisions
contained therein).

                                       NEW ENGLAND AUDIO CO., INC.

                                       By:___________________________________
                                       Name:
                                       Title:

                                       NEA DELAWARE, INC.

                                       By:___________________________________
                                       Name:
                                       Title:

<PAGE>

                                    EXHIBIT B

                  FORM OF NOTICE OF REVOLVING CREDIT BORROWING

                               _____________, 200_

Fleet National Bank, as Agent
100 Federal Street, Boston, Massachusetts  02110
Attention:  Mr. Michael J. Bassick

         Re:      Credit Agreement dated as of June __, 2001 by and among New
                  England Audio Co., Inc., NEA Delaware, Inc., the Guarantors
                  party thereto, the Lenders party thereto and Fleet National
                  Bank, as Agent (the "Credit Agreement")

Ladies and Gentlemen:

         Pursuant to Section 2.1 of the Credit Agreement, the undersigned hereby
requests that the Lenders make Revolving Credit Advances to the Borrowers in the
aggregate amount of $________ on ____________, ____.

         The representations and warranties contained or referred to in Article
5 of the Credit Agreement are true and accurate on and as of the effective date
of the requested Revolving Credit Advances as though made at and as of such date
(except as to representations and warranties made as of a certain date, which
shall be true and correct as of such date, except as to transactions permitted
by the Credit Agreement, and except that the references in the Agreement to the
2000 Financial Statements are deemed to refer to the most recent annual
financial statements furnished to the Agent and the Lenders pursuant to Section
6.2 of the Credit Agreement); and no Default has occurred and is continuing or
will result from the requested Revolving Credit Advances.

                                NEW ENGLAND AUDIO CO., INC.
                                (for itself and as agent for NEA Delaware, Inc.)

                                By:___________________________________
                                Name:
                                Title:

<PAGE>

                                    EXHIBIT C

                         FORM OF COMPLIANCE CERTIFICATE

                               _____________, 200_

Fleet National Bank, as Agent
100 Federal Street, Boston, Massachusetts  02110
Attention:  Mr. Michael J. Bassick

         Re:      Credit Agreement dated as of June __, 2001 by and among New
                  England Audio Co., Inc., NEA Delaware, Inc., the Guarantors
                  party thereto, the Lenders party thereto and Fleet National
                  Bank, as Agent (the "Credit Agreement")

Ladies and Gentlemen:

         Pursuant to the provisions of Section 6.1(b) or 6.2 of the Credit
Agreement, the undersigned hereby certifies on behalf of Tweeter Home
Entertainment Group, Inc. and its Subsidiaries as follows:

<TABLE>
<S>                                                                                      <C>
        (A)         Revolving Credit Advances and stated amount of Letters of Credit     $_________
        (B)         Maximum Revolving Credit Amount........................              $75,000,000
        (C)         Amount available for Revolving Credit
                    Advances under the Credit Agreement
                    (line B minus line A)..................................              $_________
</TABLE>

        (C)         (1)    The representations and warranties made by or on
                           behalf of the Loan Parties in the Credit Agreement
                           and in all other Lender Agreements are true and
                           correct in all material respects on and as of the
                           date hereof, with the same effect as if made at and
                           as of the date hereof (except as to representations
                           and warranties made as of a certain date, which shall
                           be true and correct only as of such date, except as
                           to transactions permitted under the terms of the
                           Credit Agreement, and except that the references in
                           the Agreement to the 2000 Financial Statements are
                           deemed to refer to the most recent annual financial
                           statements furnished to the Agent and the Lenders
                           pursuant to Section 6.2 of the Credit Agreement).

<PAGE>

                  (2)      Since the end of the last fiscal year, neither the
                           business nor assets, nor the condition, financial or
                           otherwise, of Tweeter Home Entertainment Group, Inc.
                           and its Subsidiaries, taken as a whole, has been
                           subject to any Material Adverse Effect.

                  (3)      Except as set forth in the certificates attached
                           hereto and except as heretofore disclosed to the
                           Agent in a previous Compliance Certificate, there has
                           been no change (i) in the charter documents or
                           By-Laws of the Loan Parties heretofore certified to
                           the Agent or (ii) in the incumbency of the officers
                           of the Loan Parties whose signatures have heretofore
                           been certified to the Agent.

                  (4)      The financial statements attached hereto as Schedule
                           1 are in compliance with the applicable provisions of
                           Section 6.1(b) or 6.2 of the Credit Agreement, as the
                           case may be.

                  (5)      The undersigned has caused the provisions of the
                           Credit Agreement to be reviewed and there is no
                           Default thereunder, and no condition which, with the
                           passage of time or giving of notice or both, would
                           constitute a Default thereunder, other than as set
                           forth on Schedule 2 attached hereto.

         (D)      Attached hereto as Schedule 3 are calculations demonstrating
                  that, based upon the consolidated financial statements of
                  Tweeter Home Entertainment Group, Inc. and its Subsidiaries
                  attached hereto as Schedule 1, the Loan Parties are in
                  compliance with all financial restrictions set forth in the
                  Credit Agreement.

         Terms defined in the Credit Agreement and not otherwise expressly
defined herein are used herein with the meanings so defined in the Credit
Agreement.

         IN WITNESS WHEREOF, the undersigned has caused an authorized officer to
execute this Certificate on this _____ day of ____________, 200_.

<PAGE>

                                       TWEETER HOME ENTERTAINMENT GROUP, INC.

                                       By:___________________________________
                                       Name:
                                       Title:

<PAGE>

                                   SCHEDULE 1

                            to Compliance Certificate

         The financial statements attached to this Schedule are submitted in
compliance with the following section of the Credit Agreement (check one):

                  [   ]  Section 6.1(b)
                  [   ]  Section 6.2

<PAGE>

                                   SCHEDULE 2

                            to Compliance Certificate

                          Defaults - Action Being Taken

<PAGE>

                                   SCHEDULE 3

                            to Compliance Certificate

For purposes of computing the ratios and limitations comprising the financial
restrictions that follow, terms that are capitalized and not defined herein will
be given the meanings ascribed to such terms in the Credit Agreement.

                                      [*]

----------

*        Detailed calculations of each financial covenant should follow.

<PAGE>

                                    EXHIBIT D

                        FORM OF EURODOLLAR PRICING NOTICE

                             ________________, 200_

Fleet National Bank, as Agent
100 Federal Street
Boston, Massachusetts  02110
Attention:  Mr. Michael J. Bassick

         Re:      Credit Agreement dated as of June __, 2001 by and among New
                  England Audio Co., Inc., NEA Delaware, Inc., the Guarantors
                  party thereto, the Lenders party thereto and Fleet National
                  Bank, as Agent (the "Credit Agreement")

Ladies and Gentlemen:

         Pursuant to Section 2.4 of the Credit Agreement, the undersigned hereby
confirms its request made on _______________, for a Eurodollar Rate Loan in the
amount of $__________ comprising all or a portion of outstanding Revolving
Credit Advances, effective __________.

         The Interest Period applicable to said Eurodollar Rate Loan will be
[one][two][three][six] months.

         Said Eurodollar Rate Loan represents a [conversion/continuation] of the
[Base] [Eurodollar] Rate Loan in the same amount made on __________.

                               NEW ENGLAND AUDIO CO., INC.
                               (for itself and as agent for NEA Delaware, Inc.)

                               By:___________________________________
                               Name:
                               Title:

<PAGE>

                                    EXHIBIT G

                             FORM OF LANDLORD WAIVER

         ____________________ (the "Lessor") being the lessor of certain
premises (the "Premises") commonly known as ____________________ leased to
____________________ (the "Lessee") under the lease of the Premises dated
__________ as the same may be amended from time to time, including any renewal,
extension or substitution thereof or therefor, (the "Lease"), for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Lessor, does hereby:

         1._______Acknowledge that Lessor has been advised that New England
Audio Co., Inc. has granted or will grant to Fleet National Bank, individually
and/or as agent, (the "Secured Party") security interests in inventory,
equipment, removable trade fixtures and all other personal property now owned or
hereafter acquired by the Assignee (the "Collateral"), all as more fully
described in a Security Agreement from Assignee to the Secured Party (as the
same may be amended from time to time, the "Security Agreement").

         2._______Waive, relinquish and release, solely during the term of the
Security Agreement, any and all rights of distrait, lien, levy or execution
against or upon the Collateral for any rent or other sum now or hereafter due
the Lessor under the Lease or otherwise, and all claims and demands of every
kind and nature against the Collateral.

         3._______Agree to use reasonable efforts to provide the Secured Party
with a copy of any notice given by the Lessor to the Assignee of the Assignee's
default under or termination of the Lease or of any material amendment thereof.

         4._______Agree, both before and after termination of the Lease, upon
reasonable notice to Lessor, to provide the Secured Party with access to the
Premises to effect removal or sale of the Collateral, and the Secured Party
hereby agrees (i) to repair any damage directly caused by such removal or sale,
and to indemnify the Lessor for any liability directly resulting from such
removal or sale and (ii) to remove or sell said Collateral within 30 days after
entry upon the Premises (and, if the Lease has been terminated, the Secured
Party shall be responsible to the Lessor for per diem rent and other charges
accruing under the Lease during the period of such removal or sale).

<PAGE>

         IN WITNESS WHEREOF, the Lessor has executed this Landlord's Waiver as
of _____ day of _________, 2001.

                                       LESSOR:

                                       By:_______________________________
                                       Its President
                                       Hereunto duly authorized

AGREED:

FLEET NATIONAL BANK

By:___________________________

100 Federal Street
Boston, MA 02110
Attn: Mr. Michael J. Bassick
RE: New England Audio Co., Inc.

<PAGE>

                                    EXHIBIT I

                   FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

         Assignment and Acceptance Agreement dated as of _______, ____, by and
between __________ (the "Assignor") and __________ (the "Successor Lender").

