Document:

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                               SERVICING AGREEMENT

                                  BY AND AMONG

                              THE BANK OF NEW YORK,
                       AS TRUSTEE AND SUPERVISORY SERVICER

                         PMC JOINT VENTURE, L.P. 2003-1,
                                    AS ISSUER

                                       AND

                                PMC CAPITAL, INC.
                                       AND
                              PMC COMMERCIAL TRUST,
                                  AS SERVICERS

                                   ----------

                         DATED AS OF SEPTEMBER 16, 2003

                                   ----------

                                   $92,893,169
                         PMC JOINT VENTURE, L.P. 2003-1
                         LOAN-BACKED FLOATING RATE NOTES

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                                TABLE OF CONTENTS

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ARTICLE I.              DEFINITIONS...............................................................................1

ARTICLE II.             REPRESENTATIONS, WARRANTIES AND COVENANTS.................................................1

         Section 2.1.      Representations and Warranties of Servicer. ...........................................1
         Section 2.2.      Covenants of Servicers.................................................................3
         Section 2.3.      Closing Certificate and Opinion........................................................5
         Section 2.4.      Fidelity Bond and Insurance............................................................5
         Section 2.5.      Access to Certain Documentation and Information Regarding the Loans....................6
         Section 2.6.      Merger or Consolidation................................................................6
         Section 2.7.      Indemnification........................................................................7

ARTICLE III.            GENERAL ADMINISTRATION AND SERVICING OF LOANS.............................................7

         Section 3.1.      General Duties of the Servicers........................................................7
         Section 3.2.      No Assignment or Delegation of Duties by Servicers.....................................8
         Section 3.3.      Establishment of Lockbox Account; Notices to Obligors; Deposits in Lockbox Account.....8
         Section 3.4.      Permitted Withdrawals from the Lockbox Account. .......................................9
         Section 3.5.      Payment of Taxes and Other Charges.....................................................9
         Section 3.6.      Collection of Certain Loan Payments...................................................10
         Section 3.7.      Limitation of Liability of Servicers' Officers and Others.............................10
         Section 3.8.      Servicing Compensation; Advances and Expenses.........................................10
         Section 3.9.      The Trustee's, the Noteholders' and Supervisory Servicer's Right To Examine Servicer
                           Records and Audit Operations..........................................................11
         Section 3.10.     Maintenance and Release of Loan Documentation; Satisfaction of Mortgages..............11
         Section 3.11.     Notice of Liens and Other Actions.....................................................14
         Section 3.12.     Waivers, Releases, Condemnations, Easements and Alterations...........................14
         Section 3.13.     Limitation on Liability of Servicers and Others.......................................14
         Section 3.14.     Property Address Change...............................................................14

ARTICLE IV.             SPECIFIC SERVICING PROCEDURES............................................................14

         Section 4.1.      Assumption Agreements.................................................................14
         Section 4.2.      Servicing Delinquent Accounts; Liquidation of Loans...................................15
         Section 4.3.      Foreclosure Expenses..................................................................18
         Section 4.4.      Title, Management and Disposition of REO Property.....................................18

ARTICLE V.              REPORTS TO BE PROVIDED BY SERVICERS......................................................20

         Section 5.1.      Determination Date Reports............................................................20
         Section 5.2.      Reports of Foreclosure and Abandonment of Mortgaged Property..........................22
         Section 5.3.      Quarterly Statement as to Compliance..................................................22
         Section 5.4.      Annual Independent Public Accountants' Servicing Report...............................23
         Section 5.5.      Servicers' Financial Statements; Annual Certification.................................23
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ARTICLE VI.             DEFAULTS.................................................................................24

         Section 6.1.      Servicer Defaults.....................................................................24
         Section 6.2.      Notice of Servicer Default............................................................25
         Section 6.3.      Remedies..............................................................................25
         Section 6.4.      Additional Remedies of Trustee Upon Servicer Defaults.................................25
         Section 6.5.      Supervisory Servicer To Act; Appointment of Successor.................................26
         Section 6.6.      Waiver of Defaults....................................................................26

ARTICLE VII.            TERMINATION..............................................................................27

         Section 7.1.      Servicers Not To Resign...............................................................27
         Section 7.2.      Term of Agreement.....................................................................27

ARTICLE VIII.           MISCELLANEOUS PROVISIONS.................................................................27

         Section 8.1.      Amendment.............................................................................27
         Section 8.2.      Governing Law.........................................................................27
         Section 8.3.      Notices...............................................................................28
         Section 8.4.      Severability of Provisions............................................................28
         Section 8.5.      No Partnership........................................................................28
         Section 8.6.      Counterparts..........................................................................28
         Section 8.7.      Successors and Assigns................................................................28
         Section 8.8.      Notification to Rating Agency and Noteholders.........................................28
         Section 8.9.      Indulgences; No Waivers...............................................................29
         Section 8.10.     Titles Not To Affect Interpretation...................................................29
         Section 8.11.     Entire Agreement......................................................................29
         Section 8.12.     Recordation of Agreement..............................................................29
         Section 8.13.     Further Assurances....................................................................29

EXHIBIT A           -    Form of Trust Receipt
EXHIBIT B           -    Form of Lockbox Notice Letter
EXHIBIT C           -    Form of Determination Date Report
EXHIBIT D           -    Form of Annual Statement
EXHIBIT E           -    Quarterly Officer's Certificate
EXHIBIT F           -    Officer's Certificate
EXHIBIT G           -    Form of Obligor Letter

SCHEDULE 1          -    Definitions
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                               SERVICING AGREEMENT

         This Servicing Agreement (this "Agreement"), dated as of September 16,
2003 is made and entered into by and among THE BANK OF NEW YORK, as trustee (the
"Trustee"), and as Supervisory Servicer (the "Supervisory Servicer"), PMC JOINT
VENTURE, L.P. 2003-1, a Delaware limited partnership, as issuer (the "Issuer"),
and PMC CAPITAL, INC., a Florida corporation ("PMC") and PMC COMMERCIAL TRUST, a
Texas real estate investment trust ("PMCT"), as servicers (PMC and PMCT are
hereinafter collectively referred to as the "Servicers" and individually, a
"Servicer").

                              PRELIMINARY STATEMENT

         The Issuer is the owner of the Loans and the other property being
pledged, assigned and conveyed by it to the Trustee for inclusion in the Trust
Estate pledged to secure the Notes issued pursuant to the Indenture. The
Servicers are in the business, among other things, of servicing mortgage loans.
The Issuer hereby appoints each Servicer to service the Loans that were
transferred by such Servicer to the Issuer and are included in the Trust Estate,
and each Servicer hereby accepts such appointment.

         All covenants and agreements made by the Issuer, the Servicers, the
Supervisory Servicer and the Trustee herein are for the benefit of the Holders
from time to time of the Notes, the Trustee and the Supervisory Servicer. The
Issuer, the Trustee, the Supervisory Servicer and the Servicers are entering
into this Agreement for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.

         In consideration of the mutual agreements herein contained, the Issuer,
the Servicers, the Supervisory Servicer and the Trustee hereby agree as follows:

                                   ARTICLE I.

                                   DEFINITIONS

         All capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in Schedule 1 attached hereto. Unless
otherwise provided, all calculations of interest pursuant to this Agreement are
based on a 360-day year and the actual number of days elapsed.

                                  ARTICLE II.

                    REPRESENTATIONS, WARRANTIES AND COVENANTS

         SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF SERVICER. Each Servicer
hereby represents and warrants on behalf of itself to the Trustee for the
benefit of the Noteholders, the Supervisory Servicer and the Issuer as of the
Closing Date, and at all times during the term of this Agreement shall be deemed
to represent and warrant on behalf of itself, that:

SERVICING AGREEMENT - PAGE 1
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         (a) Such Servicer has been duly formed and is validly existing under
the laws of the jurisdiction of its formation and is duly qualified to do
business and is in good standing under the laws of each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
enforceability of, or its ability to service, a Loan and no demand for such
qualification has been made upon such Servicer by any state, and, in any event
such Servicer is or will be in compliance with the laws of any such state to the
extent necessary to insure the enforceability of each Loan and the servicing of
the Loans in accordance with the terms of this Agreement;

         (b) Such Servicer holds all material licenses, certificates and permits
from all governmental authorities necessary for the conduct of its business
(except where the failure to obtain same would not materially and adversely
affect such Servicer's ability to perform its obligations hereunder in
accordance with the terms of this Agreement) and has received no notice of
proceedings relating to the revocation of any such license, certificate or
permit which singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the conduct
of the business, results of operations, net worth or condition (financial or
otherwise) of such Servicer;

         (c) Such Servicer has the full power and authority to execute, deliver
and perform, and to enter into and consummate all transactions contemplated by
this Agreement and to conduct its business as presently conducted, has duly
authorized the execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement and this Agreement constitutes a legal,
valid and binding obligation of such Servicer, enforceable against it in
accordance with its terms, except as such enforcement may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and (ii) by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);

         (d) Neither the execution and delivery by such Servicer of this
Agreement, the consummation by such Servicer of the transactions contemplated
hereby, nor the fulfillment of or compliance by such Servicer with the terms and
conditions of this Agreement conflicts or will conflict with or results or will
result in a breach of or constitutes or will constitute a default under (i) any
term or provision of the organizational documents or bylaws of the Servicer, or
(ii) any material agreement, contract, instrument or indenture to which the
Servicer is now a party or by which it is bound, or (iii) any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Servicer;

         (e) At the date hereof, such Servicer does not believe, nor does it
have any reason or cause to believe, that it cannot perform each of its
covenants contained in this Agreement;

         (f) There is no litigation pending or, to such Servicer's knowledge,
threatened, which, if determined adversely to such Servicer, would materially
and adversely affect the execution, delivery or enforceability of this
Agreement, or the ability of such Servicer to service the Loans hereunder in
accordance with the terms hereof or which would have a material adverse effect
on the financial condition of such Servicer;

SERVICING AGREEMENT - PAGE 2
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         (g) No consent, approval, authorization or order of, registration or
filing with or notice to any court or governmental agency or body is required
for the execution, delivery and performance by such Servicer of or compliance by
such Servicer with this Agreement or the consummation by such Servicer of the
transactions contemplated by this Agreement or if any such consent, approval,
authorization, order, registration, filing or notice is required, such Servicer
has obtained or will obtain it prior to the time necessary for such Servicer to
perform its obligations hereunder;

         (h) Neither this Agreement nor any statement, report or other document
furnished or to be furnished pursuant to this Agreement or in connection with
the transactions contemplated hereby contains any untrue statement of material
fact or omits to state a material fact necessary to make the statements relating
to such Servicer contained therein not misleading; and

         (i) Such Servicer is not in default with respect to any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of such Servicer or its properties or might have consequences that would
materially and adversely affect its performance hereunder.

         Upon discovery by the Issuer, the applicable Servicer, the Supervisory
Servicer or the Trustee of a material breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties, with a copy to the Noteholders and
the Rating Agency. Within 30 days of its discovery or its receipt of notice of
any such breach of a representation or warranty, the applicable Servicer shall
cure such breach in all material respects; provided that, if such failure shall
be of a nature that it cannot be cured within 30 days, the applicable Servicer
shall give written notice to the Supervisory Servicer and the Trustee, with a
copy to the Noteholders and the Rating Agency, within such 30 day period of the
corrective action it proposes to take and shall thereafter pursue such
corrective action diligently until such default is cured but in no event longer
than 90 days from the date of such notice.

