SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-4

ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)

HYBRIDON, INC.
(NAME OF ISSUER AND PERSON FILING STATEMENT)

9% CONVERTIBLE SUBORDINATED NOTES DUE 2004
(TITLE OF EACH CLASS OF SECURITIES)

44860M-AA-6; -AB-4; -AC-2; -AD-0; -AE-8; -AF-5
(CUSIP NUMBERS OF EACH CLASS OF SECURITIES)

E. ANDREWS GRINSTEAD, III
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
620 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
(617) 528-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON FILING STATEMENT)

With Copy to:

MONICA C. LORD, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100

FEBRUARY 6, 1998
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)

CALCULATION OF FILING FEE
TRANSACTION VALUATION (1)                            AMOUNT OF FILING FEE (2)
- -------------------------                            ------------------------
$51,594,664                                           $10,319

(1)  Solely for the  purpose of  calculating  the  filing fee and,  as  computed
pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended,
and Rule  0-11(b)(1)  thereunder,  the  transaction  value equals the  aggregate
principal  amount of and accrued but unpaid interest on the securities  proposed
to be exchanged  pursuant to the Offer  described in the Offer to Exchange filed
as an Exhibit hereto.

(2)  Represents 1/50th of 1% of the transaction value as calculated above.

[_] Check box if any part of the fee is offset as  provided  by Rule  0-11(a)(2)
and  identify  the filing with which the  offsetting  fee was  previously  paid.
Identify the previous filing by registration  statement  number,  or the Form or
Schedule and the date of its filing.

Amount Previously Paid:                     Filing Party: 
-------------                     ----------------------

Form or Registration No.:                   Date Filed:
-----------                     ----------------------

ITEM 1. SECURITY AND ISSUER.

(a) Incorporated herein by reference to the information appearing under
the caption "Certain  Information  Concerning Hybridon" in the Offer to
Exchange,  dated  February  6, 1998,  filed as Exhibit  9(a)(1) to this
Issuer  Tender  Offer  Statement  on  Schedule  13E-4  (the  "Offer  to
Exchange").

(b)  Incorporated  herein by reference to the information  appearing on
the  front  cover of the  Offer  to  Exchange,  and to the  information
appearing   under   the   captions   "Introduction,"   "Terms   of  the
Offer--Amount  of  Notes;  Consideration;   Expiration  Date;  Interest
Payment" and "Transactions and Agreements  Concerning the Notes" in the
Offer to Exchange.

(c) Incorporated herein by reference to the information appearing under
the caption  "Price Range of Hybridon  Common Stock;  Dividends" in the
Offer to Exchange.

(d) Not applicable.

ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) Incorporated herein by reference to the information appearing under
the caption "Source and Amount of Consideration" in the Offer to Exchange.

(b) Not applicable.

ITEM 3.  PURPOSE OF THE  TENDER  OFFER AND PLANS OR  PROPOSALS  OF THE ISSUER OR
AFFILIATE.

Incorporated herein by reference to the information  appearing under the caption
"Purpose of the Offer; Certain Effects of the Offer" in the Offer to Exchange.

ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.

Incorporated herein by reference to the information  appearing under the caption
"Transactions and Agreements Concerning the Notes" in the Offer to Exchange.

ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.

Incorporated herein by reference to the information appearing under the captions
"Transactions  and  Agreements  Concerning  the  Notes,"  "Purpose of the Offer;
Certain Effects of the Offer" and "Fees and Expenses" in the Offer to Exchange.

ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

Incorporated herein by reference to the information  appearing under the caption
"Fees and Expenses" in the Offer to Exchange.

ITEM 7. FINANCIAL INFORMATION.

(a)  Incorporated  herein  by  reference  to the  financial  statements
included in the Annual Report on Form 10-K for the year ended  December
31, 1996 of Hybridon,  Inc.  ("Hybridon"),  and the Quarterly Report on
Form  10-Q  for  the  quarterly  period  ended  September  30,  1997 of
Hybridon,  each of which is attached  hereto as an Exhibit,  and to the
information   appearing  under  the  caption   "Selected   Consolidated
Financial Information" in the Offer to Exchange.

(b) Incorporated herein by reference to the information appearing under
the  caption  "Selected  Consolidated  Financial  Information"  in the  Offer to
Exchange.

ITEM 8. ADDITIONAL INFORMATION.

(a)  Not applicable.

(b) Not applicable.

(c) Not applicable.

(d) Not applicable.

(e) Incorporated herein by reference to the information appearing under
the captions "Certain Information Concerning Hybridon," "Purpose of the
Offer;   Effects  of  the  Offer"  and   "Transactions  and  Agreements
Concerning the Notes" and also see Exhibits 9(a)(1) and 9(a)(2).

2

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

EXHIBIT NO.                                         DESCRIPTION
- -----------                                         -----------

9(a)(1)            Offer to Exchange, dated February 6, 1998.
9(a)(2)            Form of Exchange Agreement and Letter of Transmittal.
9(a)(3)            Form of Notice of Guaranteed Delivery.
9(a)(4)            Form of press release, dated February 6, 1998, to be issued
by Hybridon.
9(b)               Not applicable.
9(c)               Not applicable.
9(d)               Not applicable.
9(e)               Not applicable.
9(f)               Not applicable.
9(g)(1)            Annual Report on Form 10-K for the fiscal year ended December
31, 1996 filed by Hybridon, incorporated by reference to 
Annex D attached to the Offer to Exchange.
9(g)(2)            Quarterly Report on Form 10-Q for the fiscal quarter ended 
September 30, 1997 filed by Hybridon, incorporated by 
reference to Annex E attached to the Offer to Exchange.
9(g)(3)            Consent of Arthur Andersen LLP.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.

Dated:  February 6, 1998

HYBRIDON, INC.

By:  /s/ E. Andrews Grinstead III
------------------------------
Name: E. Andrews Grinstead III
Title: Chairman, President and
Chief Executive Officer

3

EXHIBIT 9(a)(1)

HYBRIDON, INC.