         WHEREAS, the Assignor is one of the Lenders party to the Credit
Agreement referred to below; and

         WHEREAS, the Assignor desires to sell and the Successor Lender desires
to purchase, all or a portion of the outstanding loans, advances of credit and
commitments of Assignor under the Credit Agreement and the other documents,
instruments and agreements related thereto.

         NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties agree as follows:

         Reference is made to the Credit Agreement dated as of June __, 2001 (as
amended or supplemented and as from time to time in effect, the "Credit
Agreement"), by and among New England Audio Co., Inc. and NEA Delaware, Inc.
(the "Borrowers"), the Guarantors party thereto, the lenders party thereto (the
"Lenders") and Fleet National Bank, as agent for the Lenders (the "Agent").
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.

         1.       Assignment and Acceptance. Pursuant to Section 12.2 of the
Credit Agreement, as of the close of business on __________________ (the
"Assignment Date"), the Assignor hereby assigns to the Successor Lender,
$________ of its $____________ current interest in the outstanding Revolving
Credit Advances and a ____% interest in its Commitment Percentage.

         The foregoing assignment which constitutes a ___% Commitment Percentage
under the Credit Agreement, is made together with the concomitant proportionate
amount of the undersigned's other rights and obligations under the Credit
Agreement and the other Lender Agreements, and the Successor Lender hereby
accepts and assumes such rights and obligations completely. After giving effect
to this assignment, the Assignor and the Successor Lender shall have the
interests in the Revolving Credit Notes and the Commitment Percentages set forth
on Schedule 1 attached hereto, and the Commitment Percentages of all of the
Lenders under the Credit Agreement shall be as set forth on Schedule 2 attached
hereto.

         2.       Representations and Warranties.

         (a)      Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free and clear
of any adverse claim, the Assignor makes no representation or warranty and
assumes no responsibility with respect to (i) the execution, delivery,
effectiveness, enforceability, genuineness, validity or adequacy of the Credit
Agreement, the Revolving Credit Notes or any other Lender Agreement, (ii) any
recital, representation, warranty, document, certificate, report or statement
in, provided for in, received under or in connection with, the Credit Agreement
or any other Lender Agreement or (iii) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or

<PAGE>

hereafter, of any lien or other direct or indirect security afforded or
purported to be afforded by any of the Lender Agreements or otherwise from time
to time.

         (b)      The Assignor makes no representation or warranty and assumes
no responsibility with respect to (i) the performance or observance of any of
the terms or conditions of the Credit Agreement or any other Lender Agreement on
the part of the Borrower, (ii) the business, operations, condition (financial or
otherwise) or prospects of the Borrower or any other Person or (iii) the
existence of any Default.

         (c)      The Successor Lender confirms that it has received a copy of
the Credit Agreement and each of the other Lender Agreements, together with
copies of the most recent financial statements delivered pursuant to Sections
6.1 and 6.2 of the Credit Agreement, and such other documents and information as
it has deemed appropriate to make its own credit and legal analysis and decision
to enter into this Assignment and Acceptance Agreement. The Successor Lender
confirms that it has made such analysis and decision independently and without
reliance upon the Agent, the Assignor or any other Lender.

         (d)      The Successor Lender, independently and without reliance upon
the Agent, the Assignor or any other Lender, and based on such documents and
information as it shall be deem appropriate at the time, will make its own
decisions to take or not take action under or in connection with the Credit
Agreement or any other Lender Agreement.

         (e)      The Successor Lender irrevocably appoints the Agent to act as
Agent for the Successor Lender under the Credit Agreement and the other Lender
Agreements, all in accordance with Article 13 of the Agreement and the other
provisions of the Credit Agreement and each other Lender Agreement.

         (f)      The Successor Lender agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement and the other Lender Agreements are required to be performed by it as
a Lender.

         (g)      Except as to paragraph (a) above, the foregoing assignment is
made without any representation, warranty or recourse of any kind by the
Assignor.

         3.       Party to the Agreement, etc. Upon (a) the execution and
delivery hereof by the parties hereto at least five (5) Business Days prior to
the Assignment Date, (b) the payment by the Successor Lender to Assignor of an
amount equal to the purchase price agreed between the Successor Lender and the
Assignor, and (c) payment to the Agent of the fee required to be paid pursuant
to Section 12.2(a) of the Credit Agreement, the Successor Lender shall
automatically become party to the Credit Agreement as a signatory thereto. As of
the Assignment Date, the Successor Lender shall have all the rights and
obligations of a Lender under the Credit Agreement and the other Lender
Agreements as and to the extent set forth on Schedule 1 and Schedule 2 attached
hereto. Copies of all notices and other information required to be delivered to
the Lenders under the Credit Agreement shall be delivered to the Successor
Lender at the address(es) and to attention of the Person(s) specified below the
Successor Lender's name on the execution page of this Assignment and Acceptance
Agreement. As of the Assignment Date, the

<PAGE>

Assignor shall be released from its obligations under the Credit Agreement to a
corresponding extent, and no further consent or action by any party shall be
required.

         4.       Miscellaneous. This Assignment and Acceptance Agreement may be
executed in any number of counterparts, which together shall constitute one
instrument, shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts (without giving effect to the conflict of laws
rules of any jurisdiction) and shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns.

                           [INTENTIONALLY LEFT BLANK.]

<PAGE>

         IN WITNESS WHEREOF, the Assignor and the Successor Lender have executed
this Assignment and Acceptance Agreement as of the date first above written.

                                       [ASSIGNOR]

                                       By:____________________________________
                                       Name:
                                       Title:

                                       [SUCCESSOR LENDER]

                                       By:____________________________________
                                       Name:
                                       Title:

                                       [Address for Notices]
                                       Telecopier No.:
                                       Attention: ____________________________

The foregoing is hereby acknowledged and approved:

TWEETER HOME ENTERTAINMENT GROUP, INC.*

By: ___________________________________
Name:
Title:

FLEET NATIONAL BANK, as Agent

By: ___________________________________
Name:
Title:

*        Include unless Section 12.2 of the Credit Agreement does not require
         Tweeter's consent to the assignment.

<PAGE>

                                   SCHEDULE 1

                   Successor Lender's and Assignor's Interest

The Successor Lender's interest under the Credit Agreement on and after the
Assignment Date shall be as follows:

         Commitment Percentage                                    _____%
         Principal Amount of Revolving Credit Note                $________

The Assignor's interest under the Credit Agreement on and after the Assignment
Date shall be as follows:

         Commitment Percentage                                    _____%
         Principal Amount of Revolving Credit Note                $________

<PAGE>

                                   SCHEDULE 2

                         Lenders' Commitment Percentages

         After giving effect to the assignment on the Assignment Date, the
Lenders' respective Commitment Percentages under the Credit Agreement shall be
as follows:

<TABLE>
<CAPTION>
        Lender                    Commitment              Maximum Amount
                                  Percentage        of Revolving Credit Advances
<S>                               <C>               <C>
--------------------                ---.--%                 $------.--
--------------------                ---.--%                 $------.--
--------------------                ---.--%                 $------.--
            TOTALS                  100.00%                 $______.00
</TABLE><PAGE>
                                                                     EXHIBIT 4.1

                                RIGHTS AGREEMENT

                                     BETWEEN

                                 HYBRIDON, INC.

                                       AND

                          MELLON INVESTOR SERVICES LLC

                                 AS RIGHTS AGENT

                             DATED DECEMBER 10, 2001
<PAGE>
                                Table of Contents

<TABLE>
<S>                                                                           <C>
Section 1.  Certain Definitions ..........................................     1

Section 2.  Appointment of Rights Agent ..................................     6

Section 3.  Issuance of Rights ...........................................     6

Section 4.  Form of Rights Certificates ..................................     8

Section 5.  Countersignature and Registration ............................     9

Section 6.  Transfer, Split Up, Combination and Exchange of Rights
            Certificates; Mutilated, Destroyed, Lost or Stolen
            Rights Certificates ..........................................    10

Section 7.  Exercise of Rights; Purchase Price; Expiration
            Date of Rights ...............................................    10

Section 8.  Cancellation and Destruction of Rights Certificates ..........    12

Section 9.  Reservation and Availability of Capital Stock ................    13

Section 10. Preferred Stock Record Date ..................................    14

Section 11. Adjustment of Purchase Price, Number and Kind of
            Shares or Number of Rights ...................................    14

Section 12. Certificate of Adjusted Purchase Price or Number
            of Shares ....................................................    22

Section 13. Consolidation, Merger or Sale or Transfer of
            Assets or Earning Power ......................................    22

Section 14. Fractional Rights and Fractional Shares ......................    24

Section 15. Rights of Action .............................................    26

Section 16. Agreement of Rights Holders ..................................    26

Section 17. Rights Certificate Holder Not Deemed a Stockholder ...........    27

Section 18. Concerning the Rights Agent ..................................    27

Section 19. Merger or Consolidation or Change of Name of
            Rights Agent .................................................    28

Section 20. Duties of Rights Agent .......................................    28

Section 21. Change of Rights Agent .......................................    31

Section 22. Issuance of New Rights Certificates ..........................    31

Section 23. Redemption ...................................................    32
</TABLE>

                                       -i-
<PAGE>
<TABLE>
<S>                                                                           <C>
Section 24. Exchange .....................................................    32

Section 25. Notice of Certain Events .....................................    34

Section 26. Notices ......................................................    35

Section 27. Supplements and Amendments ...................................    35

Section 28. Successors ...................................................    36

Section 29. Actions by the Board, etc ....................................    36

Section 30. Benefits of this Agreement ...................................    36

Section 31. Severability .................................................    37

Section 32. Governing Law ................................................    37

Section 33. Counterparts .................................................    37

Section 34. Descriptive Headings .........................................    37
</TABLE>
<PAGE>
                                RIGHTS AGREEMENT

RIGHTS AGREEMENT, dated December 10, 2001 (the "Agreement"), between Hybridon,
Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC,
a New Jersey limited liability company, as Rights Agent (the "Rights Agent").