         SECTION 2.2. COVENANTS OF SERVICERS. Each Servicer hereby agrees with
respect to itself that during the term of this Agreement:

         (a) Compliance with Agreements and Applicable Laws. Such Servicer shall
perform each of its obligations under this Agreement and comply with all
material requirements of any law, rule or regulation applicable to it and the
terms of the Loans and any related agreements.

         (b) Existence. Except as otherwise permitted pursuant to Section 2.6
hereof, such Servicer shall maintain its existence and shall at all times
continue to be duly organized under the laws of the state of its organization
and duly qualified and duly authorized (as described in Sections 2.1(a), (b) and
(c) hereof) and shall conduct its business in accordance with the terms of its
organizational documents and bylaws.

         (c) Financial Statements; Accountants' Reports; Other Information. Such
Servicer shall keep or cause to be kept in reasonable detail books and records
of account of such Servicer's assets and business, including, but not limited
to, books and records relating to the

SERVICING AGREEMENT - PAGE 3
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sale of the Loans sold by such Servicer to the Issuer and the servicing of such
Loans by such Servicer, which books and records shall be furnished to the
Trustee upon reasonable request.

         (d) Access to Records; Discussions with Officers and Accountants. Such
Servicer shall, upon the reasonable request of the Supervisory Servicer, the
Trustee, any Noteholder or any Beneficial Owner, permit the Supervisory
Servicer, the Trustee, any such Noteholder or any Beneficial Owner or any of
their authorized designees:

                           (i) to inspect the books and records of such Servicer
                  as they may relate to the Loans and the obligations of such
                  Servicer under this Agreement; and

                           (ii) to discuss the affairs, finances and accounts of
                  such Servicer relating to the Loans and the obligations of
                  such Servicer under this Agreement with any Authorized Officer
                  of such Servicer.

         Such inspections and discussions shall be conducted during normal
         business hours and shall not unreasonably disrupt the business of such
         Servicer. Such inspections shall be at the expense of the party
         performing or requesting such inspection unless a Servicer Default
         shall have occurred and be continuing, in which case any such
         inspection shall be at the expense of such Servicer. The books and
         records of such Servicer will be maintained in the United States at the
         address of such Servicer designated herein for receipt of notices,
         unless such Servicer shall otherwise advise the Supervisory Servicer,
         the Trustee and the Noteholders in writing not less than fifteen (15)
         Business Days prior to any such change of address.

         (e) Notice of Material Events. Such Servicer shall promptly and in any
event, within five (5) Business Days of the occurrence thereof, inform the
Supervisory Servicer, the Trustee, the Noteholders and the Rating Agency in
writing of the occurrence of any of the following:

                           (i) the submission of any claim or the initiation of
                  any legal process, litigation or administrative or judicial
                  investigation against such Servicer involving potential
                  damages or penalties in an uninsured amount in excess of
                  $1,000,000 in any one instance or $5,000,000 in the aggregate;

                           (ii) any change in the location of such Servicer's
                  principal office, any change in the location of such
                  Servicer's books and records or any change in such Servicer's
                  organizational structure or jurisdiction of organization;

                           (iii) the occurrence of any Servicer Default;

                           (iv) the commencement of any proceedings instituted
                  by or against such Servicer in any federal, state or local
                  court or before any governmental body or agency, or before any
                  arbitration board, or the promulgation of any proceeding or
                  any proposed or final rule which, if adversely determined,
                  would result in a material adverse change in the financial
                  condition or operations of such Servicer;

                           (v) the commencement of any proceedings by or against
                  such Servicer under any applicable bankruptcy, reorganization,
                  liquidation, rehabilitation,

SERVICING AGREEMENT - PAGE 4
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                  insolvency or other similar law now or hereafter in effect or
                  of any proceeding in which a receiver, liquidator,
                  conservator, trustee or similar official shall have been, or
                  may be, appointed or requested for such Servicer or any of its
                  assets;

                           (vi) the receipt of notice that (A) any license,
                  permit, charter, registration or approval necessary for the
                  performance by such Servicer of its obligations under this
                  Agreement is to be, or may be, suspended or revoked, or (B)
                  such Servicer is to cease and desist any practice, procedure
                  or policy employed by such Servicer in the conduct of its
                  business, and such cessation may result in a material adverse
                  change in the financial condition or operations of such
                  Servicer;

                           (vii) any merger, consolidation or sale of
                  substantially all of the assets of such Servicer; or

                           (viii) the final payment in full of the Notes.

         (f) Maintenance of Licenses. Such Servicer shall maintain all licenses,
permits, charters and registrations which are material to the performance by
such Servicer of its obligations under this Agreement.

         (g) Notices. Such Servicer shall promptly notify the Trustee, the
Noteholders, the Rating Agency and the Supervisory Servicer in writing of any
event, circumstance or occurrence which may materially and adversely affect the
ability of such Servicer to service any Loan or to otherwise perform and carry
out its duties, responsibilities and obligations under and in accordance with
this Agreement.

         SECTION 2.3. CLOSING CERTIFICATE AND OPINION. On the Closing Date, the
Servicers will deliver to the Issuer, the Initial Purchaser, the Supervisory
Servicer, the Noteholders and the Trustee an Opinion of Counsel, dated the
Closing Date, in form and substance satisfactory to the Noteholders, as to the
due authorization, execution and delivery of this Agreement by the Servicers and
the enforceability thereof and such other matters as reasonably requested by the
Noteholders. On the Closing Date, the Servicers shall also deliver an Officers'
Certificate, dated the Closing Date, signed by two Authorized Officers of each
Servicer, to the effect that:

         (a) the representations and warranties contained in Section 2.1 hereof
are true and correct in all material respects as of the Closing Date;

         (b) no Servicer Default exists hereunder; and

         (c) the Servicers maintain such errors and omissions insurance and
fidelity bond coverage as is required by this Agreement.

         SECTION 2.4. FIDELITY BOND AND INSURANCE. Each Servicer shall maintain
with a responsible company, at its own expense, a blanket fidelity bond in a
minimum amount of $1,000,000 (the "FIDELITY BOND") and an errors and omissions
insurance policy with coverage in an amount deemed reasonable by such Servicer
with coverage on all officers, employees or other persons acting in any capacity
requiring such persons to handle funds, money, documents or

SERVICING AGREEMENT - PAGE 5
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papers relating to the Loans ("SERVICER EMPLOYEES"). Any such fidelity bond and
errors and omissions insurance shall protect and insure the Trust Estate and the
Trustee, as Trustee for the Noteholders, its officers, employees and agents
against losses, including losses resulting from forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts of such Servicer Employees. Such
fidelity bond shall name the Trustee, for the benefit of the Noteholders, as a
loss payee and shall provide that such bond cannot be cancelled without 30 days'
prior notice to the Trustee. No provision of this Section 2.4 requiring such
fidelity bond and errors and omissions insurance shall diminish or relieve such
Servicer from its duties and obligations as set forth in this Agreement. Upon
the request of the Trustee, the Servicer shall cause to be delivered to the
Trustee a certified true copy of such fidelity bond and insurance policy.
Coverage of such Servicer under a policy or bond obtained by an Affiliate of
such Servicer and providing the coverage required by this Section shall satisfy
the requirements of this Section.

         SECTION 2.5. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE LOANS. Such Servicer shall provide to the Trustee, the Issuer, the
Supervisory Servicer, the Noteholders, the Beneficial Owners and their
representatives or designees access to the documentation regarding the Loans,
such access being afforded without charge but only upon reasonable request and
during normal business hours at the offices of such Servicer provided that such
access shall not be requested more frequently than is reasonable or justifiable.

         Such Servicer shall at all times maintain accurate records and books of
account and an adequate system of audit and internal controls. All accounting
and loan servicing records pertaining to each Loan shall be maintained in such
manner as will permit the Trustee, the Noteholders, Beneficial Owners and the
Supervisory Servicer or their duly authorized representatives and designees to
examine and audit and make legible reproductions of records during reasonable
business hours. All such records shall be maintained until no Notes remain
Outstanding or such longer period as is required by Law, including but not
limited to, all transaction registers and loan ledger histories.

         SECTION 2.6. MERGER OR CONSOLIDATION. Except as set forth in this
Section 2.6 below, such Servicer will keep in full effect its existence, rights
and franchises, and will obtain and preserve its qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement or any of the Loans it
services and to perform its duties under this Agreement.

         Any Person into which such Servicer may be merged or consolidated, or
any Person resulting from any merger, conversion or consolidation to which such
Servicer shall be a party, or any Person succeeding to the business of such
Servicer, shall be an established mortgage loan servicing institution that has a
net worth of at least $50,000,000 (unless such Person is then a Servicer
hereunder or is otherwise consented to in writing by the Trustee and the
Required Noteholders) and shall be the successor of such Servicer hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto except for notice thereof to the Rating Agency,
anything herein to the contrary notwithstanding, provided such successor accepts
the terms and conditions of this Agreement. Such Servicer shall, upon making a
determination that it will enter into any such merger or consolidation, send
written notice thereof to the Trustee, the Noteholders, the Supervisory Servicer
and the Rating Agency which shall in no event be less than thirty (30) days
prior written notice.

SERVICING AGREEMENT - PAGE 6
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         SECTION 2.7. INDEMNIFICATION. Such Servicer agrees to indemnify and
hold the Issuer, the Trust Estate, the Initial Purchaser, the Supervisory
Servicer, the Trustee, the Noteholders and the Beneficial Owners (and each of
their respective officers, directors, employees and agents) each harmless
against any and all claims, losses, damages, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments, and other costs and expenses
("Losses") resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of any of such Servicer's
representations and warranties contained in this Agreement or the negligence,
bad faith or willful misconduct of such Servicer relating to the performance of
its duties hereunder and servicing the Loans it is responsible for servicing in
compliance with the terms of this Agreement. Such Servicer agrees to indemnify
and hold each of the Trustee and the Supervisory Servicer and each of their
respective officers, directors, employees and agents harmless against any and
all Losses incurred by such indemnified Person except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on the part of
such indemnified Person, arising out of the administration of this Agreement,
the Indenture or the Supervisory Servicing Agreement or the exercise or
performance of any of such indemnified Person's rights, powers or duties
hereunder or thereunder. The Issuer, the Initial Purchaser, the Supervisory
Servicer or the Trustee, as the case may be, shall immediately notify the
Servicers if a claim is made by a third party with respect to this Agreement or
the Loans; provided, however, that failure to so notify shall not relieve the
applicable Servicer of its obligations hereunder except to the extent such
Servicer is materially prejudiced thereby. Notwithstanding anything to the
contrary contained herein, no Person acting as Servicer hereunder shall have any
liability under this Section 2.7 for the indemnification of any claim based upon
or arising from the action or omission of any predecessor Servicer.

                                  ARTICLE III.

                  GENERAL ADMINISTRATION AND SERVICING OF LOANS

         SECTION 3.1. GENERAL DUTIES OF THE SERVICERS. For and on behalf of
the Issuer, the Trustee and the Holders, each Servicer shall service and
administer the Loans it is responsible for servicing in accordance with the
provisions of this Agreement and the instructions of the Trustee hereunder.
Unless otherwise specified herein with respect to specific obligations of such
Servicer, such Servicer shall service and administer the Loans it is responsible
for servicing in the best interests of, and for the benefit of, the Holders, in
accordance with the Servicing Standard.