OFFER TO EXCHANGE FOR SERIES A PREFERRED STOCK AND
WARRANTS OF HYBRIDON, INC. ("HYBRIDON")
ANY AND ALL OUTSTANDING PRINCIPAL AMOUNT OF
AND ACCRUED BUT UNPAID INTEREST ON 9% CONVERTIBLE
SUBORDINATED NOTES DUE 2004 OF HYBRIDON

THE OFFER AND  WITHDRAWAL  RIGHTS WILL EXPIRE AT 12:00  MIDNIGHT,  NEW YORK CITY
TIME, ON MARCH 9, 1998, UNLESS THE OFFER IS EXTENDED.

Hybridon, Inc., a Delaware corporation ("Hybridon"),  invites the holders of its
9% Convertible  Subordinated  Notes due 2004 (the "Notes") to tender any and all
of the principal  amount of and accrued but unpaid  interest on  (together,  the
"Exchange  Value") their Notes in exchange (the "Exchange") for (i) 10 shares of
Series A  Preferred  Stock,  par value $.01 per share,  of  Hybridon  ("Series A
Preferred  Stock") and (ii)  warrants  ("Exchange  Warrants")  to purchase  such
number of shares  of common  stock,  par  value  $.001 per  share,  of  Hybridon
("Hybridon  Common  Stock")  equal to 15% of the  number of  shares of  Hybridon
Common Stock into which such Series A Preferred  Stock would be  convertible  at
the Exercise Price (as defined below),  for each $1,000 in Exchange Value of the
Notes  tendered,  upon the terms and subject to the conditions set forth in this
Offer to Exchange and in the Exchange  Agreement and Letter of Transmittal  (the
"Letter of  Transmittal").  See  "Purpose of the Offer;  Certain  Effects of the
Offer."  The  Offer  is  open  to  all  holders  of  Notes.  See  "Terms  of the
Offer--Consideration  Being Offered." Hybridon will enter into an agreement with
respect to the  registration  under the  Securities Act of 1933, as amended (the
"Securities Act"), of the shares of Series A Preferred Stock issued in the Offer
and shares of Hybridon Common Stock into which such Series A Preferred Stock and
the Exchange  Warrants  issued in the Offer are  convertible  and certain  other
matters. See "Terms of the  Offer--Consideration  Being Offered" and "Purpose of
the Offer;  Certain Effects of the  Offer--Ancillary  Agreements." This Offer to
Exchange,  together  with the Letter of  Transmittal,  constitutes  the "Offer."
Hybridon  will  exchange all Exchange  Value of Notes  validly  tendered and not
withdrawn, upon the terms and subject to the conditions of the Offer. See "Terms
of  the   Offer--Extension;   Termination;   Amendments"   and   "Terms  of  the
Offer--Certain Conditions of the Offer."

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

ANY TENDER OF NOTES WHICH INVOLVES DENOMINATIONS OF LESS THAN $1,000 IN EXCHANGE
VALUE  THEREOF WILL BE EXCHANGED ON A PRO RATA BASIS,  EXCEPT TO THE EXTENT THAT
SUCH  PRORATION  WOULD RESULT IN THE ISSUANCE OF A FRACTIONAL  SHARE OF SERIES A
PREFERRED STOCK. IN THE EVENT THAT SUCH FRACTIONAL SHARE WOULD RESULT,  HYBRIDON
SHALL, AT ITS SOLE  DISCRETION,  EITHER (A) ROUND SUCH  FRACTIONAL  SHARE TO THE
NEAREST  WHOLE NUMBER OF SHARES (WITH 0.5 BEING  ROUNDED UP), OR (B) PAY IN CASH
AN AMOUNT  EQUAL TO SUCH  FRACTION  MULTIPLIED  BY $100  (WHICH IS THE PER SHARE
STATED  VALUE  OF  SERIES A  PREFERRED  STOCK).  HYBRIDON  WILL  NOT  ISSUE  ANY
FRACTIONAL  SHARES OF SERIES A PREFERRED STOCK IN THE OFFER. IN THE EVENT THAT A
TENDERING  NOTEHOLDER  WOULD  OTHERWISE  BE  ENTITLED  TO  RECEIVE A  FRACTIONAL
EXCHANGE  WARRANT,  HYBRIDON SHALL ROUND UP SUCH FRACTIONAL  EXCHANGE WARRANT TO
THE NEAREST WHOLE NUMBER OF EXCHANGE WARRANTS. 

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

THE OFFER IS NOT  CONDITIONED  UPON ANY MINIMUM  AMOUNT OF EXCHANGE VALUE OF THE
NOTES BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN CONDITIONS.  SEE
"TERMS OF THE OFFER--CERTAIN CONDITIONS OF THE OFFER."

IMPORTANT

Any holder of Notes (a  "Noteholder")  desiring  to tender all or any portion of
the Exchange  Value of such Notes should either (1) complete and sign the Letter
of Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of  Transmittal,  mail or deliver it and any other required  documents to
the Depositary specified herein, and either deliver the certificate representing
the Notes to the Depositary along with the Letter of Transmittal or deliver such
Notes pursuant to the procedure for  book-entry  transfer set forth in "Terms of
the   Offer--Procedure   for  Tendering  Notes"  herein,  or  (2)  request  such
Noteholder's broker,  dealer, bank, trust company or other nominee to effect the
transaction  and such broker,  dealer,  bank,  trust company or other nominee to
complete and sign the Letter of Transmittal or a facsimile thereof in accordance
with the  instructions in the Letter of Transmittal,  mail or deliver it and any
other required documents to the Depositary  specified herein. A Noteholder whose
Notes are  registered in the name of a broker,  dealer,  bank,  trust company or
other  nominee must contact such broker,  dealer,  bank,  trust company or other
nominee if such  Noteholder  desires to tender such Notes.  Any  Noteholder  who
desires to tender Notes and whose certificate for such Notes are not immediately
available,  or who  cannot  comply in a timely  manner  with the  procedure  for
book-entry  transfer,  should tender such Notes by following the  procedures for
guaranteed  delivery set forth in "Terms of the  Offer--Procedure  for Tendering
Notes--Guaranteed Delivery Procedure" herein.

No  Noteholder  may  tender any or all of the  Exchange  Value  attributable  to
accrued but unpaid interest on the principal  amount of the Notes being tendered
without also tendering the Exchange Value attributable to such principal amount,
or vice versa.