                               W I T N E S S E T H

WHEREAS, on December 10, 2001 the Board of Directors of the Company (the
"Board") authorized and declared a dividend distribution of one Right for each
share of Common Stock (as hereinafter defined) of the Company outstanding at the
close of business on January 7, 2002 (the "Record Date"), and authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(i) or Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the earlier of the
Distribution Date or the Expiration Date, each Right initially representing the
right to purchase one one-thousandth of a share of Series C Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designations attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth (the
"Rights");

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

      Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:

      (a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company, or (iv) any
Person organized, appointed or established by the Company for or pursuant to the
terms of any such plan. Notwithstanding the foregoing, (x) no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Stock by
the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the shares of Common Stock of the Company then outstanding; provided, however
that if a Person shall become the Beneficial Owner of 15% or more of the shares
of Common Stock of the Company then outstanding as the result of an acquisition
of Common Stock by the Company and shall, following written notice from, or
public disclosure by the Company of such share purchases by the Company become
the Beneficial Owner of any additional Common Stock of the Company and shall
then beneficially own 15% or more of the shares of Common Stock then
outstanding, then such Person shall be deemed to be an "Acquiring Person" and
(y) no Person who was a holder of Series A Preferred Stock on the date of this
Agreement shall become an "Acquiring Person" solely as the result of
<PAGE>
such holder's receipt after the date of this Agreement of additional shares of
Series A Preferred Stock as a payment-in-kind dividend (or as a result of the
conversion into Common Stock of any such additional shares of Series A Preferred
Stock), unless and until such Person becomes the Beneficial Owner of 15% or more
of the shares of Common Stock of the Company then outstanding (disregarding for
purposes of this calculation (but not for purposes of any other calculation
under this Agreement) (1) any Series A Preferred Stock received by such Person
after the date of this Agreement as a payment-in-kind dividend and (2) any
shares of Common Stock received by such Person as a result of the conversion
into Common Stock of any shares of Series A Preferred Stock referred to in the
foregoing clause (1)) and (z) if the Board determines in good faith that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), has become such inadvertently, and
such Person divests as promptly as practicable (as determined in good faith by
the Board of Directors), but in any event within 15 Business Days, following
receipt of written notice from the Company of such event, of Beneficial
Ownership of a sufficient number of shares of Common Stock so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Agreement unless and until such
Person shall again become an "Acquiring Person."

      (b) "Act" shall mean the Securities Act of 1933, as amended.

      (c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") as in
effect on the date of this Agreement.

      (d) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii).

      (e) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:

            (i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, owns or has the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities), whether or not in writing, or
upon the exercise of conversion rights, exchange rights, other rights, warrants
or options, or otherwise; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect to any Original
Rights;

                                      -2-
<PAGE>
            (ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act, or any comparable or successor
rule), including pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), whether or
not in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy or consent given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and (B)
is not then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

            (iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
whether or not in writing, for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy or consent as described in the proviso to
subparagraph (ii) of this paragraph (e)) or disposing of any voting securities
of the Company.

For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(l)(i) of the General Rules and Regulations
under the Exchange Act.

      (f) "Board" shall have the meaning set forth in the WHEREAS clause at the
beginning of this Agreement.

      (g) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New Jersey are authorized or
obligated by law or executive order to close.

      (h) "Close of Business" on any given date shall mean 5:00 p.m., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.

      (i) "Common Stock" shall mean the common stock, $.001 par value, of the
Company, except that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock of such Person with the greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.

                                      -3-
<PAGE>
      (j) "Common stock equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.

      (k) "Company" shall have the meaning set forth in the introductory
paragraph hereof.

      (l) "Current market price" shall have the meaning set forth in Section
11(d)(i) hereof.

      (m) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.

      (n) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.

      (o) "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.

      (p) "Exchange Act" shall have the meaning set forth in Section 1(c)
hereof.

      (q) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.

      (r) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.

      (s) "Final Expiration Date" shall mean the close of business on December
10, 2011.

      (t) "Permitted Offer" shall mean a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined, prior
to the consummation of such tender offer or exchange offer, by directors
constituting at least 75% of all of the members of the Board, after receiving
advice from a nationally recognized investment banking firm selected by the
Board, to be (a) at a price that is fair to stockholders (taking into account
all factors which such members of the Board deem relevant including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its stockholders.

      (u) "Person" shall mean any individual, firm, corporation, partnership,
trust, association, limited liability company or other entity.

      (v) "Preferred Stock" shall mean shares of Series C Junior Participating
Preferred Stock, $.01 par value, of the Company having the rights and
preferences set forth in the form of Certificate of Designations attached to
this Agreement as Exhibit A and, to the extent that there is not a sufficient
number of shares of Series C Junior Participating Preferred Stock authorized to
permit the full exercise of the Rights, any other series of Preferred Stock,
$.01 par value, of the Company designated for such purpose containing terms
substantially similar to the terms of the Series C Junior Participating
Preferred Stock.

      (w) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.

      (x) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.

                                      -4-
<PAGE>
      (y) "Record Date" shall have the meaning set forth in the WHEREAS clause
at the beginning of this Agreement.

      (z) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.

      (aa) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.

      (bb) "Rights" shall have the meaning set forth in the WHEREAS clause at
the beginning of this Agreement.

      (cc) "Rights Agent" shall have the meaning set forth in the introductory
paragraph hereof.

      (dd) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.

      (ee) "Section 11(a)(ii) Event" shall mean an acquisition of Common Stock
described in the first sentence of Section 11(a)(ii) hereof.

      (ff) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.

      (gg) "Section 13 Event" shall mean any event described in clauses (x), (y)
or (z) of Section 13(a) hereof.

      (hh) "Series A Preferred Stock" shall mean the Series A Convertible
Preferred Stock, $.01 par value, of the Company established pursuant to the
Certificate of Designation for Series A Convertible Preferred Stock dated May 5,
1998.

      (ii) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.

      (jj) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided, however that, if such Person is deemed not to be an Acquiring Person
pursuant to clause (y) of Section 1(a) hereof, no Stock Acquisition Date shall
be deemed to have occurred.

      (kk) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities sufficient
to elect at least a majority of the directors (or comparable body) of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or otherwise controlled by such Person.

      (ll) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.

      (mm) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.

      (nn) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.

                                      -5-
<PAGE>
      Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable upon ten days' prior written notice to the Rights Agent.
The Rights Agent shall have no duty to supervise, and shall in no event be
liable for, the acts or omissions of any such Co-Rights Agent.

      Section 3. Issuance of Rights.

      (a) Until the earlier of (i) the Close of Business on the tenth Business
Day (or such later date as may be determined by the Board) after the Stock
Acquisition Date (or, if the tenth Business Day after the Stock Acquisition Date
occurs before the Record Date, the close of business on the Record Date), or
(ii) the Close of Business on the tenth Business Day (or such later date as may
be determined by action of the Board) after the date that a tender or exchange
offer (other than a Permitted Offer) by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2 of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced by the certificates for
the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will, if notified thereof and provided
with all necessary information, send by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. The Company
shall promptly notify the Rights Agent in writing upon the occurrence of the
Distribution Date and, if such notification is given orally, the Company shall
confirm same in writing on or prior to the Business Day next following. Until
such notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not occurred. With
respect to certificates for the Common Stock outstanding as of the close of
business on the Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights. In addition, in connection with the issuance or sale of shares of Common
Stock following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (i) shall, with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
benefit plan or arrangement, or upon the exercise, conversion or exchange of
securities granted or issued by the Company prior to the Distribution Date
(including, without limitation, shares of Series A Preferred Stock), and (ii)
may, in any other case, if deemed necessary or appropriate by the Board, issue
Rights Certificates representing the appropriate number of Rights in connection

                                      -6-
<PAGE>
with such issuance or sale; provided, however, that (x) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (y) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof. In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to
Sections 11(i) or 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.

      (b) As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of Rights to Purchase Preferred Stock, in substantially
the form attached hereto as Exhibit C, by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the close of business on the Record
Date, at the address of such holder shown on the records of the Company. The
failure to send a copy of the Summary of Rights shall not affect the
enforceability of any part of this Rights Agreement or the rights of any holder
of the Rights.

      (c) Rights shall be issued (i) in respect of all shares of Common Stock
that are issued (either as an original issuance or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date and (ii) in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights (x) with respect to shares of Common Stock so issued or
sold pursuant to the exercise of stock options or under any employee benefit
plan or arrangement, or upon the exercise, conversion or exchange of securities,
granted or issued by the Company prior to the Distribution Date (including,
without limitation, shares of Series A Preferred Stock), and (y) with respect to
shares of Common Stock so issued or sold in any other case, if deemed necessary
or appropriate by the Board. Certificates representing such shares of Common
Stock (including, without limitation, certificates issued upon transfer or
exchange of Common Stock) shall also be deemed to be certificates for Rights,
and shall bear the following legend:

            This certificate also evidences and entitles the holder hereof to
            certain Rights as set forth in the Rights Agreement between
            Hybridon, Inc. (the "Company") and Mellon Investor Services LLC (the
            "Rights Agent") dated December 10, 2001, as the same may be amended,
            restated or renewed from time to time (the "Rights Agreement"), the
            terms of which are hereby incorporated herein by reference and a
            copy of which is on file at the principal offices of the Company.
            Under certain circumstances, as set forth in the Rights Agreement,
            such Rights will be evidenced by separate certificates and will no
            longer be evidenced by this certificate. The Company will mail to
            the holder of this certificate a copy of the Rights Agreement, as in
            effect on the date of mailing, without charge promptly after receipt
            of a written request therefor. Under certain circumstances set forth
            in the Rights Agreement,

                                      -7-
<PAGE>
            Rights issued to, or held by, any Person who is, was or becomes an
            Acquiring Person or any Affiliate or Associate thereof (as such
            terms are defined in the Rights Agreement), whether currently held
            by or on behalf of such Person or by any subsequent holder, may
            become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date and (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights. Notwithstanding
this Section 3(c), the omission of a legend shall not affect the enforceability
of any part of this Rights Agreement or the rights of any holder of the Rights.