         (a) Consistent with the terms of this Agreement, the Servicers may
waive, modify or vary any term of any Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Obligor if, in such Servicer's reasonable determination, such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the Trustee on behalf of the Noteholders and such Servicer would
make the same determination if it serviced the Loan for its own account;
provided, however, that such Servicer may not permit any modification (except in
connection with a plan of liquidation or reorganization of the related Obligor)
with respect to any Loan that would change the Loan Rate or the default rate,
forgive the payment of any principal or interest (unless in connection with the
liquidation of the related Loan or in connection with a plan of liquidation or
reorganization of the related Obligor), or except as permitted by Section 3.6,
waive any prepayment fee or penalty,

SERVICING AGREEMENT - PAGE 7
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release any primary collateral (the first lien Mortgage) securing the Loan or
defer or extend the final maturity date of such Loan beyond the term of the
Notes without the written consent of all of the Noteholders. Notwithstanding the
foregoing, in the event that any Loan is in default, or in the judgment of the
Servicer, such default is reasonably foreseeable, such Servicer, consistent with
the Servicing Standard and written notice to the Trustee, may also waive, modify
or vary any term of such Loan (including modifications that would change the
Loan Rate or the default rate, forgive the payment of any principal or interest,
waive any prepayment fee or penalty, release any primary collateral securing the
Loan or defer or extend the final maturity date of such Loan beyond the term of
the Notes.) Without limiting the generality of the foregoing, and subject to the
consent of the Trustee and in accordance with the Servicing Standard, such
Servicer shall continue, and is hereby authorized and empowered, to execute and
deliver on behalf of the Trustee, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Loans it services and with respect to the
Mortgaged Properties. If reasonably required by such Servicer, the Trustee shall
furnish such Servicer with any powers of attorney and other documents necessary
or appropriate to enable such Servicer to carry out its servicing and
administrative duties under this Agreement.

         SECTION 3.2. NO ASSIGNMENT OR DELEGATION OF DUTIES BY SERVICERS. Each
Servicer, as an independent contractor, shall service and administer the Loans
for which it is responsible for servicing and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which such Servicer may deem necessary or desirable
and consistent with the terms of this Agreement. Such Servicer may not enter
into subservicing agreements (except with the other Servicer or an Affiliate)
for any servicing and administration of Loans without the prior written consent
of the Required Noteholders (which consent shall not be unreasonably withheld)
and without notice thereof to the Rating Agency and the Trustee. Except as
expressly provided herein, such Servicer shall not assign or transfer (except to
the other Servicer or an Affiliate) any of its rights, benefits or privileges
hereunder to any other Person, or delegate to or subcontract with, or authorize
or appoint any other Person to perform any of the duties, covenants or
obligations to be performed by such Servicer hereunder, without notice to the
Rating Agency and the Trustee and without the prior written consent of the
Required Noteholders (which consent shall not be unreasonably withheld), and
absent such written consent any agreement, instrument or act purporting to
effect any such assignment, transfer, delegation or appointment shall be void.
Such Servicer shall be liable for all acts and omissions of any subservicer,
delegate, subcontractor or other agent appointed pursuant to this Agreement.
Nothing contained in this Section 3.2 shall prohibit or be deemed to prohibit
such Servicer from contracting with third parties to perform duties that are not
duties of such Servicer hereunder that such Servicer deems reasonably necessary
in connection with the servicing of the Loans for which it is responsible for
servicing including, without limitation, title work, surveying, environmental
consulting, property management and maintenance, construction, engineering and
architectural consulting.

         SECTION 3.3. ESTABLISHMENT OF LOCKBOX ACCOUNT; NOTICES TO OBLIGORS;
DEPOSITS IN LOCKBOX ACCOUNT. On or prior to the Closing Date, the Servicers
shall cause to be established and maintained, at the Servicers' expense, if the
Servicers are PMC and/or PMCT, if not, then at the expense of the Trust Estate,
the Lockbox Account with Bank One, NA or another Financial Institution having a
long-term unsecured debt rating of at least A2 or its equivalent by the Rating
Agency at all times that it holds the Lockbox Account (the "REQUIRED RATING").

SERVICING AGREEMENT - PAGE 8
<PAGE>

         (a) Within three (3) Business Days after the Closing Date, each
Servicer will prepare and deliver to each of the Obligors with respect to the
Loans for which it is responsible for servicing, with a copy of such
correspondence to the Trustee and to the Noteholders, notices in the form
attached hereto as Exhibit B, directing each such Obligor to send all future
Monthly Payments or Principal Prepayments directly to the Lockbox Account.

         (b) Notwithstanding the foregoing notices, if such Servicer receives
any Collections, including, without limitation, any Monthly Payments, late
payment charges or other payments relating to a Loan, such Servicer will receive
such funds in trust for the Trustee and, if such Servicer is not a financial
institution having a rating of at least "P-1" or "A-1" or its equivalent by the
Rating Agency, will forward such funds to the Lockbox Account or Collection
Account no later than the Business Day immediately following the date such
Servicer obtains knowledge of such receipt. In addition, any Liquidation
Proceeds received by such Servicer will be deposited into the Lockbox Account or
Collection Account no later than the Business Day immediately following the day
such Servicer obtains knowledge of such receipt.

         (c) If the Supervisory Servicer assumes the function of Servicer under
this Agreement, the Supervisory Servicer shall have the right, at any time and
in its sole discretion, to establish and maintain at the expense of the Trust
Estate, a new Lockbox Account at a Financial Institution having the Required
Rating. Within five (5) Business Days of establishing the new Lockbox Account,
the Supervisory Servicer will prepare and deliver to each of the Obligors, with
copies of such correspondence to the Trustee and to the Noteholders, notice, in
the form of Exhibit B attached hereto, directing each such Obligor to send all
future Monthly Payments and Principal Prepayments directly to the new Lockbox
Account.

         (d) Upon receipt of notice that the institution holding the Lockbox
Account no longer has the Required Rating or that Bank One, NA no longer wishes
to hold the Lockbox Account, the Trustee will provide notice thereof to the
Servicers and the Servicers will, within three (3) Business Days, cause to be
established and maintained, at their expense if the Servicers are PMC and/or
PMCT, or if not, at the expense of the Trust Estate, a new Lockbox Account at a
Financial Institution having the Required Rating. Within five (5) Business Days
of establishing the new Lockbox Account, each Servicer will prepare and deliver
to each of the Obligors with respect to the Loans for which it is responsible
for servicing, with copies of such correspondence to the Trustee, and to the
Noteholders, notices, in the form of Exhibit B attached hereto, directing each
such Obligor to send all future Monthly Payments and Principal Prepayments
directly to the Lockbox Account.

         SECTION 3.4. PERMITTED WITHDRAWALS FROM THE LOCKBOX ACCOUNT. The
Trustee shall have the sole right to withdraw funds from the Lockbox Account and
on a daily basis, all deposits to the Lockbox Account shall be withdrawn
automatically and transferred to the Collection Account established under the
Indenture. The Trustee shall cause the entity holding the Lockbox Account to
forward funds held therein as provided herein.

         SECTION 3.5. PAYMENT OF TAXES AND OTHER CHARGES. If such Servicer
receives notice that any taxes, assessments or other charges which are or may
become a lien upon the Mortgaged Property are overdue, such Servicer will give a
written demand to the Obligor to pay such amounts and will verify whether such
payment has been made within sixty (60) days after

SERVICING AGREEMENT - PAGE 9
<PAGE>

mailing such notice (but in any event prior to the time that any taxing
authority commences to exercise its available remedies), subject to any right,
pursuant to the Mortgage, of an Obligor who is contesting the validity of such
charges and has paid to such Servicer a deposit or security in the amount of the
contested charge plus possible costs, interest and penalties or who has
otherwise established adequate reserves against such liability in accordance
with generally accepted accounting principles; provided, further, however, that
this provision shall not have the effect of permitting such Servicer to take, or
fail to take, any action in respect of the payments described herein that would
adversely affect the interest of the Trustee in any Mortgaged Property. If such
amounts have not been paid by the Obligor or the Obligor has not deposited or
reserved funds therefor as described in the immediately preceding sentence, such
Servicer will promptly make such payment as a Servicing Expense and request
reimbursement from the Obligor, and from the Trustee in accordance with Section
3.8 hereof.

         SECTION 3.6. COLLECTION OF CERTAIN LOAN PAYMENTS. Such Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Loans. Consistent with the foregoing, such Servicer shall not,
unless the charging or collection of any such late payment charge, prepayment
fee, assumption fee or any penalty or interest would result in the violation or
contravention of applicable Law, waive or permit to be waived, except pursuant
to such Servicer's customary servicing procedures, any late payment charge or
assumption fee. Such Servicer shall not, unless the charging or collection of
any such prepayment fee or penalty would result in the violation or
contravention of applicable Law, waive or permit to be waived any prepayment fee
or any penalty or interest in connection with the prepayment of a Loan;
provided, however, at any time on or after the date on which the Outstanding
Note Amount is less than 15% of the Outstanding Note Amount on the Closing Date,
such Servicer shall have the right, in its sole discretion, to waive the payment
of any prepayment fee or other penalty or interest in connection with the
prepayment of a Loan. Notwithstanding any other provisions hereof, such Servicer
shall not charge or impose on any Obligor, nor seek to charge or impose on any
Obligor, nor assert a right to receive, any fee, charge, premium or penalty that
if charged or collected would violate or contravene any Law, including usury
laws or the terms of the related Loan.

         SECTION 3.7. LIMITATION OF LIABILITY OF SERVICERS' OFFICERS AND OTHERS.
No director, officer, employee or agent of such Servicer shall be under any
liability to the Trustee, the Issuer, the Supervisory Servicer, the Holders or
any other persons for any action taken by them or for their refraining to take
any action in good faith pursuant to this Agreement or for errors in judgment;
except that such provision shall not protect any of them from liability which
would be imposed by reason of willful misfeasance, willful misconduct, bad faith
or negligence.

         SECTION 3.8. SERVICING COMPENSATION; ADVANCES AND EXPENSES. As
compensation for its services hereunder, each Servicer shall be paid the
Servicing Fee with respect to the Loans for which it is responsible for
servicing. Such Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall be entitled to
reimbursement thereof as described below. The Servicing Fee shall be paid to
such Servicer and Servicing Expenses reimbursed to such Servicer pursuant to
Section 6.4 of the Indenture.