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

AS SET FORTH IN MORE DETAIL IN THE LETTER OF TRANSMITTAL, BY SIGNING AND SENDING
SUCH LETTER OF TRANSMITTAL, THE TENDERING NOTEHOLDERS ARE THEREBY MAKING CERTAIN
REPRESENTATIONS AND AGREEING TO BE BOUND BY CERTAIN COVENANTS CONTAINED THEREIN.
IN ADDITION,  HYBRIDON WILL MAKE CERTAIN  REPRESENTATIONS  AND  AGREEMENTS  WITH
RESPECT TO CERTAIN MATTERS PURSUANT TO THE LETTER OF TRANSMITTAL. SUCH COVENANTS
AND REPRESENTATIONS OF HYBRIDON WILL BECOME EFFECTIVE AND BINDING ON HYBRIDON AT
SUCH TIME THAT  HYBRIDON  ACCEPTS FOR EXCHANGE ANY OF THE EXCHANGE  VALUE OF THE
NOTES  TENDERED  BY A  TENDERING  NOTEHOLDER.  IN THE  EVENT  THAT THE  OFFER IS
TERMINATED  BY HYBRIDON OR HYBRIDON  DOES NOT ACCEPT FOR  EXCHANGE  ANY EXCHANGE
VALUE OF THE NOTES  VALIDLY  TENDERED  BY A  TENDERING  NOTEHOLDER,  NONE OF THE
COVENANTS,   AGREEMENTS  AND  REPRESENTATIONS  MADE  BY  EITHER  SUCH  TENDERING
NOTEHOLDER  OR HYBRIDON IN THE LETTER OF  TRANSMITTAL  WILL BE VALID  AGAINST OR
BINDING   UPON  THE  PARTY   WHO  MADE  ANY  SUCH   COVENANTS,   AGREEMENTS   OR
REPRESENTATIONS. ANY TENDER NOT ACCOMPANIED BY THE LETTER OF TRANSMITTAL WILL BE
DEEMED INVALID. PLEASE READ CAREFULLY THE LETTER OF TRANSMITTAL. SEE "PURPOSE OF
THE   OFFER;    CERTAIN   EFFECTS   OF   THE    OFFER--ANCILLARY    AGREEMENTS."

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

THIS  TRANSACTION  HAS NOT BEEN APPROVED OR  DISAPPROVED  BY THE  SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE  SECURITIES  COMMISSION  PASSED  UPON THE  FAIRNESS  OR MERITS OF THIS
TRANSACTION  NOR UPON THE ACCURACY OR ADEQUACY OF THE  INFORMATION  CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

NEITHER HYBRIDON, ITS BOARD OF DIRECTORS NOR ANY OF ITS EXECUTIVE OFFICERS MAKES
ANY  RECOMMENDATION  TO ANY NOTEHOLDER AS TO WHETHER TO TENDER ANY OR ALL OF THE
EXCHANGE VALUE OF THE NOTES OWNED BY SUCH NOTEHOLDER.  EACH NOTEHOLDER MUST MAKE
HIS, HER OR ITS OWN DECISIONS AS TO WHETHER TO TENDER NOTES AND, IF SO, HOW MUCH
IN EXCHANGE VALUE TO TENDER.

Although  the Notes have been  eligible  for trading in the  Private  Offerings,
Resales and Trading through the Automatic Linkages  ("PORTAL") market,  Hybridon
has been advised by the National  Quotation Bureau that it has no records of any
reported transactions in the Notes on the PORTAL market. Moreover,  Hybridon has
no pricing  information with respect to the secondary market transactions in the
Notes,  which became freely tradable upon the  effectiveness of the Registration
Statement  (Reg. No.  333-25833)  covering the same.  Shares of Hybridon  Common
Stock,  into which the Notes are  convertible (at a $35.0625  conversion  price,
after giving effect to the  one-for-five  reverse  stock split),  are quoted for
trading  on the  Nasdaq  OTC  Bulletin  Board.  As of the close of  business  on
February 5, 1998 (the last trading date prior to the commencement of the Offer),
the last  reported  bid price on the  Nasdaq OTC  Bulletin  Board for a share of
Hybridon Common Stock was $1.500.

Questions or requests for assistance or for  additional  copies of this Offer to
Exchange,  the  Letter  of  Transmittal  for the  Notes  or other  tender  offer
materials  may be directed to Hybridon at its address and  telephone  number set
forth on the back cover of this Offer to Exchange.

The date of this Offer to Exchange is February 6, 1998.

2

NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY  RECOMMENDATION  ON BEHALF OF HYBRIDON
AS TO WHETHER  NOTEHOLDERS  SHOULD TENDER THEIR NOTES PURSUANT TO THE OFFER.  NO
PERSON  HAS  BEEN   AUTHORIZED   TO  GIVE  ANY   INFORMATION   OR  TO  MAKE  ANY
REPRESENTATIONS  IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED  HEREIN
OR IN THE LETTER OF TRANSMITTAL.  IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION  AND  REPRESENTATIONS  MUST  NOT  BE  RELIED  UPON  AS  HAVING  BEEN
AUTHORIZED BY HYBRIDON.

TABLE OF CONTENTS

PAGE

SUMMARY....................................................................   4
INTRODUCTION...............................................................   6
TERMS OF THE OFFER.........................................................   7
Amount of Notes; Consideration; Expiration Date; Interest Payment.......   7
Procedure for Tendering Notes...........................................   9
Withdrawal Rights.......................................................  10
Acceptance for Exchange of Notes and Exchange for Consideration.........  10
Certain Conditions of the Offer.........................................  11
Extension; Termination; Amendments......................................  11
SELECTED CONSOLIDATED FINANCIAL INFORMATION................................  12
RECENT DEVELOPMENTS........................................................  14
PRICE RANGE OF HYBRIDON COMMON STOCK; DIVIDENDS............................  14
PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.........................  15
SOURCE AND AMOUNT OF CONSIDERATION.........................................  17
TRANSACTIONS AND AGREEMENTS CONCERNING THE NOTES...........................  17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES....................................  17
FEES AND EXPENSES..........................................................  20
CERTAIN INFORMATION CONCERNING HYBRIDON....................................  20
ADDITIONAL INFORMATION.....................................................  22
MISCELLANEOUS..............................................................  23