      (d) Until the earlier of the Distribution Date and the Expiration Date,
the transfer of any certificates representing shares of Common Stock in respect
of which Rights have been issued shall also constitute the transfer of the
Rights associated with such shares of Common Stock. In the event that the
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such shares of
Common Stock shall be deemed cancelled and retired so that the Company shall not
be entitled to exercise any Rights associated with the shares of Common Stock
which are no longer outstanding.

      Section 4. Form of Rights Certificates.

      (a) The Rights Certificates (and the forms of election to purchase,
certification and assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (which shall not affect the
rights, duties or responsibilities of the Rights Agent) and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or over-the-counter
market on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 7, 11 and 22 hereof, the Rights
Certificates, whenever distributed, shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one one-thousandth of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.

      (b) Any Rights Certificate issued pursuant to Section 3, Section 11(i) or
Section 22 hereof that represents Rights beneficially owned by persons known to
be: (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration)

                                      -8-
<PAGE>
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom such Acquiring Person has any continuing
agreement, arrangement or understanding (whether or not in writing) regarding
the transferred Rights or (B) a transfer which the Board has determined is part
of a plan, arrangement or understanding (whether or not in writing) that has as
a primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible and to the extent the
Rights Agent has been notified thereof) the following legend:

            The Rights represented by this Rights Certificate are or were
            beneficially owned by a Person who was or became an Acquiring Person
            or an Affiliate or Associate of an Acquiring Person (as such terms
            are defined in the Rights Agreement). Accordingly, this Rights
            Certificate and the Rights represented hereby may become null and
            void in the circumstances specified in Section 7(e) of such
            Agreement.

The provisions of Section 7(e) hereof shall be operative whether or not the
foregoing legend is contained on any such Rights Certificate.

      Section 5. Countersignature and Registration.

      (a) The Rights Certificates shall be executed on behalf of the Company by
its Chief Executive Officer, President or any Vice President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof, which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.

      (b) Following the Distribution Date and receipt by the Rights Agent of all
necessary information, the Rights Agent shall keep or cause to be kept, at its
office designated as the appropriate place for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, the Rights Certificate
number and the date of each of the Rights Certificates.

                                      -9-
<PAGE>
      Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

      (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates (other than Rights Certificates representing Rights that have
become void pursuant to Section 7(e) hereof or that have been exchanged pursuant
to Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of one one-thousandths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other securities, cash or other
assets, as the case may be) as the Rights Certificate or Certificates
surrendered then entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged,
with the form of assignment and certificate appropriately executed, at the
office of the Rights Agent designated for such purpose. Neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Rights Certificate until the registered
holder shall have properly completed and signed the certificate contained in the
form of assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates. The Rights Agent shall have no duty or obligation under
this Section unless and until it is satisfied that all such taxes and/or charges
have been paid.

      (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security satisfactory to them, and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will execute and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.

      Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

      (a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side

                                      -10-
<PAGE>
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of one one-thousandths of a share of
Preferred Stock (or other shares, securities, cash or other assets, as the case
may be) as to which such surrendered Rights are then exercisable, at or prior to
the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights
expire as provided in Section 13(d) hereof, (iii) the time at which the Rights
are redeemed as provided in Section 23 hereof (the "Redemption Date") and (iv)
the time at which such Rights are exchanged as provided in Section 24 hereof
(the earliest of (i), (ii), (iii) and (iv) being herein referred to as the
"Expiration Date").

      (b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $13.00 and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.

      (c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased and an
amount equal to any applicable tax or charge, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased and the Company
hereby authorizes its transfer agent to comply with such requests, or (B) if the
Company shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such requests, (ii) requisition from the Company the amount of cash, if
any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made in cash or by certified bank check or money order
payable to the order of the Company. In the event that the Company is obligated
to issue other securities (including Common Stock) of the Company, pay cash
and/or distribute other property pursuant to Section 11(a) hereof, the Company
shall make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
necessary to comply with this Agreement.

      (d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the

                                      -11-
<PAGE>
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
Sections 6 and 14 hereof.

      (e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
(whether or not in writing) regarding the transferred Rights or (B) a transfer
which the Board has determined is part of an agreement, arrangement or
understanding (whether or not in writing) that has as a primary purpose or
effect avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. No Rights Certificate shall be issued at any time upon the transfer
of any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Rights Certificate
delivered to the Rights Agent for transfer to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence shall be cancelled. The Company
shall notify the Rights Agent when this Section 7(e) applies and shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.

      (f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported transfer or
exercise as set forth in this Section 7 unless such registered holder shall have
(i) duly and properly completed and signed the certificate following the form of
assignment or election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such assignment or exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or any Affiliates or Associates thereof as the Company or the
Rights Agent shall reasonably request.

      Section 8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the

                                      -12-
<PAGE>
written request of the Company, destroy such cancelled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.

      Section 9. Reservation and Availability of Capital Stock.

      (a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.

      (b) So long as the shares of Preferred Stock (and, following the
occurrence of a Section 11(a)(ii) Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange or automated quotation system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be so listed upon official
notice of issuance upon such exercise.

      (c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Act, with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the Expiration Date, and (iv) obtain such other
regulatory approvals as may be necessary for it to issue securities purchasable
upon the exercise of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective or to obtain any other
required regulatory approval in connection with the exercisability of the
Rights. Upon any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect, each time with prompt written notice thereof to the Rights Agent.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite registration
or qualification in such jurisdiction shall have been effected or obtained.

      (d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a share of Preferred
Stock (and, following the

                                      -13-
<PAGE>
occurrence of a Triggering Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable.

      (e) The Company further covenants and agrees that it will pay when due and
payable any and all taxes and governmental charges that may be payable in
respect of the issuance or delivery of the Rights Certificates and of any
certificates for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) upon the exercise
of Rights. The Company shall not, however, be required (i) to pay any tax or
charge that may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificate evidencing Rights surrendered for
exercise or (ii) to issue or deliver any certificates for a number of one
one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax or charge shall have been
paid (any such tax or charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax or charge is due.

      Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered with the forms of election and
certification duly executed and payment of the Purchase Price (and all
applicable taxes and charges) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to securities for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

      Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

                                      -14-
<PAGE>
      (a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs that would
require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.

                  (ii) Subject to Section 24 of this Agreement, in the event
that any Person, alone or together with its Affiliates or Associates, becomes an
Acquiring Person (other than pursuant to a Permitted Offer), then, promptly
following the first occurrence of such event, proper provision shall be made so
that each holder of a Right (except as provided below and in Section 7(e)
hereof) shall thereafter have the right to receive (subject to the last sentence
of Section 23(a)), upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of a number of one
one-thousandths of a share of Preferred Stock, such number of shares of Common
Stock of the Company that equals the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by 50%
of the current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").

                  (iii) In the event that the number of shares of Common Stock
that are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price (such excess, the "Spread"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock which the

                                      -15-
<PAGE>
Board has deemed to have the same value as shares of Common Stock (such shares
of preferred stock, "common stock equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value, where such aggregate value has been
determined by the Board based upon the advice of a nationally recognized
investment banking firm selected by the Board; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) days following the later of (x) the first occurrence of
a Section 11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y) being
referred to herein as the "Section 11(a)(ii) Trigger Date"), then the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect, each time with prompt written notice to
the Rights Agent. For purposes of this Section 11(a)(iii), the value of the
Common Stock shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the value of any "common stock equivalent" shall be deemed to
have the same value as the Common Stock on such date.

      (b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible

                                      -16-
<PAGE>
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes. Shares of Preferred Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options
or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.

      (c) In case the Company shall fix a record date for a distribution to all
holders of Preferred Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such current market price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock on such record date. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.

      (d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the current
market price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common Stock,
and prior to the expiration

                                      -17-
<PAGE>
of the requisite thirty (30) Trading Day or ten (10) Trading Day period, as set
forth above, after the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification occurs,
then, and in each such case, the "current market price" shall be properly
adjusted to take into account ex-dividend or post record date trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and the low asked prices in the over-the-counter market, as reported by The
Nasdaq Stock Market, Inc. ("Nasdaq") or such other system then in use, or, if on
any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. All references in this Section to closing prices, last quoted prices or
other stock prices mean prices during regular trading hours, without giving
effect to any after-hours or extended hours trading. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date shall be as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. The term "Trading Day" shall mean a day on
which Nasdaq or any national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on
Nasdaq or any national securities exchange, a Business Day. If the Common Stock
is not publicly held or not so listed or traded, "current market price" per
share shall mean the fair value per share as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.

                  (ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market price"
per share of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the current market
price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, "current market price"
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board, which determination shall be described in
a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "current market price" of one
one-thousandth of a share of Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock divided by 1,000.

                                      -18-
<PAGE>
      (e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest ten-millionth of a share of Preferred Stock,
or hundred-thousandth of a share of Common Stock or other security, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment, or (ii)
the Expiration Date.