SERVICING AGREEMENT - PAGE 10
<PAGE>

         (a) All reasonable and customary "out-of-pocket" costs and expenses
incurred in the performance by such Servicer of its servicing obligations
hereunder ("SERVICING EXPENSES") shall constitute routine servicing
responsibilities of such Servicer, which shall include, but are not limited to,
expenditures for the following, subject to the provisions of this Agreement, (i)
attorneys' fees, trustee fees under any deed of trust, recording, filing and
publication fees, title report and title search costs, costs associated with
environmental audits, court costs, witness fees and all other costs incurred in
respect of any enforcement of a Loan, any judicial foreclosure, or any
foreclosure sale, trustee's sale or acquisition in lieu of foreclosure, or in
respect of the insurance, sale or other disposition of any Mortgaged Property or
REO Property; (ii) repair, restoration, maintenance or other protection of any
Mortgaged Property (whether incurred before or after such property became an REO
Property) in accordance with and subject to the provisions of this Agreement, as
applicable; and (iii) compliance with such Servicer's obligations under Section
3.5 hereof; provided, however, such Servicer shall advance the expenses
described in clauses (i) through (iii) above if, but only if, such Servicer
would make an advance if it held the affected Loan or REO Property for its own
account and, in such Servicer's judgment, such amounts will be recoverable from
related Collections. Servicing Expenses shall not include any portion of such
Servicer's overhead or normal salary and operating expenses.

         SECTION 3.9. THE TRUSTEE'S, THE NOTEHOLDERS' AND SUPERVISORY SERVICER'S
RIGHT TO EXAMINE SERVICER RECORDS AND AUDIT OPERATIONS. The Trustee, the
Noteholders, the Beneficial Owners and the Supervisory Servicer and their
designees shall have the right upon reasonable prior notice, during normal
business hours and as often as reasonably required, to examine and audit (at no
cost to such Servicer unless a Servicer Default has occurred and is then
continuing) any and all of the books, records or other information of such
Servicer directly relating to the Loans, whether held by such Servicer or by
another on behalf of such Servicer, which may be relevant to the performance or
observance by such Servicer of the terms, covenants or conditions of this
Agreement. The Trustee, the Noteholders, the Beneficial Owners and the
Supervisory Servicer shall have the right upon reasonable prior notice, during
normal business hours and as often as reasonably required to perform ongoing
diligence of such Servicer's operations through loan reviews, re-appraisals (at
no cost to such Servicer) or other reasonable review of such Servicer's
operations. No amounts payable in respect of the foregoing (other than costs
associated with re-appraisals) shall be paid from the Trust Estate unless a
Servicer Default exists and is then continuing.

         SECTION 3.10. MAINTENANCE AND RELEASE OF LOAN DOCUMENTATION;
SATISFACTION OF MORTGAGES. Each Servicer shall retain, with respect to each
Loan for which it is responsible for servicing, the originals (or copies if
originals are not available) of all of the instruments and documents relating to
the Loan that would be maintained by a prudent lender servicing such Loan for
its own account (the "Servicer Loan File"), except for those original
instruments and documents constituting a part of the Trustee Loan File that are
required to be held by the Trustee.

         Each Servicer Loan File shall remain the property of the Issuer pledged
to the Trustee for the benefit of the Holders and shall be held by such Servicer
in trust for the benefit of the Trustee on behalf of the Holders. Upon written
request of the Trustee, such Servicer shall immediately deliver all or any of
such instruments, records and documents in its possession or custody to the
Trustee, together with a list identifying each Loan to which such records
pertain. Each Servicer, at its option, may microfilm, microfiche or otherwise
condense any records or documents

SERVICING AGREEMENT - PAGE 11
<PAGE>

constituting a part of, or relating to, any Loan or any Servicer Loan File for
which it is responsible, provided that such Servicer, upon written request by
the Trustee, promptly reproduces in their entirety any or all such records or
documents at no cost to the Trustee.

         (a) Each Servicer shall maintain each Servicer Loan File for a period
of four (4) years after the related Loan has been paid in full, is foreclosed
upon or is otherwise liquidated, or such longer period as may be required by
Law. Each Servicer shall maintain an appropriate account record for each Loan
which shall include the permanent loan number for each Loan serviced by such
Servicer as shown on the Loan Schedule. Any system utilized for the Loan account
records shall be capable of producing, for any Loan, an account transcript
itemizing in chronological order the date, amount and application of each
Monthly Payment by due date and other information affecting the amounts paid by
the Obligor, including the latest outstanding Loan Principal Balance.

         (b) Each Servicer shall not grant a satisfaction or release of a
Mortgage without having obtained payment in full of the indebtedness secured by
the Mortgage or otherwise prejudice any right the Trustee may have under the
mortgage instruments, subject to Section 4.1 hereof. Upon the prepayment in full
or other liquidation of a Loan, the Servicer shall immediately deposit the
prepayment or Liquidation Proceeds in the Lockbox Account or the Collection
Account and prepare and deliver to the Trustee and Supervisory Servicer a
request for the appropriate instrument releasing the Mortgaged Property from the
lien of the Mortgage, together with an Officer's Certificate (i) certifying that
(A) all amounts that the Obligor is obligated to pay under the Underlying Note,
the Mortgage and any other document pertaining to the Loan, including, but not
limited to, all required payments of principal and interest, have been paid in
full and deposited in the Lockbox Account or the Collection Account; or (B) all
Liquidation Proceeds that such Servicer reasonably believes will be collected
with respect to a Liquidated Loan have been collected and deposited in the
Lockbox Account or the Collection Account; and (ii) requesting that (X) the
Trustee Loan File for such Loan be released by the Trustee to such Servicer and
(Y) the Trustee execute and deliver to such Servicer the appropriate instrument
prepared by such Servicer necessary to release the lien of the Mortgage,
together with the Underlying Note bearing written evidence of cancellation or
assignment thereof, as appropriate.

         The Trustee shall, upon receipt of a written request from a Servicing
Officer and approval of the Supervisory Servicer, execute any document provided
to the Trustee by the Servicer or take any other action requested in such
request, that is, in the opinion of such Servicer as evidenced by such request,
required by any state or other jurisdiction to discharge the lien of a Mortgage
upon the satisfaction thereof and the Trustee will sign and post, but will not
guarantee receipt of, any such documents to such Servicer, or such other party
as such Servicer may direct in writing, within five (5) Business Days of the
Trustee's receipt of such certificate or documents. Such certificate or
documents shall establish to the Trustee's satisfaction that the related Loan
has been paid in full by or on behalf of the Obligor and that such payment has
been deposited in the Lockbox Account or the Collection Account, as the case may
be.

         Upon receipt of the Trustee Loan File, the Servicer shall record the
mortgage release or satisfaction in the proper recording office, deliver the
Underlying Note and/or the recorded original of such instrument of release or
satisfaction to the Obligor, deposit any remaining

SERVICING AGREEMENT - PAGE 12
<PAGE>

documents into the Servicer Loan File, and retain the Servicer Loan File as
provided in section (a) and (b) above. Any costs and expenses associated with
the release of any Loan shall be the expense of the Trust Estate to the extent
not paid by the applicable Obligor.

         Any applications for partial release of any part of a Mortgaged
Property must be approved in the manner set forth in Section 3.12 hereof.

         (c) From time to time as is appropriate, a Servicer may request the
Trustee to deliver or cause to be delivered to such Servicer all or part of the
documents constituting a part of the Trustee Loan File to facilitate the
servicing or foreclosure of any Loan, the acquisition of any Mortgaged Property
in lieu of foreclosure, the partial release of any Mortgaged Property from the
lien of the Mortgage or the making of any corrections to the Underlying Note or
the Mortgage or other documents constituting the Trustee Loan File. To make such
request, such Servicer shall deliver to the Trustee an Officer's Certificate
requesting that possession of all, or any document constituting part of, the
Trustee Loan File be released to such Servicer; such certificate shall certify
the reason for such release. Such Servicer also shall deliver to the Trustee
together with such certificate a Trust Receipt signed by a Servicing Officer, in
substantially the form attached as Exhibit A hereto.

         If a Servicer at any time seeks to initiate a foreclosure proceeding
with respect to any Mortgaged Property, then such Servicer shall deliver to the
Trustee, for signature by the Trustee, as appropriate, any court pleadings,
requests for Trustee's sale or other documents necessary to the foreclosure or
to any legal action brought to obtain judgment against the Obligor on the
Underlying Note or the Mortgage, or to obtain a deficiency judgment, or to
enforce any other remedies or rights provided by the Underlying Note or the
Mortgage or otherwise available at law or in equity. Such Servicer shall also
deliver to the Trustee an Officer's Certificate requesting that such pleadings
or documents be executed by the Trustee and certifying as to the reason such
documents or pleadings are required and that the execution and delivery thereof
by the Trustee will not invalidate the Mortgage except for the termination of
such lien upon completion of the proposed foreclosure. Notwithstanding the
foregoing, such Servicer shall cause possession of any Trustee Loan File or
documents therein that have been released by the Trustee to be returned to the
Trustee when the need for such file or documents no longer exists, but in any
event within thirty (30) calendar days after release by the Trustee unless (i)
the Loan has been liquidated and the Liquidation Proceeds relating to the Loan
have been deposited in the Lockbox Account or the Collection Account or (ii) the
Trustee Loan File or documents so released have been delivered to an attorney, a
public trustee or other public official, as required by Law, to initiate or
pursue legal action or other proceedings to foreclose the applicable Mortgage,
and such Servicer has delivered to the Trustee an Officer's Certificate
certifying as to the name and address of the Person to which the Trustee Loan
File, or documents therefrom, have been delivered and the purpose or purposes of
such delivery.

         (d) Each Servicer shall, at its expense if the Servicer is PMC, PMCT or
an Affiliate of either of them, if not, at the expense of the Trust Estate,
prepare and deliver to the Trustee any instruments required in connection with
substitution of a Loan pursuant to Section 3.3 of the Indenture and will pay any
recording or filing costs associated therewith.

SERVICING AGREEMENT - PAGE 13
<PAGE>

         SECTION 3.11. NOTICE OF LIENS AND OTHER ACTIONS. Such Servicer shall,
at all times, exercise reasonable efforts to prevent any Lien or judicial levy
upon or writ of attachment against a Mortgaged Property of which such Servicer
is notified or otherwise has knowledge, which is, or may be, superior to the
lien of the Mortgage.

         SECTION 3.12. WAIVERS, RELEASES, CONDEMNATIONS, EASEMENTS AND
ALTERATIONS. Any applications for partial releases of real property and releases
of personal property which are part of a Mortgaged Property, the creation or
release of easements, waivers of rights under any Mortgage, consent to
alteration, removal or demolition of improvements and other matters affecting
the Mortgage or the Mortgaged Property, other than those which are contractually
provided for in the Underlying Note or related loan documents, shall be subject
to the prior written approval of the Trustee which consent shall not be
unreasonably withheld and which shall be provided only upon written
certification by such Servicer that such action is consistent with the Servicing
Standard and the Mortgage and the ability to collect under the Underlying Note
will not be adversely affected by such release.

         SECTION 3.13. LIMITATION ON LIABILITY OF SERVICERS AND OTHERS. Each
Servicer and any director, officer, employee or agent of such Servicer may rely
on any document of any kind which it in good faith reasonably believes to be
genuine and to have been adopted or signed by the proper authorities respecting
any matters arising hereunder. Subject to the terms of Section 2.7 herein, such
Servicer shall have no obligation to appear with respect to, prosecute or defend
any legal action which is not incidental to such Servicer's duty to service the
Loans in accordance with this Agreement. The Issuer agrees to indemnify and hold
such Servicer harmless from any loss, claim, demand, liability or expense
(including, without limitation, past acts of predecessor Servicers and fees and
expenses of legal counsel) arising from or relating to the performance of its
duties under this Agreement which do not result from such Servicer's negligence,
bad faith or willful misconduct.