ANNEXES TO OFFER TO EXCHANGE*
Annex A     Form of Certificate of Designation of Series A Preferred Stock of 
Hybridon
Annex B     Form of Warrant Agreement for Exchange Warrants**
Annex C     Form of Certificate of Designation of Series B Preferred Stock of 
Hybridon
Annex D     Annual Report on Form 10-K for the fiscal year ended December 31, 
1996 of Hybridon
Annex E     Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1997 of Hybridon
Annex F     Proxy Statement on Schedule 14A for the 1997 Annual Meeting of 
Stockholders of Hybridon
Annex F-1   Proxy  Statement  on  Schedule  14A for the  Special  Meeting  of
Stockholders of Hybridon held on November 18, 1997
Annex G     Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997 of Hybridon
Annex H     Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1997 of Hybridon
Annex H-1   Amendment on Form 10-Q/A to Quarterly Report on Form 10-Q for the 
fiscal quarter ended June 30, 1997
Annex I     Current Report on Form 8-K dated April 2, 1997 of Hybridon
Annex J     Current Report on Form 8-K dated July 25, 1997 of Hybridon
Annex K     Current Report on Form 8-K dated September 3, 1997 of Hybridon
Annex L     Current Report on Form 8-K dated September 19, 1997 of Hybridon
Annex M     Current Report on Form 8-K dated September 23, 1997 of Hybridon
Annex N     Current Report on Form 8-K dated November 18, 1997 of Hybridon
Annex O     Current Report on Form 8-K dated December 3, 1997 of Hybridon
Annex P     Current Report on Form 8-K dated January 11, 1998 of Hybridon
Annex Q     Current Report on Form 8-K dated January 13, 1998 of Hybridon
Annex R     Current Report on Form 8-K dated January 22, 1998 of Hybridon
Annex S     Current Report on Form 8-K dated January 16, 1998 of Hybridon
Annex T     Form of Unit Purchase Agreement for the New Offering
Annex U     Form of Notes due 2007 of Hybridon
- --------------------
* Unless  otherwise  noted,  none of the  documents  attached  hereto as Annexes
contain  exhibits,  annexes and other  attachments  thereto.  
** Form of Warrant Certificate is attached as Exhibit A thereto.

3

SUMMARY

This general  summary is provided  solely for the convenience of the Noteholders
and is qualified in its entirety by reference to the full text and more specific
details  contained in this Offer to Exchange and the Letter of  Transmittal  and
any amendments hereto and thereto.

Hybridon................................    Hybridon, Inc., a Delaware corporation.

The Notes...............................    9% Convertible Subordinated Notes due 2004 of Hybridon.

Amount of Notes Sought..................    All of the  outstanding  Notes,  together  with  accrued but
unpaid interest thereon.                                    

Exchange Value..........................    The principal  amount of and accrued but unpaid  interest on 
the Notes.                                                   

Consideration...........................    The consideration being offered per $1,000 in Exchange Value
of the  Notes  tendered  consists  of 10  shares of Series A
Preferred  Stock and  Exchange  Warrants  to  purchase  such
number of shares of  Hybridon  Common  Stock equal to 15% of
the  number of shares of  Hybridon  Common  Stock into which
such shares of Series A Preferred Stock would be convertible
at the Exercise Price (as defined below).  See "Terms of the
Offer--  Consideration  Being  Offered"  and "Price Range of
Hybridon Common Stock; Dividends."                          

Conditions of Offer.....................    The  Offer is not  conditioned  upon any  minimum  amount of
Exchange  Value of the  Notes  being  tendered.  The  Offer,
however, is subject to certain conditions. See "Terms of the
Offer--Certain Conditions of the Offer."                    

Expiration Date.........................    March 9, 1998, at 12:00 Midnight, New York City time, unless
extended.                                                   

How to Tender Notes.....................    See "Terms of the Offer--Procedure for Tendering Notes." For 
further  information,  call Hybridon or consult your broker, 
dealer, bank, trust company or other nominee for assistance. 

Withdrawal Rights.......................    Any or all of Exchange  Value of the  tendered  Notes may be
withdrawn  at any time prior to the  Expiration  Date of the
Offer and, unless accepted for payment prior thereto, may be
withdrawn   after   April  1,   1998.   See  "Terms  of  the
Offer--Withdrawal Rights."                                  

New Offering............................    The  Company  recently  commenced a private  offering,  on a 
"best  efforts"  basis,  of up to 550 Units (at $100,000 per 
Unit), each Unit consisting of $100,000  principal amount of 
Notes due 2007  ("Offering  Notes") and certain  warrants to 
purchase Common Stock of Hybridon (the "New Offering").  See 
Annexes T and U for more information on the New Offering.    

Purpose of Offer........................    The  Offer  constitutes  a part  of the  restructuring  (the
"Restructuring")  of the  capital  structure  of Hybridon to
raise, pursuant to the New Offering, up to $55,000,000 (less
fees,   commissions   and  expenses)  in  cash  for  use  in
Hybridon's  operations and to reduce Hybridon's debt service
obligations.  In  connection  with  the  Restructuring,  the
holders of  approximately  $40,000,000  principal  amount of
Notes (the "Consenting Notes"), for themselves and on behalf
of their  respective  transferees,  consented,  among  other
things, to subordinate their Notes to the Offering Notes and
to defer, if Hybridon so elects,  the next interest  payment
scheduled  for April 1,  1998  until  October  1,  1998.  To
evidence  such consent and other  matters  (the  "Consent"),
Hybridon and State Street Bank and Trust Company, as trustee
(the  "Trustee"),  have  entered  into a First  Supplemental
Indenture,  dated as of January 13, 1998 (the  "Supplemental
Indenture").   The   Supplemental   Indenture   amended  the
Indenture,  dated as of March 26, 1997, between Hybridon and
the Trustee (as amended by the Supplemental  Indenture,  the
"Indenture"), which governs the Notes.                      