      (f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Stock, thereafter the
number of such other securities so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (e), (g),
(h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other securities; provided, however, that the Company shall not be liable for
its inability to reserve and keep available for issuance upon exercise of the
Rights pursuant to Section 11(a)(ii) a number of shares of Common Stock greater
than the number then authorized by the Company's Certificate of Incorporation
but not outstanding or reserved for other purposes.

      (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

      (h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest ten-millionth) obtained by
(i) multiplying (x) the number of one one-thousandths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

      (i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-hundred-

                                      -19-
<PAGE>
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement (with prompt written notice thereof to the Rights Agent) of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.

      (j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandth of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.

      (k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of one one-thousandths of a share of fully paid and
nonassessable Preferred Stock at such adjusted Purchase Price.

      (l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer (and shall give prompt written notice of
such election to the Rights Agent) until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the number
of one one-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.

                                      -20-
<PAGE>
      (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.

      (n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction that complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any charter or bylaw provisions or
any rights, warrants or other instruments or securities outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
stockholders of the Person who constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates or
Associates. The Company shall not consummate any consolidation, merger, sale or
transfer described in clause (i), (ii) or (iii) of the prior sentence unless
prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(n).

      (o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23, Section 24 or Section 27 hereof,
take (or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.

      (p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Record Date and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, the number of Rights associated with each share
of Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction, the numerator of which shall be the number of

                                      -21-
<PAGE>
shares of Common Stock outstanding immediately prior to the occurrence of such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately following the occurrence of such event.

      Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and/or Section 13
hereof, the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts and computations accounting for
such adjustment, (b) file with the Rights Agent, and with each transfer agent
for the Preferred Stock and the Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment or statement therein contained, and shall have no duty or liability
with respect to, and shall not be deemed to have knowledge of, any adjustment
unless and until it shall have received such certificate.

      Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.

      (a) In the event that, at any time after a Person has become an Acquiring
Person, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with Section
11(o) hereof), then, and in each such case and except as contemplated by Section
13(d) hereof, proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), which
shall not be subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-thousandths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and (2) dividing that product (which, following the first
occurrence of a

                                      -22-
<PAGE>
Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that, subject
to clause (v) below, the provisions of Section 11 hereof shall apply only to
such Principal Party following the first occurrence of a Section 13 Event; (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.

      (b) "Principal Party" shall mean

                  (i) in the case of any transaction described in clause (x) or
            (y) of the first sentence of Section 13(a), the Person that is the
            issuer of any securities into which shares of Common Stock of the
            Company are converted in such merger or consolidation, and if no
            securities are so issued, the Person that is the other party to such
            merger or consolidation; and

                  (ii) in the case of any transaction described in clause (z) of
            the first sentence of Section 13(a), the Person that is the party
            receiving the greatest portion of the assets or earning power
            transferred pursuant to such transaction or transactions;

provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint ventures and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.

      (c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its

                                      -23-
<PAGE>
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any consolidation, merger or sale
of assets mentioned in paragraph (a) of this Section 13, the Principal Party
will

                  (i) prepare and file a registration statement under the Act,
            with respect to the Rights and the securities purchasable upon
            exercise of the Rights on an appropriate form, and will use its best
            efforts to cause such registration statement to (A) become effective
            as soon as practicable after such filing and (B) remain effective
            (with a prospectus at all times meeting the requirements of the Act)
            until the Expiration Date;

                  (ii) use its best efforts to qualify or register the Rights
            and the securities purchasable upon exercise of the Rights under the
            blue sky laws of such jurisdictions as may be necessary or
            appropriate; and

                  (iii) deliver to holders of the Rights historical financial
            statements for the Principal Party and each of its Affiliates that
            comply in all respects with the requirements for registration on
            Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at the same time as, or at any time after, the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).

      (d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
(or a wholly owned subsidiary of any such Person or Persons) who acquired shares
of Common Stock pursuant to a Permitted Offer, (ii) the price per share of
Common Stock paid in such transaction is not less than the price per share of
Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such Permitted Offer, and (iii) the form of consideration
paid in such transaction is the same as the form of consideration paid pursuant
to such Permitted Offer. Upon consummation of any such transaction contemplated
by this Section 13(d), all Rights hereunder shall expire.

      Section 14. Fractional Rights and Fractional Shares.

      (a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(i) or (p) hereof, or to
distribute Rights Certificates that evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on

                                      -24-
<PAGE>
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and the low asked prices in
the over-the-counter market, as reported by Nasdaq or such other system then in
use or, if on any such date the Rights are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board. All references
in this Section to closing prices, last quoted prices or other stock prices
means prices during regular trading hours, without giving effect to any
after-hours or extended hours trading. If on any such date no such market maker
is making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board shall be used, which determination shall
be described in a statement filed with Rights Agent and shall be conclusive for
all purposes.

      (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates that evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractional shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts; provided, however,
that holders of such depositary receipts shall have all of the designations and
the powers, preferences and rights, and the qualifications, limitations and
restrictions to which they are entitled as beneficial owners of the shares of
Preferred Stock represented by such depositary receipts. In lieu of fractional
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock), the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-thousandth of a share of Preferred Stock. For purposes
of this Section 14(b), the current market value of one one-thousandth of a share
of Preferred Stock shall be one one-thousandth of the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.

      (c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company shall pay to
the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market price of one (1) share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.

      (d) The holder of a Right by the acceptance of such Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14. The Rights Agent
shall have no duty or obligation with respect to

                                      -25-
<PAGE>
this Section 14 and Section 24(e) unless and until it has received specific
instructions (and sufficient cash, if required) from the Company with respect to
the Rights Agent's duties and obligations under such Sections.

      (e) Whenever a payment for fractional Rights or fractional shares is to be
made by the Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights Agent a certificate setting forth in reasonable detail the facts
related to such payments and the prices and/or formulas utilized in calculating
such payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments. The Rights Agent shall be
fully protected in relying upon such a certificate and shall have no duty with
respect to, and shall not be deemed to have knowledge of any payment for
fractional Rights or fractional shares under any Section of this Agreement
relating to the payment of fractional Rights or fractional shares unless and
until the Rights Agent shall have received such a certificate and sufficient
monies.

      Section 15. Rights of Action. All rights of action in respect of this
Agreement, except the rights of action expressly given to the Rights Agent in
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

      Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

      (a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;

      (b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office of
the Rights Agent designated for such purposes, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate forms and certificates
duly completed and fully executed;

      (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone

                                      -26-
<PAGE>
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the penultimate sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and

      (d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to prevent the issuance of any such order, decree or ruling and to have
any such order, decree or ruling lifted or otherwise overturned as soon as
possible.

      Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-thousandths of
a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

      Section 18. Concerning the Rights Agent.

      (a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the preparation, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, damage, judgment,
fine, penalty, claim, demand, settlement, cost or expense (including without
limitation, the reasonable fees and expenses of legal counsel), incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent (which gross negligence, bad faith, or willful misconduct must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction), for any action taken, suffered or omitted by
the Rights Agent in connection with the acceptance, administration, exercise and
performance of its duties under this Agreement, including the costs and expenses
of defending against any claim of liability in the premises. The provisions of
this Section 18 and Section 20 below shall survive the termination of this
Agreement, the exercise or expiration of the Rights and the resignation or
removal of the

                                      -27-
<PAGE>
Rights Agent. The costs and expenses reasonably incurred in enforcing this right
of indemnification shall be paid by the Company.

      (b) The Rights Agent shall be authorized and protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Agreement in reliance
upon any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof. The Rights Agent shall not be deemed to have
knowledge of any event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and shall incur no
liability for failing to take any action in connection therewith unless and
until it has received such notice in writing.

      Section 19. Merger or Consolidation or Change of Name of Rights Agent.

      (a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, however, that such
Person would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.

      (b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.

      Section 20. Duties of Rights Agent. The Rights Agent undertakes only the
duties and obligations expressly imposed by this Agreement (and no implied
duties or obligations) upon the following terms and conditions, by all of which
the Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:

                                      -28-
<PAGE>
      (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the written advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent and
the Rights Agent shall incur no liability for or in respect of any action taken,
suffered or omitted by it in accordance with such written advice or opinion.

      (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking, suffering or omitting to take any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights Agent for
any action taken or suffered by it under the provisions of this Agreement in
reliance upon such certificate.

      (c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct (which gross negligence, bad faith
or willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction). Anything to
the contrary notwithstanding, in no event shall the Rights Agent be liable for
special, punitive, indirect, consequential or incidental loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage. Any liability
of the Rights Agent under this Agreement will be limited to the amount of fees
paid by the Company to the Rights Agent.

      (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

      (e) The Rights Agent shall not be under any responsibility or have any
liability in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after receipt of a certificate describing any such adjustment, delivered
pursuant to Section 12); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock or Preferred Stock to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.

                                      -29-
<PAGE>

      (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

      (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and such instructions shall be full authorization and protection to the
Rights Agent, and the Rights Agent shall not be liable for any action taken,
suffered or omitted to be taken by it in accordance with instructions of any
such officer. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken, suffered or omitted by the Rights Agent with
respect to its duties or obligations under this Rights Agreement and the date on
and/or after which such action shall be taken, suffered or such omission shall
be effective. The Rights Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall not be less than five
Business Days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions in response to such application
specifying the action to be taken, suffered or omitted.

      (h) The Rights Agent and any stockholder, affiliate, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent or any such
stockholder, affiliate, director, officer or employee from acting in any other
capacity for the Company or for any other Person.

      (i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its directors, officers, employees, attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, absent gross
negligence, bad faith or willful misconduct (which gross negligence, bad faith
or willful misconduct must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction) in the
selection and continued employment of such directors, officers, employees,
attorneys or agents thereof.

      (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.