         SECTION 3.14. PROPERTY ADDRESS CHANGE. Each Servicer shall note in its
records and notify the Trustee of all changes of address of an Obligor or of a
Mortgaged Property of which such Servicer is notified or of which such Servicer
has knowledge.

                                   ARTICLE IV.

                          SPECIFIC SERVICING PROCEDURES

         SECTION 4.1. ASSUMPTION AGREEMENTS. When a Mortgaged Property has been
or is about to be conveyed by the Obligor, the Servicer shall, at its option, to
the extent it has knowledge of such conveyance or prospective conveyance, either
(i) exercise its rights to accelerate the maturity of the related Loan under any
"due-on-sale" clause contained in the related Mortgage or Underlying Note;
provided, however, that such Servicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of such Servicer, is not
enforceable under applicable law or if such enforcement would materially
increase the risk of default or delinquency on, or materially decrease the
security for, such Loan, or (ii) enter into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Underlying Note
and, unless prohibited by applicable law or the Mortgage, the Obligor shall
remain liable

SERVICING AGREEMENT - PAGE 14
<PAGE>

thereon. Such Servicer may enter into an assumption agreement with the
transferee only if (a) the transferee qualifies for credit under the customary
credit policies of such Servicer, (b) an officer of such Servicer has examined
and approved all instruments as are necessary to carry out the assumption
transaction and approved such instruments as to form and substance, (c) the
execution and delivery of such instruments by all necessary parties will not
cause the unpaid principal balance and any accrued interest thereon for the Loan
to be uncollectible in whole or in part, and (d) upon closing the assumption
transaction (i) the Mortgage will continue to be a first lien upon the Mortgaged
Property, and (ii) the Loan Rate and Monthly Payment for the Loan will not be
changed nor will the term of the Note be extended or shortened. For each
proposed assumption transaction, such Servicer shall deliver an Officer's
Certificate to the Trustee certifying that each of the applicable requirements
specified in the immediately preceding sentence have been satisfied together
with the assumption instruments requiring execution by the Trustee. Such
certificate shall also indicate whether the seller/transferor of the Mortgaged
Property will be released from liability on the Loan and that such Servicer has
made a good faith determination that any such release will not adversely affect
the collectibility of the Loan. Such Servicer shall perform substantially the
same level of due diligence with respect to the transferee as was performed on
the seller/transferor in connection with the origination of the Loan and shall
release the seller/transferor from liability only if any applicable Law requires
that the transferor-Obligor be released from liability on the Loan or such
Servicer has made a good faith determination that the applicable requirements
set forth above have been satisfied.

         Each Servicer is also authorized with the prior approval of the Trustee
to enter into a substitution of liability agreement with such transferee,
pursuant to which the original Obligor is released from liability and such
person is substituted as Obligor and becomes liable under the Underlying Note.
Such Servicer shall notify the Trustee that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which original shall be added by the
Trustee to the related Trustee's Loan File and shall, for all purposes, be
considered a part of such Trustee's Loan File to the same extent as all other
documents and instruments constituting a part thereof. Any fee collected by such
Servicer for consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to such Servicer as
additional servicing compensation.

         Notwithstanding the foregoing paragraph or any other provision of this
Agreement, such Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Loan by operation of law or any assumption which such Servicer may be restricted
by law from preventing, for any reason whatsoever.

         SECTION 4.2. SERVICING DELINQUENT ACCOUNTS; LIQUIDATION OF LOANS.
Each Servicer shall exercise diligence in obtaining payment of Monthly Payments
when due under the terms of each Loan and shall use reasonable efforts to
contact any delinquent Obligor.

         If any delinquent Obligor shall be or become a bankrupt or otherwise
become the subject of any insolvency or similar proceeding, such Servicer shall
notify the Trustee of such event and, thereafter, shall carry out all reasonable
actions necessary for the benefit and protection of the interests of the Trustee
and the Holders, including, but not limited to, retention of counsel to

SERVICING AGREEMENT - PAGE 15
<PAGE>

represent the Trustee in any bankruptcy or other court proceedings relating to
such Obligor or the Mortgaged Property.

         If any Loan previously reported on a Determination Date Report as more
than ninety (90) days delinquent is subsequently reported as being brought
current, the Servicer will verify with the relevant Obligor that the Obligor
paid the delinquent payments, by sending the Obligor the letter in the form
attached hereto as Exhibit G.

         (a) In the event that any payment due under any Loan and not postponed
pursuant to Section 3.1 is not paid when the same becomes due and payable, or in
the event the Obligor fails to perform any other covenant or obligation under
such Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such other action as it shall deem to be in the best
interests of the Trustee and the Holders. The Servicer shall foreclose upon or
otherwise effect the ownership in the name of the Trustee of Mortgaged
Properties relating to defaulted Loans as to which no satisfactory arrangements
can be made for collection of delinquent payments in accordance with the
customary collection policies of such Servicer and the provisions of Section
3.1. In connection with such foreclosure or other conversion, such Servicer
shall exercise collection and foreclosure procedures with the same degree of
care and skill in its exercise or use as it would exercise or use under the
circumstances in the conduct of its own affairs and shall in any event, comply
with the Servicing Standard. Such Servicer shall use its reasonable efforts to
realize upon such defaulted Loans in accordance with the Servicing Standard.
Such Servicer shall be responsible for all other costs and expenses incurred by
it in any foreclosure proceedings; provided, however, that it shall be entitled
to reimbursement thereof as contemplated in Sections 3.8 and 4.3 hereof.

         No modification, recast or extension of a Loan other than as provided
above and in Section 3.1 is permitted without the prior written consent of the
Trustee.

         Notwithstanding the foregoing provisions of this Section 4.2, no
Servicer shall, on behalf of the Trustee, obtain title to a Mortgaged Property
by deed in lieu of foreclosure or otherwise, or take any other action with
respect to any Mortgaged Property, if, as a result of any such action, the
Trustee, on behalf of the Noteholders, could, in the reasonable judgment of such
Servicer, made in accordance with the Servicing Standard, be considered to hold
title to, to be a "mortgagee-in possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of CERCLA or any
comparable law, unless such Servicer has previously determined in accordance
with the Servicing Standard, based on a Phase I Environmental Assessment (and
any additional environmental testing that such Servicer deems necessary and
prudent) of such Mortgaged Property conducted by an Independent Person who
regularly conducts Phase I Environmental Assessments and performed during the
twelve-month period preceding any such acquisition of title or other action,
that the Mortgaged Property is in material compliance with applicable
environmental laws and regulations or, if not, that it would maximize the
recovery to the Noteholders on a present value basis to acquire title to or
possession of the Mortgaged Property and to effect such compliance.

         (b) If the environmental testing contemplated by Section 4.2(b) above
establishes that any of the conditions set forth therein have not been satisfied
with respect to any Mortgaged Property securing a defaulted Loan, the Servicer
shall, in accordance with the Servicing

SERVICING AGREEMENT - PAGE 16
<PAGE>

Standard, prepare a written report to the Trustee and the Noteholders
summarizing the environmental condition of the Mortgaged Property and proposing
a course of action to pursue with respect to such Mortgaged Property. In the
event that such Servicer has not received through the trustee the written
objection to such proposed course of action of the Required Holders within
thirty (30) days of the Trustee's distributing such notice, such Servicer may
take such proposed action provided such proposed action is consistent with
Section 4.2(b) above.

         (c) Each Servicer shall report to the Trustee monthly in writing as to
any actions taken by such Servicer with respect to any Mortgaged Property as to
which the environmental testing contemplated in Section 4.2(b) above has
revealed that any of the conditions set forth thereon have not been satisfied,
in each case until the earliest to occur of satisfaction of all such conditions
and the release of the Lien of the related Mortgage on such Mortgaged Property.

         (d) If foreclosure has been approved as provided above, such Servicer
shall initiate or cause to be initiated the foreclosure action according to such
procedures as are authorized by Law and the practices in the locality where the
Mortgaged Property is located. In the event that title to the Mortgaged Property
is acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be taken in the name of the Trustee for the benefit of
the Holders.

         (e) Each Servicer shall have the right to determine, in accordance with
the Servicing Standard, the advisability of seeking to obtain a deficiency
judgment if the state in which the Mortgaged Property is located and the terms
of the Loan permit such an action and shall, in accordance with the Servicing
Standard, seek such deficiency judgment if it deems advisable.

         (f) After a Loan has become a Liquidated Loan, the applicable Servicer
shall promptly prepare and forward to the Trustee a liquidation report detailing
the Liquidation Proceeds received from the Liquidated Loan, expenses incurred
with respect thereto and any Realized Loss incurred in connection therewith.

         (g) If the requirements of Sections 4.2(b) and (c) hereof have been
satisfied, the Servicer may accept a deed in lieu of foreclosure, provided that
(i) marketable title as evidenced by a policy of title insurance can be conveyed
to and acquired by the Trustee or its designee; (ii) no cash consideration is to
be paid to the Obligor by the Trustee; and (iii) such Servicer has obtained from
the Obligor a written acknowledgment that the deed is being accepted as an
accommodation to the Obligor and on the condition that the Mortgaged Property
will be transferred to the Trustee or its designee free and clear of all claims,
liens, encumbrances, attachments, reservations or restrictions except for those
to which the Mortgaged Property was subject at the time the Mortgaged Property
became subject to the Mortgage. Title shall be conveyed directly from the
Obligor to the Trustee for the benefit of the Holders.

         (h) Such Servicer will indemnify and hold harmless the Trustee, the
Noteholders, the Beneficial Owners, the Supervisory Servicer and their
respective directors, officers, agents and employees from and against any and
all claims, demands, losses, penalties, liabilities, costs, damages, injuries
and expenses, including, without limitation, reasonable attorneys' fees and
expenses, suffered or sustained by such parties, either directly or indirectly,
relating to or arising out of the violation of an Environmental Law with respect
to a Mortgaged Property resulting from such Servicer's failure to perform its
obligations hereunder, including without limitation

SERVICING AGREEMENT - PAGE 17
<PAGE>

any expenses and other costs incurred in connection with the defense of any such
action, proceeding or claim. This obligation shall survive the termination of
this Agreement, the Indenture and the Supervisory Servicing Agreement or the
earlier resignation or removal of the Trustee or the Supervisory Servicer, as
the case may be.

         SECTION 4.3. FORECLOSURE EXPENSES. The applicable Servicer shall
prepare a written estimate of the amount of attorneys' fees, trustee's fees and
other costs in respect of any foreclosure or acquisition in lieu of foreclosure
and shall send copies of such estimate to the Trustee and the Noteholders. Such
Servicer shall arrange payment of attorneys' fees, trustees' fees and other
foreclosure costs at the commencement of foreclosure proceedings.

         Such Servicer may reimburse itself for any Servicing Expenses paid by
such Servicer, made in connection with such Loan or such foreclosure or other
action, out of amounts received by such Servicer in connection with liquidation
of the Loan, prior to remittance of any such amounts to the Lockbox Account or
the Collection Account.