Upon the occurrence of the Restructuring Trigger (as defined 
below),  the Offering Notes (which  currently rank senior to 
the Consenting  Notes) will  automatically be converted into 
shares of Series B Preferred  Stock of  Hybridon  (with such 
powers, limitations and preferences as set forth in the form 
of the  Certificate  of  Designation  of Series B  Preferred 
Stock,  which is annexed hereto as Annex C) which shall rank 
junior  to the  Series A  Preferred  Stock  issuable  in the 
Offer.  As a result,  the Offer  presents the holders of the 
Consenting Notes with an opportunity  effectively to nullify 
the  subordination  effected  by  the  Consent  if  the  Net 
Proceeds   Threshold   (as  defined   below)  is   achieved. 
Furthermore,  unless the Restructuring  Trigger occurs prior 
to the  Termination  Date (as  defined in the Unit  Purchase 
Agreement  included as Annex T hereto) of the New  Offering: 
(i) purchasers of Units in the New Offering will be entitled 
to receive additional  warrants to purchase,  at an exercise 
price of $.001 per share of Hybridon  Common Stock, a number 
of shares of Hybridon Common Stock equal to 100% (rounded to 
the  nearest  whole  share)  of the  Hybridon  Common  Stock 
underlying  their  purchased  Offering  Notes,  and (ii) the 
interest rate borne by the Offering Notes will increase from 
14% to 18% per  annum.  The Offer is open to all  holders of 
the Notes.  See "Terms of the Offer --  Consideration  Being 
Offered." If successful,  the Restructuring will improve the 
financial  position of Hybridon by reducing the indebtedness 
of Hybridon for financial  reporting  purposes,  and thereby 
improve the chances of Hybridon being                        

4

able  to  comply  with  the  quantitative  criteria  for the
listing of Hybridon Common Stock on the Nasdaq Stock Market.
See "Purpose of the Offer; Certain Effects of the Offer."   

Restructuring Trigger...................    At such time that both (a) at least $40,000,000 in principal
amount of the Notes  (together  with all of the then accrued
but unpaid interest thereon) is irrevocably exchanged in the
Offer for Series A Preferred  Stock and  Exchange  Warrants,
and (b) Hybridon has received  proceeds in the New Offering,
net of cash fees, commissions and expenses ("Net Proceeds"),
equal  to  or  exceeding   $20,000,000  (the  "Net  Proceeds
Threshold").   There   can   be  no   assurance   that   the
Restructuring Trigger will occur.                           

Consenting Notes........................    The Notes held by those holders who, for  themselves  and on
behalf of their  respective  transferees,  consented,  among
other  things,  to  subordinate  their Notes to the Offering
Notes and to defer, if Hybridon so elects, the next interest
payment  scheduled  for April 1, 1998 until October 1, 1998,
and  Notes   representing  the  same  indebtedness  as  such
Consenting Notes. The Offer,  however, is not limited to the
holders of the Consenting Notes; all Noteholders are invited
to tender in the Offer.                                     

Market Price of Notes...................    Although  the Notes have been  eligible  for  trading in the 
PORTAL  market,  Hybridon  has been  advised by the National 
Quotation  Bureau  that it has no  records  of any  reported 
transactions  in the Notes on the PORTAL  market.  Moreover, 
Hybridon  has no pricing  information  with respect to other 
types of secondary market  transactions in the Notes. Shares 
of  Hybridon   Common  Stock,   into  which  the  Notes  are 
convertible (at a $35.0625  conversion  price,  after giving 
effect to the one-for-five  reverse stock split), are quoted 
for  trading  on the  Nasdaq OTC  Bulletin  Board.  The last 
reported  bid  price  of the  Hybridon  Common  Stock on the 
Nasdaq  OTC  Bulletin  Board is shown on the front  cover of 
this Offer to Exchange.  See "Price Range of Hybridon Common 
Stock; Dividends."                                           

Interest Payments.......................    Hybridon made a regular semi-annual  interest payment on the 
Notes on  October  1,  1997 to  holders  of record as of the 
close of  business on  September  15,  1997.  Holders of the 
Notes tendered and purchased  pursuant to the Offer will not 
be entitled to any interest payments in respect of any later 
interest  periods  (or any  portion  thereof).  Hybridon  is 
required to make the next interest  payments on the Notes on 
April  1,  1998 to  holders  of  record  as of the  close of 
business  on March  15,  1998,  except  that  such  interest 
payments on the Consenting Notes may, at Hybridon's  option, 
be deferred until October 1, 1998 pursuant to the Consent.   

Solicitation Fee........................    None.  See "Fees and Expenses."

Exchange Date...........................    As soon as practicable  after the Expiration  Date, which is
expected  to be no later than four  business  days after the
Expiration   Date.  See  "Terms  of  the   Offer--Extension;
Termination;  Amendments"  and "Terms of the Offer-- Certain
Conditions of the Offer."                                   

Further Information.....................    Additional  copies of this Offer to Exchange,  the Letter of 
Transmittal  and the Notice of  Guaranteed  Delivery  may be 
obtained by contacting Hybridon at the address and telephone 
number  shown on the back cover of this  Offer to  Exchange. 
Questions  about the Offer  should be directed to E. Andrews 
Grinstead,  III, Chairman of the Board,  President and Chief 
Executive Officer of Hybridon, at the same telephone number. 

5

INTRODUCTION

Hybridon  invites the Noteholders to tender any and all of the Exchange Value of
their Notes in exchange  for 10 shares of Series A Preferred  Stock and Exchange
Warrants to purchase such number of shares of Hybridon Common Stock equal to 15%
of the number of shares of  Hybridon  Common  Stock  into  which such  shares of
Series A Preferred  Stock would be convertible at the Exercise Price (as defined
below), for each $1,000 in Exchange Value of the Notes tendered,  upon the terms
and subject to the  conditions set forth herein and in the Letter of Transmittal
for the Notes  tendered.  See  "Purpose  of the  Offer;  Certain  Effects of the
Offer."  The  Offer  is  open  to  all  holders  of  Notes.  See  "Terms  of the
Offer--Consideration  Being Offered." Hybridon will enter into an agreement with
respect to the  registration  under the Securities Act of the shares of Series A
Preferred  Stock  issued in the Offer and shares of Hybridon  Common  Stock into
which such  Series A Preferred  Stock and the  Exchange  Warrants  issued in the
Offer  are   convertible   and  certain  other   matters.   See  "Terms  of  the
Offer--Consideration  Being Offered" and "Purpose of the Offer;  Certain Effects
of the Offer--Ancillary  Agreements." This Offer to Exchange,  together with the
Letter  of   Transmittal,   constitutes   the   "Offer".   See   "Terms  of  the
Offer--Extension;  Termination;  Amendments"  and  "Terms of the  Offer--Certain
Conditions of the Offer."