                                      -30-
<PAGE>

      (k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Company and the Rights Agent will deem the beneficial owner of
the rights evidenced by such Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof and such assignment or election to purchase will
not be honored.

      Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a Person organized and doing business
under the laws of the United States (or of any state of the United States) in
good standing, which is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate of a
Person described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

      Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.

                                      -31-
<PAGE>

      Section 23.  Redemption.

      (a) The Board may, at its option, at any time prior to the earlier of (i)
the close of business on the tenth Business Day (or such later date as may be
determined by the Board pursuant to clause (i) of the first sentence of Section
3(a) with respect to the Distribution Date) following the Stock Acquisition Date
(or, if the Stock Acquisition Date shall have occurred prior to the Record Date,
the close of business on the tenth Business Day following the Record Date) and
(ii) the Final Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $0.001 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"). The redemption of the Rights
by the Board may be made effective at such time, on such basis and with such
conditions as the Board in its sole discretion may establish. The Company may,
at its option, pay the Redemption Price in cash, shares of Common Stock (based
on the "current market price," as defined in Section 11(d)(i) hereof, of the
Common Stock at the time of redemption) or any other form of consideration, or
any combination of any of the foregoing, deemed appropriate by the Board.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.

      (b) Immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent and
without any further action and without any notice, the right to exercise the
Rights shall terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the action of the Board ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.

      (c) In the event of a redemption of the Rights in accordance with this
Agreement, the Company may, at its option, discharge all of its obligations with
respect to the Rights by (i) issuing a press release announcing the manner of
redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer Agent of
the Common Stock, and upon such action, all outstanding Rights and Right
Certificates shall be null and void without any further action by the Company.

      Section 24.  Exchange.

      (a) The Board may, at its option, at any time after a Section 11(a)(ii)
Event, exchange all or part of the then outstanding and exercisable Rights
(which (i) shall not include Rights that

                                      -32-
<PAGE>
have become void pursuant to the provisions of Section 7(e) hereof, and (ii)
shall include, without limitation, any Rights issued after the Distribution
Date) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the shares of Common Stock then outstanding.

      (b) Immediately upon the action of the Board ordering the exchange of any
Rights pursuant to subsection (a) of this Section 24, evidence of which shall
have been filed with the Rights Agent, and without any further action and
without any notice, the right to exercise such Rights shall terminate and the
only right thereafter of a holder of such Rights shall be to receive that number
of shares of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange (with prompt written notice thereof to the Rights Agent);
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange shall state the
method by which the exchange of shares of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.

      (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or equivalent preferred stock, as such
term is defined in Section 11(b) hereof) for shares of Common Stock exchangeable
for Rights, at the initial rate of one one-thousandth of a share of Preferred
Stock (or equivalent preferred stock) for each share of Common Stock, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to Section 3(A) of the Certificate of Designations
attached hereto as Exhibit A, so that the fraction of a share of Preferred Stock
(or equivalent preferred stock) delivered in lieu of each share of Common Stock
shall have the same voting rights as one share of Common Stock.

      (d) In the event that there shall not be sufficient shares of Common Stock
or Preferred Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.

      (e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such

                                      -33-
<PAGE>
fractional shares of Common Stock, there shall be paid to the registered holders
of the Right Certificates with regard to which such fractional shares of Common
Stock would otherwise be issuable, an amount in cash equal to the same fraction
of the current market value of a whole share of Common Stock. For the purposes
of this subsection (e), the current market value of a whole share of Common
Stock shall be the closing price per share of Common Stock (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.

      Section 25.  Notice of Certain Events.

      (a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.

      (b) In case a Section 11(a)(ii) Event shall occur, then, in any such case,
(i) the Company shall as soon as practicable thereafter give to the Rights Agent
and each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Stock shall be deemed thereafter to refer also to Common
Stock and/or, if appropriate, other securities; provided that the failure to
give such notice shall not affect the validity of such consent.

                                      -34-
<PAGE>

      Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) or by facsimile transmission as follows:

                        Hybridon, Inc.
                        345 Vassar Street
                        Cambridge, MA  02139
                        Attention: Chief Executive Officer
                        Facsimile No.: (617) 679-5592

                        with a copy to:

                        Hale and Dorr LLP
                        60 State Street
                        Boston, MA 02109
                        Attention:  David E. Redlick, Esq.
                        Facsimile No.: (617) 526-5000

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) or by facsimile transmission as follows as
follows:

                         Mellon Investor Services LLC
                         111 Founder's Plaza 11th Floor
                         East Hartford, CT 06108
                         Attention: Relationship Manager
                         Facsimile No.: (860) 528-6472

                         with a copy to:

                         Mellon Investor Services LLC
                         85 Challenger Road
                         Ridgefield, NJ 07660-2108
                         Attention: General Counsel
                         Facsimile No.: (201) 296-4004

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

      Section 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may, in

                                      -35-
<PAGE>
its sole and absolute discretion, and the Rights Agent shall, if the Company so
directs but subject to the other provisions of this Section, supplement or amend
any provision of this Agreement in any respect without the approval of any
holders of the Rights. At any time when the Rights are no longer redeemable,
except as provided in the penultimate sentence of this Section 27, the Company
may, by approval of at least 75% of the members of the Board, and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights in order (i) to cure any ambiguity
or (ii) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, provided that no
such supplement or amendment shall adversely affect the interests of the holders
of Rights as such (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, and provided, such supplement
or amendment does not change or increase the Rights Agent's rights, duties,
liabilities or obligations, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the contrary,
no supplement or amendment shall be made which changes the Redemption Price.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.

      Section 28.  Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

      Section 29. Actions by the Board, etc. The Board shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights. The Rights
Agent shall always be entitled to assume that the Company's Board of Directors
acted in good faith and shall be fully protected and incur no liability in
reliance thereon.

      Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).

                                      -36-
<PAGE>

      Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid, void or unenforceable
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated (with prompt written notice to the Rights Agent) and shall not expire
until the close of business on the tenth day following the date of such
determination by the Board.

      Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of Delaware applicable to contracts made
and to be performed entirely within Delaware; provided, however, that all
provisions regarding the rights, duties and obligations of the Rights Agent
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
state.

      Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

      Section 34. Descriptive Headings.  Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

              The remainder of this page intentionally left blank.

                                      -37-
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

Attest:                             HYBRIDON, INC.

By:      /s/ Adrienne Drago       By:      /s/ Stephen R. Seiler
Name:    Adrienne Drago           Name:    Stephen R. Seiler
Title:   Executive Assistant      Title:   Chief Executive Officer

Attest:                           MELLON INVESTOR SERVICES LLC,
                                  as Rights Agent

By:      /s/ Lee Tinto           By:       /s/ Lynore A. LeConche
Name:    Lee Tinto               Name:     Lynore A. LeConche
Title:   Vice President          Title:    Vice President

                                      -38-
<PAGE>

                                     FORM OF

                           CERTIFICATE OF DESIGNATIONS

                                       OF

                  SERIES C JUNIOR PARTICIPATING PREFERRED STOCK

                                       OF

                                 HYBRIDON, INC.

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

Hybridon, Inc., a corporation organized and existing under the laws of the State
of Delaware (hereinafter called the "Corporation"), hereby certifies that the
following resolution was adopted by the Board of Directors of the Corporation at
a meeting duly called and held on December 10, 2001:

RESOLVED: That pursuant to the authority granted to and vested in the Board of
Directors of the Corporation (hereinafter called the "Board") in accordance with
the provisions of the Certificate of Incorporation, as amended, the Board hereby
creates a series of Preferred Stock, $.01 par value per share (the "Preferred
Stock"), of the Corporation and hereby states the designation and number of
shares, and fixes the relative rights, preferences and limitations thereof as
follows:

      SERIES C JUNIOR PARTICIPATING PREFERRED STOCK:

      Section 1. Designation and Amount. The shares of such series shall be
designated as "Series C Junior Participating Preferred Stock" (the "Series C
Preferred Stock") and the number of shares constituting the Series C Preferred
Stock shall be one hundred thousand (100,000). Such number of shares may be
increased or decreased by resolution of the Board prior to issuance; provided,
that no decrease shall reduce the number of shares of Series C Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series C Preferred Stock.

      Section 2.  Dividends and Distributions.

      (A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
C Preferred Stock with respect to dividends, the holders of shares of Series C
Preferred Stock, in preference to the holders of Common Stock, par value $.001
per share (the "Common Stock"), of the Corporation, and of any other junior
stock, shall be entitled to receive, when, as and if declared by the Board out
of funds

                                      A-1
<PAGE>
of the Corporation legally available for the payment of dividends, quarterly
dividends payable in cash on the last day of each fiscal quarter of the
Corporation in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series C Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $10 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series C Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision, combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series C Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event. In the event the Corporation shall at any time declare or pay any
dividend on the Series C Preferred Stock payable in shares of Series C Preferred
Stock, or effect a subdivision, combination or consolidation of the outstanding
shares of Series C Preferred Stock (by reclassification or otherwise than by
payment of a dividend in shares of Series C Preferred Stock) into a greater or
lesser number of shares of Series C Preferred Stock, then in each such case the
amount to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under clause (b) of the first sentence of this
Section 2(A) shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Series C Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series C Preferred Stock outstanding immediately after such
event.

      (B) The Corporation shall declare a dividend or distribution on the Series
C Preferred Stock as provided in paragraph (A) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock) and the Corporation shall pay such
dividend or distribution on the Series C Preferred Stock before the dividend or
distribution declared on the Common Stock is paid or set apart; provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the
Series C Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.

      (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first

                                      A-2
<PAGE>
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series C Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series C Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board may fix a record date
for the determination of holders of shares of Series C Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.