         SECTION 4.4. TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY.
Upon the acquisition of REO Property by a Servicer by foreclosure or conveyance
in lieu of foreclosure, such Servicer shall notify the Trustee promptly that the
REO Property has been acquired and shall thereafter: (i) deliver the deed or
certificate of sale to the Trustee, or its nominee; (ii) manage, conserve and
protect the REO Property in the same manner and to such extent as is customary
in the locality where such REO Property is located including the rental of the
same, or any part thereof, as such Servicer deems to be in the best interest of
the Trustee for the benefit of the Holders; (iii) pay all costs such as taxes
and assessments relating to the REO Property; (iv) process any claims for
redemption and otherwise comply with any redemption procedures required by Law;
(v) sell or otherwise dispose of the REO Property and remit the proceeds to the
Trustee; and (vi) timely file any and all federal, state and local tax or
information returns or reports as are required as a result of the acquisition or
disposition of REO Property and perform any withholding required in connection
therewith. Such Servicer shall not acquire any REO Property relating to a
Charged-Off Loan that is required to be released from the lien of the Indenture
and disposed of by the Issuer on the next Payment Date. If any REO Property is
expected to be acquired, such Servicer shall inform the Issuer, the Noteholders
and the Trustee and the Issuer shall comply with Section 5.14 of the Indenture.

         Each Servicer shall manage, conserve, protect and operate each REO
Property for the Trustee solely for the purpose of its prudent and prompt
disposition and sale. Such Servicer shall, either itself or through an agent
selected by such Servicer, manage, conserve, protect and operate the REO
Property in the same manner that it manages, conserves, protects and operates
other foreclosed property for its own account and in the same manner that
similar property in the same locality as the REO Property is managed. Such
Servicer shall attempt to sell the same (and may temporarily rent the same) on
such terms and conditions as such Servicer deems to be in the best interest of
the Holders.

         (a) Until the REO Property is disposed of, such Servicer shall (i) take
appropriate action to secure the REO Property and maintain proper surveillance
over it; (ii) advance all costs such as taxes and assessments; (iii) maintain
the REO Property so as to preserve its value and prevent any additional deferred
maintenance; and (iv) submit monthly statements for services to

SERVICING AGREEMENT - PAGE 18
<PAGE>

the Trustee, together with additional documentation including statements of
income and expenses (accompanied by copies of paid invoices for every expense
item).

         (b) Until the REO Property is disposed of, such Servicer shall maintain
for such REO Property, a standard hazard insurance policy providing fire and
extended coverage in an amount equal to the full replacement cost of all
improvements on the Mortgaged Property, which requirement may be satisfied by a
master force placed or blanket insurance policy insuring against hazard losses.
If the Mortgaged Property is in an area identified in the Federal Register by
the Federal Emergency Management Agency as having special flood hazards (and
such flood insurance has been made available) such Servicer shall maintain a
flood hazard insurance policy meeting the requirements of the current guidelines
of the Federal Insurance Administration with an insurance carrier generally
acceptable to commercial mortgage lending institutions for properties, similar
to the REO Property in an amount representing coverage not less than the lesser
of (i) the full insurable value of such REO Property, or (ii) the maximum amount
of insurance which is available under the Flood Disaster Protection Act of 1973,
as amended from time to time. Such Servicer will also maintain comprehensive
general liability insurance and business interruption insurance (to the extent
applicable) in such amounts as are then customary for similarly situated
properties and businesses.

         (c) Such Servicer shall advance all funds necessary for the proper
operation, management, insurance and maintenance of the REO Property. On each
Determination Date Report, such Servicer shall schedule its reasonable expenses
with respect to any REO Property for the related Collection Period.

         (d) Such Servicer shall deposit all funds collected and received in
connection with the operation or disposition of any REO Property in the
Collection Account or the Lockbox Account no later than the Business Day
immediately following notice of receipt of such funds, net of funds necessary
for the proper operation, management, insurance and maintenance of the REO
Property.

         (e) If as of the date of disposition of any REO Property there remain
unpaid Servicing Fees with respect to the related Loan, such Servicer shall be
entitled to payment for the unpaid Servicing Fees and reimbursement for the
unreimbursed related Servicing Expenses from proceeds received in connection
with the disposition prior to remittance of any proceeds to the Trustee.

         (f) Disposition of REO Property shall be carried out by such Servicer
at such price and upon such terms and conditions as such Servicer, in its
judgment, believes to be in the best interests of the Holders, subject to and in
accordance with Section 4.2. Upon the sale of any Mortgaged Property, such
Servicer shall remit the net cash proceeds remaining after payment of expenses
of the sale to the Collection Account or the Lockbox Account.

         (g) If any Charged-Off Loan is expected to be released from the Lien of
the Indenture on the next Payment Date, such Servicer shall not commence a
foreclosure proceeding or accept a deed in lieu of foreclosure. Any
determination by such Servicer that a Loan is a Charged-Off Loan shall be made
in good faith.

SERVICING AGREEMENT - PAGE 19
<PAGE>

                                   ARTICLE V.

                       REPORTS TO BE PROVIDED BY SERVICERS

         SECTION 5.1. DETERMINATION DATE REPORTS.

         (a) Monthly Reports. Each month, not later than 12:00 noon Dallas time
on the third (3rd) Business Day preceding each Payment Date, the Servicers shall
deliver to the Trustee, in electronic format, the receipt and legibility of
which shall be confirmed telephonically, with hard copy thereof to be delivered
on the next Business Day, with copies to the Supervisory Servicer (if other than
the Trustee), the Noteholders and the Rating Agency, a Determination Date Report
in the form attached hereto as Exhibit C signed by a Servicing Officer stating
the date (day, month and year), referring to this Agreement by name and date and
stating, as of the close of business on the immediately preceding Determination
Date:

                           (i) the aggregate amount of all funds received in
                  respect of scheduled principal payments on the Loans during
                  the related Collection Period;

                           (ii) the aggregate amount of interest received on the
                  Loans during the related Collection Period;

                           (iii) the number and Loan Principal Balances of all
                  Loans which were the subject of Principal Prepayments during
                  the related Collection Period and the aggregate amount of
                  Principal Prepayments received with respect to the Loans
                  during such Collection Period;

                           (iv) the aggregate Loan Principal Balance of the
                  Loans as of the related Determination Date, stating any REO
                  Properties separately;

                           (v) the loan number and the aggregate number and
                  aggregate Loan Principal Balance of Loans delinquent
                  thirty-one (31) days to fifty-nine (59) days, sixty (60) days
                  to eighty-nine (89) days, ninety (90) to one hundred nineteen
                  (119) days, one hundred twenty (120) to one hundred forty-nine
                  (149) days, one hundred fifty (150) to one hundred
                  seventy-nine (179) days and one hundred eighty (180) or more
                  days as of the Determination Date;

                           (vi) the loan number and the aggregate number and
                  aggregate Loan Principal Balance of Loans which were
                  Charged-Off Loans as of the Determination Date and the related
                  recovery thereon;

                           (vii) the number and aggregate Loan Principal Balance
                  of Loans (A) which will be released from the Lien of the
                  Indenture during the related Collection Period or on the
                  related Payment Date, (B) which have been repurchased
                  including the Takeout Price therefor and (C) which have been
                  substituted for a Substitute Loan including any Asset
                  Substitution Shortfall therefor;

SERVICING AGREEMENT - PAGE 20
<PAGE>

                           (viii) the number and aggregate Loan Principal
                  Balance of Loans which were in foreclosure as of the related
                  Determination Date;

                           (ix) with respect to any Loan that became an REO
                  Property during the related Collection Period, (a) the Loan
                  Principal Balance of such Loan as of the date title to such
                  REO Property was acquired, (b) the book value and length of
                  time held of each REO Property as of the related Determination
                  Date, and (c) the income and expenses incurred by the
                  applicable Servicer in connection with any REO Property during
                  the related Collection Period;

                           (x) the amount of any Realized Losses incurred during
                  the related Collection Period;

                           (xi) the cumulative Realized Losses since the Closing
                  Date;

                           (xii) the Required Principal Distribution Amount for
                  the related Payment Date and information as to the calculation
                  of such amount;

                           (xiii) the Regular Interest Distribution Amount for
                  the related Payment Date and information as to the calculation
                  of such amount;

                           (xiv) the difference between the Interest
                  Distribution Amount minus the Regular Interest Distribution
                  Amount, if any, and information as to the calculation of such
                  amount;

                           (xv) the Outstanding Note Amount;

                           (xvi) the Servicing Fee, Supervisory Servicer's Fee,
                  if any, and Trustee's Fee due on the related Payment Date;

                           (xvii) the amount of all Servicing Expenses paid by
                  each Servicer during such Collection Period and any and all
                  other amounts deducted by each Servicer in accordance with the
                  terms hereof from Collections received by each Servicer prior
                  to remittance thereof to the Lockbox Account and a detailed
                  report describing the type and amount of all such Servicing
                  Expenses and other deductions;

                           (xviii) information as to any Redemption Trigger
                  Event or Event of Default;

                           (xix) the Specified Spread Account Requirement,
                  including the beginning balance of the Spread Account,
                  additions thereto and transfers therefrom during the related
                  Collection Period; and

                           (xx) such other information as the Trustee, the
                  Noteholders or the Rating Agency may reasonably require.

SERVICING AGREEMENT - PAGE 21
<PAGE>

         To the extent that there are inconsistencies between the electronic
version of the Determination Date Report and the hard copy thereof, the Trustee
shall be entitled to rely upon the electronic version.

         (b) Annual Statement. Within ninety (90) days after the end of each
calendar year, the Servicers shall furnish to the Trustee and the Noteholders
such information in the form attached hereto as Exhibit D as is reasonably
necessary to provide to the Holders a statement containing the aggregate amount
of principal of and interest on the Notes paid during the prior calendar year,
aggregated for such calendar year or applicable portion thereof during which
such Person was a Holder. Such obligation of the Servicers shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Servicers pursuant to any requirements of the Code as
from time to time are in force.

         (c) Computer Data. Prior to the Closing Date the Servicers shall
provide the Supervisory Servicer with all data on the Servicers' computerized
servicing system relating to the Loans in an electronically readable form
specified by the Supervisory Servicer and shall update such data at least
monthly.

         (d) Other Reports. The Servicers shall furnish to the Trustee, the
Noteholders, the Rating Agency and the Supervisory Servicer, during the term of
this Agreement, such periodic, special or other reports, Officer's Certificates,
data relating to the Loans or information, whether or not provided for herein,
as shall be reasonably requested, all such reports or information to be provided
by and in accordance with such applicable instructions and directions as the
Trustee, the Noteholders, the Rating Agency or the Supervisory Servicer may
reasonably require; provided, however, the Servicers shall be reimbursed for the
reasonable cost of providing such additional reports.

         SECTION 5.2. REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY. Each year the Servicers shall make any reports of foreclosures and
abandonments of any Mortgaged Property required by the Code.

         SECTION 5.3. QUARTERLY STATEMENT AS TO COMPLIANCE. The Servicers will
deliver to the Trustee, the Noteholders, the Rating Agency and the Supervisory
Servicer, quarterly, no later than each April 15, July 15, October 15 and
January 15, for each quarterly period ending on each March 31, June 30,
September 30 and December 31, commencing on October 15, 2003, an Officer's
Certificate in the form attached hereto as Exhibit E stating that (a) the
Servicers have fully complied with the provisions of this Agreement, (b) a
review of the activities of the Servicers during the preceding quarter and of
the Servicers' performance under this Agreement has been made under such
officer's supervision and (c) to the best of such officer's knowledge, based on
such review, the Servicers have fulfilled all of their obligations, duties and
responsibilities under this Agreement throughout such quarterly period (or, with
respect to the first such report, since the Closing Date) and no Servicer
Default exists, or, if there has been a default or failure in the fulfillment of
any such obligation, specifying each such default or failure known to such
officer and the nature and status thereof and the action being taken by the
applicable Servicer to cure such default.