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

ANY TENDER OF NOTES WHICH INVOLVES DENOMINATIONS OF LESS THAN $1,000 IN EXCHANGE
VALUE  THEREOF WILL BE EXCHANGED ON A PRO RATA BASIS,  EXCEPT TO THE EXTENT THAT
SUCH  PRORATION  WOULD RESULT IN THE ISSUANCE OF A FRACTIONAL  SHARE OF SERIES A
PREFERRED STOCK. IN THE EVENT THAT SUCH FRACTIONAL SHARE WOULD RESULT,  HYBRIDON
SHALL, AT ITS SOLE  DISCRETION,  EITHER (A) ROUND SUCH  FRACTIONAL  SHARE TO THE
NEAREST  WHOLE NUMBER OF SHARES (WITH 0.5 BEING  ROUNDED UP), OR (B) PAY IN CASH
AN AMOUNT  EQUAL TO SUCH  FRACTION  MULTIPLIED  BY $100  (WHICH IS THE PER SHARE
STATED  VALUE  OF  SERIES A  PREFERRED  STOCK).  HYBRIDON  WILL  NOT  ISSUE  ANY
FRACTIONAL  SHARES OF SERIES A PREFERRED STOCK IN THE OFFER. IN THE EVENT THAT A
TENDERING  NOTEHOLDER  WOULD  OTHERWISE  BE  ENTITLED  TO  RECEIVE A  FRACTIONAL
EXCHANGE  WARRANT,  HYBRIDON SHALL ROUND UP SUCH FRACTIONAL  EXCHANGE WARRANT TO
THE NEAREST WHOLE NUMBER OF EXCHANGE WARRANTS.

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

THE OFFER IS NOT  CONDITIONED  UPON ANY MINIMUM  AMOUNT OF THE EXCHANGE VALUE OF
THE NOTES BEING TENDERED.  THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN CONDITIONS.
SEE "TERMS OF THE OFFER--CERTAIN CONDITIONS OF THE OFFER."

NEITHER HYBRIDON, ITS BOARD OF DIRECTORS NOR ANY OF ITS EXECUTIVE OFFICERS MAKES
ANY  RECOMMENDATION  TO ANY NOTEHOLDER AS TO WHETHER TO TENDER ANY OR ALL OF THE
EXCHANGE  VALUE OF THE  NOTES.  EACH  NOTEHOLDER  MUST MAKE HIS,  HER OR ITS OWN
DECISION  AS TO WHETHER TO TENDER  THE NOTES  AND,  IF SO, HOW MUCH IN  EXCHANGE
VALUE OF THE NOTES TO TENDER.

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

AS SET FORTH IN MORE DETAIL IN THE LETTER OF TRANSMITTAL, BY SIGNING AND SENDING
SUCH LETTER OF TRANSMITTAL,  THE TENDERING  NOTEHOLDERS ARE AGREEING TO BE BOUND
BY CERTAIN COVENANTS CONTAINED THEREIN. ANY TENDER NOT ACCOMPANIED BY THE LETTER
OF  TRANSMITTAL  WILL BE DEEMED  INVALID.  PLEASE READ  CAREFULLY  THE LETTER OF
TRANSMITTAL.  SEE  "PURPOSE  OF THE  OFFER;  CERTAIN  EFFECTS  OF THE  OFFER  --
ANCILLARY AGREEMENTS." -------------------------------

Although the Notes have been eligible for trading in the PORTAL market, Hybridon
has been advised by the National  Quotation Bureau that it has no records of any
reported transactions in the Notes on the PORTAL market. Moreover,  Hybridon has
no  pricing  information  with  respect  to  other  types  of  secondary  market
transactions in the Notes.  The shares of Hybridon Common Stock,  into which the
Notes are convertible (at a $35.0625  conversion  price,  after giving effect to
the one-for-five  reverse stock split), are quoted for trading on the Nasdaq OTC
Bulletin  Board  under the symbol  "HYBN".  The last  reported  bid price on the
Nasdaq OTC Bulletin Board, as of the close of business on the date of this Offer
to Exchange,  for the Hybridon  Common Stock is shown on the front cover of this
Offer to Exchange.

A  semi-annual  interest  payment  on the Notes was paid on  October  1, 1997 to
holders of record as of the close of business on September 15, 1997.  Holders of
the Notes tendered into and purchased pursuant to the Offer will not be entitled
to any interest payment in respect of any later interest periods (or any portion
thereof).  Hybridon is required to make the next interest  payments on the Notes
on April 1, 1998 to holders of record as of the close of  business  on March 15,
1998,  except  that such  interest  payments  on the  Consenting  Notes may,  at
Hybridon's option, be deferred until October 1, 1998 pursuant to the Consent.

Tendering  Noteholders  will not be obligated to pay  brokerage  commissions  or
solicitation fees with respect to the exchange of the Notes by Hybridon pursuant
to the Offer.  Hybridon will reimburse promptly each broker,  dealer, bank trust
company  and other  nominee who  assists in the  dissemination  of this Offer to
Exchange and other related  materials to the beneficial  owners of the Notes for
reasonable  out-of-pocket  expenses incurred in connection  therewith.  Hybridon
will pay all charges and expenses of ChaseMellon  Shareholder  Services,  L.L.C.
(the  "Depositary")  incurred  in  connection  with the  Offer.  No other  fees,
soliciting or otherwise,  will be paid by Hybridon in connection with the Offer.
See "Fees and Expenses".

6

Noteholders  are not under any obligation to tender Notes pursuant to the Offer.
The Offer does not constitute  notice of redemption of any Notes pursuant to the
Indenture  which governs the Notes,  nor does Hybridon intend to effect any such
redemption  by making  the  Offer.  The Offer  does not  constitute  a waiver by
Hybridon  of any option it has to redeem the Notes.  See  "Purpose of the Offer;
Certain Effects of the Offer."