      Section 3.  Voting Rights.  The holders of shares of Series C Preferred
Stock shall have the following voting rights:

      (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series C Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series C Preferred Stock payable
in shares of Series C Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series C Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
C Preferred Stock) into a greater or lesser number of shares of Series C
Preferred Stock, then in each such case the number of votes per share to which
holders of shares of Series C Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Series C Preferred Stock that were
outstanding immediately prior to such event and the denominator of which is the
number of shares of Series C Preferred Stock outstanding immediately after such
event.

      (B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series C Preferred Stock and
the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.

      (C) (i) If at any time dividends on any Series C Preferred Stock shall be
in arrears in an amount equal to six quarterly dividends thereon, the holders of
the Series C Preferred Stock, voting as a separate series from all other series
of Preferred Stock and classes of

                                      A-3
<PAGE>
capital stock, shall be entitled to elect two members of the Board in addition
to any Directors elected by any other series, class or classes of securities and
the authorized number of Directors will automatically be increased by two.
Promptly thereafter, the Board of the Corporation shall, as soon as may be
practicable, call a special meeting of holders of Series C Preferred Stock for
the purpose of electing such members of the Board. Such special meeting shall in
any event be held within 45 days of the occurrence of such arrearage.

                  (ii) During any period when the holders of Series C Preferred
Stock, voting as a separate series, shall be entitled and shall have exercised
their right to elect two Directors, then, and during such time as such right
continues, (a) the then authorized number of Directors shall be increased by
two, and the holders of Series C Preferred Stock, voting as a separate series,
shall be entitled to elect the additional Directors so provided for, and
(b) each such additional Director shall not be a member of any existing class of
the Board, but shall serve until the next annual meeting of stockholders for the
election of Directors, or until his successor shall be elected and shall
qualify, or until his right to hold such office terminates pursuant to the
provisions of this Section 3(C).

                  (iii) A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series C Preferred Stock
entitled to vote in an election of such Director.

                  (iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while the holders of Series C
Preferred Stock shall be entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or removal, then, promptly
thereafter, the Board shall call a special meeting of the holders of Series C
Preferred Stock for the purpose of filling such vacancy and such vacancy shall
be filled at such special meeting. Such special meeting shall in any event be
held within 45 days of the occurrence of such vacancy.

                  (v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of Series C Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
Director elected pursuant to this Section 3(C), or his successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the holders of the shares of the
Series C Preferred Stock to vote as provided in this Section 3(C) shall cease,
subject to renewal from time to time upon the same terms and conditions, and the
holders of shares of the Series C Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.

      (D) Except as set forth herein, or as otherwise provided by law, holders
of Series C Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.

      Section 4.  Certain Restrictions.

                                      A-4
<PAGE>

      (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series C Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series C Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:

                  (i) declare or pay dividends, or make any other distributions,
            on any shares of stock ranking junior (either as to dividends or
            upon liquidation, dissolution or winding up) to the Series C
            Preferred Stock;

                  (ii) declare or pay dividends, or make any other
            distributions, on any shares of stock ranking on a parity (either as
            to dividends or upon liquidation, dissolution or winding up) with
            the Series C Preferred Stock, except dividends paid ratably on the
            Series C Preferred Stock and all such parity stock on which
            dividends are payable or in arrears in proportion to the total
            amounts to which the holders of all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for
            consideration shares of any stock ranking junior (either as to
            dividends or upon liquidation, dissolution or winding up) to the
            Series C Preferred Stock, provided that the Corporation may at any
            time redeem, purchase or otherwise acquire shares of any such junior
            stock in exchange for shares of any stock of the Corporation ranking
            junior (either as to dividends or upon dissolution, liquidation or
            winding up) to the Series C Preferred Stock; or

                  (iv) redeem or purchase or otherwise acquire for consideration
            any shares of Series C Preferred Stock, or any shares of stock
            ranking on a parity with the Series C Preferred Stock, except in
            accordance with a purchase offer made in writing or by publication
            (as determined by the Board) to all holders of such shares upon such
            terms as the Board, after consideration of the respective annual
            dividend rates and other relative rights and preferences of the
            respective series and classes, shall determine in good faith will
            result in fair and equitable treatment among the respective series
            or classes.

      (B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

      Section 5. Reacquired Shares. Any shares of Series C Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.

                                      A-5
<PAGE>
      Section 6.  Liquidation, Dissolution or Winding Up.

      (A) Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series C Preferred Stock unless, prior thereto, the holders of shares of Series
C Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series C
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series C Preferred Stock, except distributions made ratably on the Series C
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.

      (B) Neither the consolidation, merger or other business combination of the
Corporation with or into any other corporation nor the sale, lease, exchange or
conveyance of all or any part of the property, assets or business of the
Corporation shall be deemed to be a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 6.

      (C) In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the aggregate amount to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of paragraph (A) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series C Preferred Stock payable
in shares of Series C Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series C Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Series C Preferred Stock) into a greater or lesser number of shares of Series C
Preferred Stock, then in each such case the aggregate amount to which holders of
shares of Series C Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of paragraph (A) of this Section 6 shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Series C Preferred Stock that were outstanding immediately
prior to such event and the denominator of which is the number of shares of
Series C Preferred Stock outstanding immediately after such event.

      Section 7. Consolidation, Merger, etc. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of

                                      A-6
<PAGE>
Series C Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series C Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. In the event the Corporation shall
at any time declare or pay any dividend on the Series C Preferred Stock payable
in shares of Series C Preferred Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Series C Preferred Stock (by
reclassification or otherwise than by payment of a dividend in shares of Series
C Preferred Stock) into a greater or lesser number of shares of Series C
Preferred Stock, then in each such case the amount set forth in the first
sentence of this Section 7 with respect to the exchange or change of shares of
Series C Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Series C Preferred
Stock that were outstanding immediately prior to such event and the denominator
of which is the number of shares of Series C Preferred Stock outstanding
immediately after such event.

      Section 8.  No Redemption.  The shares of Series C Preferred Stock
shall not be redeemable.

      Section 9. Rank. The Series C Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all series of
any other class of the Preferred Stock issued either before or after the
issuance of the Series C Preferred Stock (including, without limitation, the
Series A Convertible Preferred Stock $.01 par value, of the Company established
pursuant to the Certificate of Designation for Series A Convertible preferred
Stock dated May 5, 1998), unless the terms of any such series shall provide
otherwise.

      Section 10. Amendment. At such time as any shares of Series C Preferred
Stock are outstanding, the Certificate of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series C Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series C Preferred Stock, voting
together as a single class.

      Section 11. Fractional Shares. Series C Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series C Preferred Stock.

                                      A-7
<PAGE>
      IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chief Executive Officer this 10th day of December,
2001.
                                    HYBRIDON, INC.

                                    By:
                                         ---------------------------
                                    Name:
                                         ---------------------------
                                    Title:
                                         ---------------------------

                                      A-8
<PAGE>

                          [Form of Rights Certificate]

Certificate No. R-                                          ______ Rights

NOT EXERCISABLE AFTER DECEMBER 10, 2011 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001 PER RIGHT AND TO
EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*

                                HYBRIDON, INC.

                               Rights Certificate

This certifies that ____________, or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated December 10, 2001 (the "Rights Agreement"), between Hybridon,
Inc., a Delaware corporation (the "Company"), and Mellon Investor Services LLC
(the "Rights Agent"), to purchase from the Company after the Distribution Date
(as such term is defined in the Rights Agreement) and at any time prior to
5:00 p.m. (New York time) on December 10, 2011 at the office of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one
one-thousandth of a fully paid, non-assessable share of Series C Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, $.01 par
value per share, at a purchase price of $13.00 in cash per one one-thousandth of
a share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one one-thousandth of a share of Preferred Stock which may be
purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of the close of business on
December 10, 2001, based on the Preferred Stock as constituted at such date.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Rights Agreement.

Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced by
this Rights Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any

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

* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.

                                      B-1
<PAGE>
such Acquiring Person (as such terms are defined in the Rights Agreement), (ii)
a transferee of any such Acquiring Person, Associate or Affiliate who becomes a
transferee after the Acquiring Person becomes an Acquiring Person, or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a person who, concurrently with or after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.

As provided in the Rights Agreement, the Purchase Price and the number and kind
of shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Section 11(a)(ii) Events.

This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal offices of the
Company and are available upon written request to the Company.

This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, with
the Form of Election and Certificate set forth on the reverse side duly
executed, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-thousandths of a share of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $.001 per Right at any time prior to the earlier of (i) the close of business
on the tenth Business Day (or such later date as may be determined by the Board
pursuant to clause (i) of the first sentence of Section 3(a) with respect to the
Distribution Date) following the Stock Acquisition Date (or, if the Stock
Acquisition Date shall have occurred prior to the Record Date, the close of
business on the tenth Business Day following the Record Date) and (ii) the Final
Expiration Date.

Subject to the provisions of the Rights Agreement, the Company may, at its
option, at any time after a Section 11(a)(ii) Event, exchange all or part of the
Rights evidenced by this Certificate for shares of the Company's Common Stock or
for Preferred Stock (or shares of a class or series of the Company's preferred
stock having the same rights, privileges and preferences as the Preferred
Stock).

                                      B-2
<PAGE>
No fractional shares of Preferred Stock will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.

No holder of this Rights Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent.

      WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.

Dated as of _______________

ATTEST:                             HYBRIDON, INC.

___________________________         By:___________________________
Secretary                           Title:_________________________

COUNTERSIGNED:

MELLON INVESTOR SERVICES LLC,
as Rights Agent

By:___________________________

  Authorized Signature

                                      B-3
<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such

               holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED                                               hereby
                   ----------------------------------------------
sells, assigns and transfers unto
                                 ----------------------------------------
-------------------------------------------------------------------------

                (Please print name and address of transferee)

-------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ______________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.