SERVICING AGREEMENT - PAGE 22
<PAGE>

         SECTION 5.4. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
The Servicers at their expense shall cause a nationally recognized firm of
independent certified public accountants to furnish a statement to the Trustee,
the Supervisory Servicer, the Noteholders and the Rating Agency on or before May
1 of each year, commencing on May 1, 2004, to the effect that, with respect to
the most recently ended fiscal year, such firm has examined certain records and
documents relating to the Servicers' performance of their servicing obligations
and that, on the basis of such examination, conducted substantially in
compliance with the Uniform Single Attestation Program for Mortgage Bankers,
such firm is of the opinion that such servicing has been conducted substantially
in compliance in all material respects with the requirements of the standard
servicing procedures outlined in the Uniform Single Attestation Program for
Mortgage Bankers, except for such exceptions noted therein. In the event such
firm requires the Trustee or the Supervisory Servicer to agree to the procedures
performed by such firm, the Servicers shall direct the Trustee and the
Supervisory Servicer in writing to so agree; it being understood and agreed that
the Trustee and the Supervisory Servicer will deliver such letter of agreement
in conclusive reliance upon the direction of the Servicers, and each of the
Trustee and the Supervisory Servicer makes no independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.

         SECTION 5.5. SERVICERS' FINANCIAL STATEMENTS; ANNUAL CERTIFICATION.
Within one hundred twenty (120) days after the end of each fiscal year beginning
with the fiscal year ending December 31, 2003, each Servicer shall submit to the
Trustee, the Noteholders and the Rating Agency a copy of its annual audited
financial statements or in the event the Servicers are not PMC and/or PMCT, a
copy of the annual audited consolidated financial statement of its parent.
Within forty-five (45) days after the end of each of the first three (3) fiscal
quarters of each fiscal year beginning with the quarter ending June 30, 2003,
each Servicer shall submit to the Trustee, the Noteholders and the Rating Agency
a copy of its quarterly financial statements. This Section 5.5 notwithstanding,
if the Supervisory Servicer assumes the role of Servicer, it shall not be
obligated to submit copies of its quarterly financial statements. Such financial
statements shall, to the extent required by the Securities Exchange Act of 1934,
as amended, whether or not the Servicer is subject to such Act, include a
balance sheet, income statement, statement of retained earnings, beneficiaries'
(or shareholders') equity, statement of cash flows and all related notes and
schedules and shall be in comparative form.

         Contemporaneously with the submission of the financial statements
required by the preceding paragraph, the Servicers shall deliver to the Trustee,
the Noteholders and the Rating Agency an Officer's Certificate in the form
attached hereto as Exhibit F to the effect that:

         (a) such officer has confirmed that the Fidelity Bond, the Errors and
Omissions Insurance Policy and any other bonds or insurance required by Section
2.4 hereof are in full force and effect; and

         (b) the representations and warranties of such Servicer set forth in
Section 2.1 are true and correct in all material respects as if made on the date
of such certification.

         Such Servicer shall also furnish and certify such other information as
to its organization, activities and personnel as the Trustee, the Noteholders,
the Companies, the Rating Agency or the Supervisory Servicer may reasonably
request from time to time.

SERVICING AGREEMENT - PAGE 23
<PAGE>

                                   ARTICLE VI.

                                    DEFAULTS

         SECTION 6.1. SERVICER DEFAULTS. The happening of any one or more of the
following events shall constitute a Servicer Default hereunder:

         (a) Any failure by the Servicers to make any payment, deposit, advance
or transfer of funds required to be paid, deposited, advanced or transferred
under the terms of this Agreement, and such failure continues unremedied for
five (5) Business Days after discovery by the Servicers of such failure or
receipt by the Servicers of notice of such failure;

         (b) Failure on the part of the Servicers duly to observe or perform in
any material respect any of their covenants or agreements contained in this
Agreement or the Supervisory Servicing Agreement which continues unremedied for
thirty (30) days after the earlier to occur of the Servicers obtaining actual
knowledge of such failure or the Servicers' receipt of written notice of such
failure or breach as the case may be; provided, however, if such failure shall
be of a nature that it cannot be cured within thirty (30) days, such failure
shall not constitute a Servicer Default hereunder if within such 30-day period
the Servicers give notice to the Trustee and the Supervisory Servicer of the
corrective action it proposes to take, which corrective action is agreed in
writing by the Trustee to be satisfactory and the Servicers shall thereafter
pursue such corrective action diligently until such default is cured but in no
event longer than ninety (90) days;

         (c) A decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against a Servicer, and such
decree or order shall have remained in force undischarged or unstayed for a
period of ninety (90) days;

         (d) A Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to such Servicer or
of or relating to all or substantially all of its property;

         (e) A Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payments of its obligations;

         (f) A Servicer shall cease to be an Eligible Servicer;

         (g) A material adverse change occurs in the financial condition of a
Servicer, which change materially impairs the ability of the Servicer to perform
its obligations under this Agreement; or

SERVICING AGREEMENT - PAGE 24
<PAGE>

         (h) Any representation or warranty made by a Servicer in any
Transaction Document proves to have been incorrect in any material respect when
made, which has a material adverse effect on the Noteholders and which continues
to have a material adverse effect or be incorrect in any material respect for a
period of thirty (30) days after written notice of such inaccuracy, requiring it
to be remedied, has been given to the Servicers by the Trustee, the Supervisory
Servicer or any Noteholder; provided, however, if such inaccuracy is of a nature
that it cannot be remedied within such 30-day period and the Servicer gives
notices to the Trustee and the Supervisory Servicer of the corrective action it
proposes to take, which corrective action is agreed in writing by the Trustee to
be satisfactory and the Servicer shall thereafter pursue such corrective action
diligently until such default is cured but in no event longer than ninety (90)
days from the date of such notice.

         SECTION 6.2. NOTICE OF SERVICER DEFAULT. In the case of a Servicer
Default referred to in Section 6.1 hereof or upon any termination of the
Servicers pursuant to Article VII hereof, the Trustee shall immediately notify
the Supervisory Servicer by telephone or telecopy (telephonic notice to be
followed by written notice within one Business Day) and shall promptly notify
the Rating Agency and the Holders in writing.

         SECTION 6.3. REMEDIES. So long as any such Servicer Default shall not
have been remedied within any applicable cure period, the Trustee may, and at
the written direction of the Required Noteholders shall, by notice in writing
specifying the termination date to the Servicers and the Supervisory Servicer
(and to the Trustee if given by the Holders), terminate all of the rights and
obligations of the Servicers under this Agreement and in and to the Loans and
the proceeds thereof. On or after the receipt by the Servicers of such written
notice, all authority and power shall pass to and be vested in the Supervisory
Servicer pursuant to and under this Section; and, without limitation, the
Supervisory Servicer is hereby authorized and empowered to execute and deliver,
on behalf of the Servicers, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the purposes of such notice of termination,
whether to complete the transfer and assignment of the Loans and related
documents or otherwise. All reasonable costs and expenses (including, without
limitation, attorneys' fees) of the Trustee, the Supervisory Servicer or the
Servicers incurred in connection with such termination and transfer will be at
the expense of the Servicers. The Servicers agree to cooperate with the
Supervisory Servicer and the Trustee in effecting the termination of the
Servicers' responsibilities and rights hereunder, including, without limitation,
the transfer to the Supervisory Servicer for administration by it of any cash
amounts held by the Servicers or thereafter received relating to the Loans and
all Servicer Loan Files. In addition to any other amounts which are then, or,
notwithstanding the termination of their activities as Servicers, may become
payable to the Servicers under this Agreement, the applicable Servicer shall be
entitled to receive out of any delinquent payment on account of interest on a
Loan due during a Collection Period prior to the notice of termination received
pursuant to this Section 6.3 and received after such notice, that portion of
such payment which it would have received pursuant to Section 3.8 hereof if such
notice had not been given.

         SECTION 6.4. ADDITIONAL REMEDIES OF TRUSTEE UPON SERVICER DEFAULTS.
Upon any Servicer Default, the Trustee, in addition to the rights specified in
Section 6.3 hereof, shall have the right, in its own name and as Trustee, to
take all actions now or hereafter existing at law, in

SERVICING AGREEMENT - PAGE 25
<PAGE>

equity or by statute to enforce its rights and remedies and to protect the
interests, and enforce the rights and remedies, of the Noteholders (including
the institution and prosecution of all judicial, administrative and other
proceedings and the filings of proofs of claim and debt in connection
therewith). No remedy provided for by this Agreement shall be exclusive of any
other remedy, and each and every remedy shall be cumulative and in addition to
any other remedy and no delay or omission to exercise any right or remedy shall
impair any such right or remedy or shall be deemed to be a waiver of any
Servicer Default.

         SECTION 6.5. SUPERVISORY SERVICER TO ACT; APPOINTMENT OF SUCCESSOR. On
the effective date of any resignation of the Servicers pursuant to Section 7.1
hereof or on the date the Servicers are removed as servicer pursuant to this
Article VI, the Supervisory Servicer (or any successor appointed by the
Supervisory Servicer pursuant to the Supervisory Servicing Agreement) hereof
shall be the successor in all respects to the Servicers in their capacity as
servicers under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicers by the terms and provisions hereof in
accordance with and subject to the terms and conditions of the Supervisory
Servicing Agreement; provided, however, that the Supervisory Servicer or
successor Servicer shall not be liable for any acts or omissions of the
Servicers occurring prior to such succession or for any breach by the Servicers
of any of their representations or warranties contained herein or in any related
document or agreement. The Supervisory Servicer (or other successor) shall
assume all of the rights and obligations of the Servicers in accordance with the
terms and conditions of the Supervisory Servicing Agreement which shall control
over any provisions herein covering the same subject matter. The Servicers
shall, upon request of the Trustee or the Supervisory Servicer but at the
expense of the Servicers, deliver to the Supervisory Servicer (or other
successor), all Servicer Loan Files, documents and records (including computer
tapes and diskettes) relating to the Loans and an accounting of any amounts
collected and held by the Servicers and otherwise use their reasonable efforts
to effect the orderly and efficient transfer of servicing rights and obligations
to the assuming party.

         The Servicers agree to cooperate with the Trustee and the Supervisory
Servicer or any other successor servicer in effecting the termination of the
Servicers' servicing responsibilities and rights hereunder and shall promptly
provide the Supervisory Servicer or such successor servicer, as applicable, all
documents and records reasonably requested by it to enable it to assume the
Servicers' functions hereunder and shall promptly also transfer to the
Supervisory Servicer or such successor servicer, as applicable, all amounts
which then have been or should have been deposited in the Lockbox Account by the
Servicers or which are thereafter received with respect to the Loans. Neither
the Trustee, the Supervisory Servicer nor any other successor servicer shall be
held liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicers to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having jurisdiction
over the Servicers hereunder. The Supervisory Servicer shall provide written
notice of each appointment of a successor to the Servicers hereunder, other than
the Supervisory Servicer, to each Holder and the Rating Agency, and the Trustee.