Copies of this Offer to Exchange and the Letter of Transmittal  are being mailed
to record holders of the Notes and will be furnished to brokers, dealers, banks,
trust  companies and other nominees whose names, or the names of whose nominees,
appear on  Hybridon's  Noteholder  list or,  if  applicable,  who are  listed as
participants in a clearing  agency's  security  position  listing for subsequent
transmittal to beneficial owners of the Notes.

TERMS OF THE OFFER

AMOUNT OF NOTES; CONSIDERATION; EXPIRATION DATE; INTEREST PAYMENT

Upon the terms and subject to the conditions  described herein and in the Letter
of  Transmittal,  Hybridon will purchase any and all Exchange Value of the Notes
that are validly  tendered on or prior to the Expiration Date (as defined below)
(and not properly withdrawn in accordance with  "--Withdrawal  Rights" below) in
exchange  for 10 shares of Series A  Preferred  Stock and  Exchange  Warrants to
purchase  such  number of shares of  Hybridon  Common  Stock equal to 15% of the
number of shares of  Hybridon  Common  Stock into which such  shares of Series A
Preferred  Stock would be convertible at the Exercise Price (as defined  below),
for each  $1,000 in  Exchange  Value of the Notes  tendered.  See  "--Extension;
Termination;   Amendments,"   "--Consideration  Being  Offered"  and  "--Certain
Conditions of the Offer." Any tender of Notes which  involves  denominations  of
less than $1,000 in  Exchange  Value  thereof  will be  exchanged  on a pro rata
basis,  except to the extent that such proration would result in the issuance of
a  fractional  share  of  Series A  Preferred  Stock.  In the  event  that  such
fractional share would result,  Hybridon shall, at its sole  discretion,  either
(a) round such fractional  share to the nearest whole number of shares (with 0.5
being  rounded  up),  or (b) pay in  cash  an  amount  equal  to  such  fraction
multiplied  by $100 (which is the per share  stated  value of Series A Preferred
Stock).  Hybridon  will not issue any  fractional  shares of Series A  Preferred
Stock in the Offer. In the event that a tendering  Noteholder would otherwise be
entitled to receive a fractional Exchange Warrant,  Hybridon shall round up such
fractional Exchange Warrant to the nearest whole number of Exchange Warrants.

The later of 12:00 Midnight, New York City time, on March 9, 1998, or the latest
time and date to which  the  Offer is  extended  is  referred  to  herein as the
"Expiration  Date".  There can be no assurance  that  Hybridon will exercise its
right to extend the Offer.

Regular semi-annual interest payments on the Notes were paid on October 1, 1997,
to holders of record as of the close of business on September 15, 1997.  Holders
of the Notes  tendered  into and  purchased  pursuant  to the Offer  will not be
entitled to any interest  payments in respect of any later interest  periods (or
any portion thereof).

No alternative, conditional or contingent tenders will be accepted by Hybridon.

CONSIDERATION BEING OFFERED

Holders of the Notes are  invited to tender any or all  Exchange  Value of their
Notes in  exchange  for 10  shares  of Series A  Preferred  Stock  and  Exchange
Warrants to purchase such number of shares of Hybridon Common Stock equal to 15%
of the number of shares of  Hybridon  Common  Stock  into  which such  shares of
Series A Preferred  Stock would be convertible at the Exercise Price (as defined
below), for each $1,000 in Exchange Value of the Notes tendered and accepted for
exchange by Hybridon.  Any tender of Notes which involves  denominations of less
than $1,000 in Exchange  Value  thereof  will be  exchanged on a pro rata basis,
except to the extent  that such  proration  would  result in the  issuance  of a
fractional  share of Series A Preferred Stock. In the event that such fractional
share would result,  Hybridon  shall, at its sole  discretion,  either (a) round
such  fractional  share to the nearest  whole  number of shares  (with 0.5 being
rounded up), or (b) pay in cash an amount equal to such  fraction  multiplied by
$100 (which is the per share stated value of Series A Preferred Stock). Hybridon
will not issue any fractional  shares of Series A Preferred  Stock in the Offer.
In the event that a tendering  Noteholder would otherwise be entitled to receive
a fractional Exchange Warrant,  Hybridon shall round up such fractional Exchange
Warrant to the nearest whole number of Exchange Warrants.  The fair market value
of the Series A Preferred Stock and Exchange Warrants will be allocated first to
principal and then to accrued but unpaid interest on the principal amount of the
Notes.

Series A Preferred Stock

The following  summary  description  of Series A Preferred  Stock of Hybridon is
necessarily  incomplete  and is thus  qualified  in its  entirety by the form of
Certificate  of  Designation  of the  Series A  Preferred  Stock and the form of
Certificate  of  Designation  of Series B Preferred  Stock which are attached as
Annex A and  Annex  C,  respectively,  to this  Offer to  Exchange  and they are
incorporated herein by reference.

The Certificate of  Incorporation  of Hybridon permits its Board of Directors to
issue up to 5,000,000  shares of preferred  stock, par value $.01 per share (the
"Hybridon  Preferred Stock"),  in one or more series, to designate the number of
shares constituting such series, and fix by resolution,  the powers, privileges,
preferences  and  relative,   optional  or  special  rights  thereof,  including
liquidation  preferences and dividends,  and conversion and redemption rights of
each  such  series.  No  shares  of  Hybridon   Preferred  Stock  are  currently
outstanding.  Immediately  prior to the  acceptance  for  exchange  of the Notes
tendered  into the Offer,  Hybridon will file with the Secretary of State of the
State of Delaware a Certificate of Designation concerning the Series A Preferred
Stock, with the following designations:

Dividend:                     6.5% per annum, payable on the same dates interest
payments are  currently to be paid with respect to
the Notes.  The  dividend  may be paid with either
cash or  additional  shares of Series A  Preferred
Stock, at the option of Hybridon.                 

Liquidation Preference:       $100.00   per  share  plus   accrued   but  unpaid
dividends.

7

Ranking:                      The  Series  A  Preferred   Stock  ranks,   as  to
dividends and  liquidation  preference,  senior to
the  Series B  Preferred  Stock  and the  Hybridon
Common Stock.

Conversion Price:             Through April 1, 2000, the conversion price of the
Series A Preferred Stock shall be $35.00 per share
of Hybridon Common Stock.