Dated:
       --------------------
                                          -----------------------------
                                          Signature
Signature Guaranteed:

                                   Certificate

The undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not beneficially owned by, or being assigned to, an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined pursuant
to the Rights Agreement).

Dated:
       --------------
                                          -----------------------------
                                          Signature
Signature Guaranteed:

                                     NOTICE

The signature to the foregoing Assignment and Certificate must correspond to the
name as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.

                                      B-4
<PAGE>

                          FORM OF ELECTION TO PURCHASE

                 (To be executed if holder desires to exercise
                 Rights represented by the Rights Certificate.)

To:    HYBRIDON, INC.

      The undersigned hereby irrevocably elects to exercise ___________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:

Please insert social security
or other identifying number
                            --------------------------------------------------

 -----------------------------------------------------------------------------
                       (Please print name and address)

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

If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:

Please insert social security
or other identifying number
                            ----------------------------------------------------

 -------------------------------------------------------------------------------
                       (Please print name and address)

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

Dated:
       --------------
                                                  -----------------------------
                                                  Signature
Signature Guaranteed:

                                      B-5
<PAGE>

                                   Certificate

      The undersigned hereby certifies by checking the appropriate boxes that:

      (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined pursuant to the
Rights Agreement);

      (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate thereof.

Dated:
      --------------------
                                          -----------------------------
                                          Signature
Signature Guaranteed:

                                     NOTICE

The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-6
<PAGE>

                              SUMMARY OF RIGHTS TO

                            PURCHASE PREFERRED STOCK

On December 10, 2001, the Board of Directors of Hybridon, Inc. (the "Company"),
declared a dividend of one Right for each outstanding share of the Company's
Common Stock to stockholders of record at the close of business on January 7,
2002 (the "Record Date"). Each Right entitles the registered holder to purchase
from the Company one one-thousandth of a share of Series C Junior Participating
Preferred Stock, $.01 par value per share (the "Preferred Stock"), at a Purchase
Price of $13.00 in cash, subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement dated December 10, 2001 (the "Rights
Agreement") between the Company and Mellon Investor Services LLC, as Rights
Agent.

Initially, the Rights are not exercisable and will be attached to all
certificates representing outstanding shares of Common Stock, and no separate
Rights Certificates will be distributed. The Rights will separate from the
Common Stock, and the Distribution Date will occur, upon the earlier of (i) 10
business days following the first date of a public announcement that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 15% or more of the outstanding shares of Common
Stock. The Distribution Date may be deferred in circumstances determined by the
Board of Directors. In addition, certain inadvertent acquisitions and certain
acquisitions of additional shares of Series A Preferred Stock as payment-in-kind
dividends will not trigger the occurrence of the Distribution Date. Until the
Distribution Date (or earlier redemption or expiration of the Rights), (i) the
Rights will be evidenced by the Common Stock certificates outstanding on the
Record Date, together with this Summary of Rights, or by new Common Stock
certificates issued after the Record Date which contain a notation incorporating
the Rights Agreement by reference, (ii) the Rights will be transferred with and
only with such Common Stock certificates; and (iii) the surrender for transfer
of any certificates for Common Stock outstanding (with or without a copy of this
Summary of Rights or such notation) will also constitute the transfer of the
Rights associated with the Common Stock represented by such certificate.

The Rights are not exercisable until the Distribution Date and will expire upon
the close of business on December 10, 2011 (the "Final Expiration Date") unless
earlier redeemed or exchanged as described below. As soon as practicable after
the Distribution Date, separate Rights Certificates will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date
and, thereafter, the separate Rights Certificates alone will represent the
Rights. Except as otherwise determined by the Board of Directors, and except for
shares of Common Stock issued upon exercise, conversion or exchange of then
outstanding options, convertible or exchangeable securities or other contingent
obligations to issue shares or pursuant to any employee benefit plan or
arrangement, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.

                                      C-1
<PAGE>

In the event that any Person becomes an Acquiring Person, unless the event
causing the 15% threshold to be crossed is a Permitted Offer (as defined in the
Rights Agreement), then, promptly following the first occurrence of such event,
each holder of a Right (except as provided below and in Section 7(e) of the
Rights Agreement) shall thereafter have the right to receive, upon exercise,
that number of shares of Common Stock of the Company (or, in certain
circumstances, cash, property or other securities of the Company) which equals
the exercise price of the Right divided by 50% of the current market price (as
defined in the Rights Agreement) per share of Common Stock at the date of the
occurrence of such event. However, Rights are not exercisable following such
event until such time as the Rights are no longer redeemable by the Company as
described below. Notwithstanding any of the foregoing, following the occurrence
of such event, all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by any Acquiring Person will be
null and void. The event summarized in this paragraph is referred to as a
"Section 11(a)(ii) Event."

For example, at an exercise price of $13.00 per Right, each Right not owned by
an Acquiring Person (or by certain related parties) following a Section
11(a)(ii) Event would entitle its holder to purchase for $13.00 such number of
shares of Common Stock (or other consideration, as noted above) as equals $13.00
divided by one-half of the current market price (as defined in the Rights
Agreement) of the Common Stock. Assuming that the Common Stock had a market
price of $6.50 per share at such time, the holder of each valid Right would be
entitled to purchase four shares of Common Stock, having a market value of 4 x
$6.50, or $26.00, for $13.00.

In the event that, at any time after any Person becomes an Acquiring Person, (i)
the Company is consolidated with, or merged with and into, another entity and
the Company is not the surviving entity of such consolidation or merger (other
than a consolidation or merger which follows a Permitted Offer) or if the
Company is the surviving entity, but shares of its outstanding Common Stock are
changed or exchanged for stock or securities (of any other person) or cash or
any other property, or (ii) more than 50% of the Company's assets or earning
power is sold or transferred, each holder of a Right (except Rights which
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, that number of shares of common stock of the
acquiring company which equals the exercise price of the Right divided by 50% of
the current market price (as defined in the Rights Agreement) of such common
stock at the date of the occurrence of the event. The events summarized in this
paragraph are referred to as "Section 13 Events." A Section 11(a)(ii) Event and
Section 13 Events are collectively referred to as "Triggering Events."

For example, at an exercise price of $13.00 per Right, each valid Right
following a Section 13 Event would entitle its holder to purchase for $13.00
such number of shares of common stock of the acquiring company as equals $13.00
divided by one-half of the current market price (as defined in the Rights
Agreement) of such common stock. Assuming that such common stock had a market
price of $6.50 per share at such time, the holder of each valid Right would be
entitled to purchase four shares of common stock of the acquiring company,
having a market value of 4 x $6.50, or $26.00, for $13.00.

At any time after the occurrence of a Section 11(a)(ii) Event, when no person
owns a majority of the Common Stock, the Board of Directors of the Company may
exchange the Rights (other than

                                      C-2
<PAGE>
Rights owned by such Acquiring Person which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock, or one one-thousandth
of a share of Preferred Stock (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).

The Purchase Price payable, and the number of units of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the then-current market price (as defined in the Rights Agreement) of the
Preferred Stock, or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings) or of subscription rights
or warrants (other than those referred to above). The number of Rights
associated with each share of Common Stock is also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in Common Stock or subdivisions, consolidations or combinations of
the Common Stock occurring, in any such case, prior to the Distribution Date.

With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least 1% of the Purchase Price. No
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) will be issued
and, in lieu thereof, an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading date prior to the date of
exercise.

Preferred Stock purchasable upon exercise of the Rights will not be redeemable.
Each share of Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors, a minimum preferential quarterly dividend
payment of $10 per share or, if greater, an aggregate dividend of 1,000 times
the dividend declared per share of Common Stock. In the event of liquidation,
the holders of the Preferred Stock will be entitled to a minimum preferential
liquidation payment of $1,000 per share, plus an amount equal to accrued and
unpaid dividends, and will be entitled to an aggregate payment of 1,000 times
the payment made per share of Common Stock. Each share of Preferred Stock will
have 1,000 votes, voting together with the Common Stock. In the event of any
merger, consolidation or other transaction in which Common Stock is changed or
exchanged, each share of Preferred Stock will be entitled to receive 1,000 times
the amount received per share of Common Stock. These rights are protected by
customary antidilution provisions. Because of the nature of the Preferred
Stock's dividend, liquidation and voting rights, the value of one one-thousandth
of a share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.

At any time prior to the earlier of the tenth Business Day (or such later date
as may be determined by the Board of Directors of the Company) after the Stock
Acquisition Date, the Company may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (the "Redemption Price"), payable in cash or
stock. Immediately upon the redemption of the Rights or such earlier time as
established by the Board in the resolution ordering the redemption of the

                                      C-3
<PAGE>
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price. The Rights may also be redeemable
following certain other circumstances specified in the Rights Agreement.

Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends. Although the distribution of the Rights should not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.

Any provision of the Rights Agreement, other than the redemption price, may be
amended by the Board prior to such time as the Rights are no longer redeemable.
Once the Rights are no longer redeemable, the Board's authority to amend the
Rights is limited to correcting ambiguities or defective or inconsistent
provisions in a manner that does not adversely affect the interest of holders of
Rights.

The Rights are intended to protect the stockholders of the Company in the event
of an unfair or coercive offer to acquire the Company and to provide the Board
with adequate time to evaluate unsolicited offers. The Rights may have
anti-takeover effects. The Rights will cause substantial dilution to a person or
group that attempts to acquire the Company without conditioning the offer on a
substantial number of Rights being acquired. The Rights, however, should not
affect any prospective offeror willing to make an offer at a fair price and
otherwise in the best interests of the Company and its stockholders, as
determined by a majority of the Board. The Rights should not interfere with any
merger or other business combination approved by the Board.

A copy of the Rights Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to the Company's Current Report on Form 8-K. A copy of
the Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.

                                      C-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00032-of-00352.parquet"}]]