         SECTION 6.6. WAIVER OF DEFAULTS. The Trustee (with the written consent
of the Required Noteholders and with notice to the Rating Agency) may, on behalf
of all Noteholders, waive any events permitting removal of the Servicers as
servicers pursuant to this Article VI.

SERVICING AGREEMENT - PAGE 26
<PAGE>

Upon any waiver of a past default, such default shall cease to exist, and any
Servicer Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereto except to the extent
expressly so waived.

                                  ARTICLE VII.

                                   TERMINATION

         SECTION 7.1. SERVICERS NOT TO RESIGN. The Servicers shall not assign
this Agreement or resign from the obligations and duties hereby imposed on them
except by mutual consent of the Servicers and the Trustee (with the Required
Noteholders' consent), or upon the determination that the Servicers' duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Servicers. Any such determination permitting the
resignation of the Servicers shall be evidenced by a Certificate of an
Authorized Officer of the Servicers to such effect delivered to the Trustee, the
Noteholders, the Supervisory Servicer and the Rating Agency. No such resignation
shall become effective until a successor has assumed the Servicers'
responsibilities and obligations hereunder in accordance with Section 6.5.

         SECTION 7.2. TERM OF AGREEMENT. This Agreement shall continue in
existence and effect until the earlier of (a) the later of the final payment or
other liquidation of the last Loan or the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Loan and the remittance
of all funds due thereunder, (b) the payment in full of the Notes in accordance
with the Indenture, in addition to all other amounts payable thereunder, and the
discharge of the Indenture in accordance with the terms thereof, or (c) mutual
consent of the Servicers, the Trustee, the Supervisory Servicer and all Holders
in writing.

                                  ARTICLE VIII.

                            MISCELLANEOUS PROVISIONS

         SECTION 8.1. AMENDMENT. This Agreement may be amended from time to time
by the Servicers, the Issuer, the Supervisory Servicer and the Trustee (acting
at the written direction of the Required Noteholders) by written agreement, with
thirty (30) days prior written notice to the Rating Agency. Notwithstanding the
foregoing, this Agreement may be amended without the written direction of the
Required Noteholders to modify any provisions of this Agreement required by the
Rating Agency to maintain the rating of the Notes or to cure any ambiguity,
defect, omission, conflict or inconsistency in this Agreement or between the
terms of this Agreement and any other document executed or delivered in
connection herewith. This Agreement may also be amended without the written
direction of the Required Noteholders, so long as such amendment does not
materially adversely affect the rights of the Noteholders (which may be
evidenced by an opinion of counsel delivered to the parties hereto).

         SECTION 8.2. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL

SERVICING AGREEMENT - PAGE 27
<PAGE>

BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES
OF CONFLICTS OF LAW.

         SECTION 8.3. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be duly given if addressed to the appropriate
Notice Address and delivered by hand or sent by nationally recognized express
courier, or mailed by registered mail, postage prepaid, or transmitted by
telecopy, and shall be effective upon receipt, except when telecopied, in which
case, any such communication shall be effective upon telecopy against receipt of
answer back or written confirmation thereof.

         SECTION 8.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this
Agreement. The parties hereto further agree that the holding by any court of
competent jurisdiction that any remedy pursued by the Trustee hereunder is
unavailable or unenforceable shall not affect in any way the ability of the
Trustee to pursue any other remedy available to it.

         SECTION 8.5. NO PARTNERSHIP. Nothing herein contained shall be deemed
or construed to create a partnership or joint venture between the parties
hereto, and the services of the Servicers shall be rendered as independent
contractors and not as agents for the Trustee.

         SECTION 8.6. COUNTERPARTS. This Agreement may be executed in one or
more counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.

         SECTION 8.7. SUCCESSORS AND ASSIGNS; BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the Servicers, the Issuer, the
Supervisory Servicer, the Trustee and their respective successors and assigns.
Each Servicer acknowledges and consents to the assignment to the Trustee for the
benefit of the Noteholders of all of the Issuer's rights and the delegation of
any of the Issuer's obligations hereunder pursuant to the Indenture.

         SECTION 8.8. NOTIFICATION TO RATING AGENCY AND NOTEHOLDERS. The Trustee
shall give prompt notice to the Rating Agency and the Noteholders of the
occurrence of any of the following events of which it has received notice: (a)
any modification or amendment to this Agreement, the Indenture or any other
Transaction Documents, (b) any proposed removal, replacement, resignation or
change of the Trustee or the Servicers, (c) any Event of Default under the
Indenture or any Servicer Default and (d) the final payment in full of the
Notes. Whenever the terms of this Agreement require that notice or reports be
given to the Rating Agency or the Noteholders, the Person to provide such notice
or reports shall first give them to the Trustee who shall provide them to the
Rating Agency or the Noteholders, as applicable. Additionally, the Trustee, upon
receipt, shall provide copies to the Rating Agency, the Companies (to the extent
the Companies are not then the Servicers) and the Noteholders of all amendments,
compliance reports, Determination Date Reports, financial statements, operating
reports, environmental reports and any and all other reports received by the
Trustee from the

SERVICING AGREEMENT - PAGE 28
<PAGE>

Servicers, the Issuer or the Supervisory Servicer from time to time to the
extent such reports have not been otherwise forwarded to the Rating Agency, the
Companies and the Noteholders pursuant to the provisions of this Agreement or
the other Transaction Documents.

         SECTION 8.9. INDULGENCES; NO WAIVERS. Neither the failure nor any delay
on the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.

         SECTION 8.10. TITLES NOT TO AFFECT INTERPRETATION. The titles of
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.

         SECTION 8.11. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof.

         SECTION 8.12. RECORDATION OF AGREEMENT. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or the comparable
jurisdictions in which any Mortgaged Property is situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicers and at their expense upon the written request of the
Trustee.

         SECTION 8.13. FURTHER ASSURANCES. Notwithstanding any other provision
of this Agreement, neither Trustee nor the Supervisory Servicer shall have any
obligation to consent to any amendment or modification of this Agreement unless
it has been provided reasonable security or indemnity against its out-of-pocket
expenses (including reasonable attorneys' fees) to be incurred in connection
therewith by the person requesting the amendment. To the extent permitted by
law, each Servicer agrees that it will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
instruments as the Trustee may reasonably request to effectuate the intention of
or facilitate the performance of this Agreement.

         SECTION 8.14. FORCE MAJEURE. Notwithstanding anything to the contrary
otherwise contained herein, each Servicer will be excused from the performance
required of it under this Agreement and under each other Transaction Document
for any period, and to the extent, that such performance is prevented, hindered,
delayed, in whole or in part, by any circumstances beyond its reasonable
control, including, without limitation, any fire or other casualty, failure of
power, telecommunications or other equipment, strike, lockout or other labor
trouble, court order, acts of governmental bodies, banking moratorium, embargo,
sabotage, confiscation,

SERVICING AGREEMENT - PAGE 29
<PAGE>

condemnation, riot, civil disturbance, insurrection, act of terrorism, war or
other activity of armed forces or other similar reason beyond the control of the
Servicers.

            [THE IMMEDIATELY FOLLOWING PAGE CONTAINS THE SIGNATURES.]

SERVICING AGREEMENT - PAGE 30
<PAGE>

         IN WITNESS WHEREOF, the Issuer, the Servicers, the Supervisory Servicer
and the Trustee have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.

                                       PMC CAPITAL, INC., as a Servicer
                                       PMC COMMERCIAL TRUST, as a Servicer

                                       By: /s/ Jan F. Salit
                                           -------------------------------------
                                           Jan F. Salit
                                           Executive Vice President

                                       THE BANK OF NEW YORK,
                                       as Trustee

                                       By: /s/ Eric A. Lindahl
                                           -------------------------------------
                                           Name: Eric A. Lindahl
                                                 -------------------------------
                                           Title: Agent
                                                  ------------------------------

                                       THE BANK OF NEW YORK,
                                       as Supervisory Servicer

                                       By: /s/ Eric A. Lindahl
                                           -------------------------------------
                                           Name: Eric A. Lindahl
                                                 -------------------------------
                                           Title: Agent
                                                  ------------------------------

                                       PMC JOINT VENTURE, L.P. 2003-1,
                                       as Issuer

                                       By: PMC Joint Venture LLC 2003-1
                                           Its General Partner

                                       By: /s/ Jan F. Salit
                                           -------------------------------------
                                           Jan F. Salit
                                           Executive Vice President

SERVICING AGREEMENT - PAGE 31<PAGE>
                                                                     EXHIBIT 4.3

                                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
<PAGE>
                                                                     Exhibit 4.3

                                 AMENDMENT NO. 1
                                       TO
                                RIGHTS AGREEMENT

This AMENDMENT NO. 1 TO RIGHTS AGREEMENT (the "Amendment") is entered into as of
August 27, 2003, 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"). Capitalized terms not otherwise defined
herein shall have the meanings given them in the Rights Agreement dated as of
December 10, 2001, between the parties hereto.

                                    RECITALS

WHEREAS, the Board has determined that it is in the best interest of the Company
to amend the Rights Agreement to modify the definition of Acquiring Person to
exclude a certain stockholder of the Company from such definition in specified
circumstances; and

WHEREAS, the Company has determined that the Rights Agreement be amended in
accordance with Section 27 of the Rights Agreement, as set forth herein, and the
Rights Agent is hereby directed to join in the amendment to the Rights Agreement
as set forth herein.

                                    AGREEMENT

NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:

1. Section 1(a) of the Rights Agreement is hereby amended to read in its
entirety as follows:

                  "(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, (iv) any Person organized, appointed or
         established by the Company for or pursuant to the terms of any such
         plan, or (v) an Exempted Person. 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 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
<PAGE>
         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), 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." "

2. Section 1 of the Rights Agreement is hereby amended by adding the following
section:

         "(oo)"Exempted Person" shall mean Pillar Investment Limited, together
              with all of its Affiliates and Associates ("Pillar"), unless and
              until the earlier of such time as Pillar, directly or
              indirectly, becomes the Beneficial Owner of (x) more than
              11,000,000 shares of Common Stock (subject to appropriate
              adjustment for stock splits, stock dividends, recapitalizations,
              reclassifications and other similar events affecting the Common
              Stock) or (y) less than 14% of the Common Stock then
              outstanding, in either of which event, Pillar immediately shall
              cease to be an Exempted Person."

3. Section 3(a) of the Rights Agreement is hereby amended by deleting the first
sentence of Section 3(a) in its entirety and inserting in lieu thereof the
following sentence:

         "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, or in the
         case of an Exempted Person, more than 11,000,000 shares of Common Stock
         (subject to appropriate adjustment for stock splits, stock dividends,
         recapitalizations, reclassifications and other similar events affecting
         the Common Stock)
<PAGE>
         (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)."

4. Except as amended hereby, the Rights Agreement shall remain unchanged and
shall remain in full force and effect.

5. This Amendment may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.

6. This Amendment 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 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.

                  [remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by
their respective duly authorized representatives as of the date first above
written.

HYBRIDON, INC.

By:      /s/ Stephen R. Seiler

Name:    Stephen R. Seiler

Title:   Chief Executive Officer

MELLON INVESTORS SERVICES LLC,
as Rights Agent

By:      /s/ Lynore LeConche

Name:    Lynore LeConche

Title:   Vice President

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