After April 1, 2000, the  conversion  price of the
Series A  Preferred  Stock  shall be 212.5% of the
Initial Conversion Price (as defined below) of the
Series B Preferred  Stock (subject to antidilution
adjustments   set  forth  in  the  Certificate  of
Designation for the Series A Preferred  Stock); in
addition,   there   shall   be  a  reset  of  such
conversion  price (the  "Series A Reset") upon the
occurrence  of the  Series B  One-Year  Reset  (as
defined below) to 212.5% of the  conversion  price
of  the  Series  B  Preferred  Stock   immediately
following the Series B One-Year Reset.

As used herein, the "Initial  Conversion Price" of
the Series B Preferred Stock shall mean the lesser
of (i) $3.00,  and (ii) 80% of the  Trading  Price
(as defined hereinafter) as of the initial closing
date,  any  interim  closing  date  or  the  final
closing date (the "Final Closing Date") of the New
Offering, whichever is the lowest; "Trading Price"
shall  mean,  generally,  the  lesser  of (i)  the
average  closing bid price of the Hybridon  Common
Stock for 30 consecutive trading days, ending with
the trading day  immediately  prior to the date on
which the Trading Price is being  determined,  and
(ii) the average closing bid price of the Hybridon
Common Stock for five  consecutive  trading  days,
ending with the trading day  immediately  prior to
the date as of which  the  Trading  Price is being
determined; "Series B One-Year Reset" shall mean a
reset  of  the   conversion   price  of  Series  B
Preferred  Stock  which  would  take  place if the
average  closing  bid  price  for  20  consecutive
trading   days,   ending   with  the  trading  day
immediately prior to the Final Closing Anniversary
(as defined hereinafter), is less than 125% of the
then conversion  price of Series B Preferred Stock
as of the one-year anniversary (the "Final Closing
Anniversary") of the Final Closing Date.

Mandatory Conversion
or Redemption:               On or  after  the date of the  Series  B  One-Year
Reset  and  after  April  1,  2000 in the  case of
clause (ii) below, if the closing bid price of the
Hybridon   Common   Stock   exceeds  250%  of  the
then-current  conversion  price  of the  Series  B
Preferred  Stock  for 20  trading  days  in any 30
consecutive  trading day period,  Hybridon may (i)
cause  the   Series  A   Preferred   Stock  to  be
converted,  in  whole or in  part,  into  Hybridon
Common   Stock   at  200%   of  the   then-current
conversion  price of the Series B Preferred  Stock
or (ii)  redeem the Series A  Preferred  Stock for
cash in an  amount  equal  to  $100.00  per  share
(subject to appropriate  adjustment to reflect any
stock split, reclassification or reorganization of
the Series A Preferred Stock) plus any accrued but
unpaid dividends  (provided that holders will have
the right to convert into  Hybridon  Common Stock,
at the conversion  price applicable after April 1,
2000,   any   shares  so  called   for   mandatory
conversion   or    redemption).    Any   mandatory
conversion or redemption  (in the case of Series A
Preferred  Stock)  of the  Series  A or  Series  B
Preferred  Stock must be executed  with respect to
both series on a pro rata basis.

Class Voting Rights:          Hybridon shall not,  without the affirmative  vote
or consent  of the  holders of at least 50% of all
outstanding  Series  A  Preferred  Stock,   voting
separately as a class, (i) amend,  alter or repeal
any provision of the Certificate of  Incorporation
or the  By-laws of  Hybridon  so as  adversely  to
affect   the   relative    rights,    preferences,
qualifications, limitations or restrictions of the
Series A  Preferred  Stock  (with the  issuance of
securities  ranking  prior to, or pari passu with,
the   Series  A   Preferred   Stock   (A)  upon  a
Liquidation  Event (as defined in the  Certificate
of  Designation  for Series A Preferred  Stock) or
(B) with  respect to the payment of  dividends  or
distributions not being considered to so adversely
affect, but the exchange of any shares of Series B
Preferred   Stock  for   shares  of  a  series  of
preferred  stock of the Company  ranking  prior to
the Series A Preferred  Stock being  considered to
so adversely  affect) or (ii)  authorize or issue,
or increase  the  authorized  amount of,  Series A
Preferred  Stock,  other than  Series A  Preferred
Stock  issuable  in  exchange  for  the  Notes  or
accrued  but  unpaid   interest   thereon  in  the
Exchange  or  issuable  as  dividends  on Series A
Preferred Stock.

Exchange Warrants

The following  summary  description  of the Exchange  Warrants of Hybridon to be
issued in the  Offer is  necessarily  incomplete  and thus is  qualified  in its
entirety by the form of Warrant  Agreement  (the "Warrant  Agreement")  which is
attached  as Annex B to this  Offer  to  Exchange  and  incorporated  herein  by
reference.

In  connection  with the Offer,  each  tendering  Noteholder  will  receive,  in
addition to shares of Series A Preferred Stock,  Exchange Warrants to purchase a
number of shares of Hybridon  Common  Stock equal to 15% of the number of shares
of Hybridon  Common Stock into which the Series A Preferred Stock issued to such
Noteholder  pursuant to the Offer would be convertible at the Exercise Price (as
defined  in the  following  sentence).  The  Exchange  Warrants  have an initial
exercise price equal to 212.5% of the Initial  Conversion  Price of the Series B
Preferred Stock (the "Exercise Price"), provided,  however, that, until April 2,
2000, the Exchange Warrants' exercise price shall be equal to the then-effective
conversion  price of the Series A Preferred  Stock.  The  Exchange  Warrants are
subject  to  redemption  at the  option  of  Hybridon  under  the  circumstances
described in Section 8 of the Warrant Agreement.

Registration Rights

The following  summary  description of the registration  rights to be granted to
the tendering Noteholders in connection with the Offer is necessarily incomplete
and thus is qualified in its entirety by the applicable  provisions contained in
the  Letter  of  Transmittal  and such  provisions  are  incorporated  herein by
reference.

Hybridon  will  agree to use its best  efforts  to file (by the later of (A) the
earliest to occur of (i) the filing  date of the  registration  statement  to be
filed  pursuant to the Unit Purchase  Agreement  relating to the New Offering (a
form of which is attached hereto as Annex T), (ii) the expiration of thirty (30)
days after the Final  Closing Date and (iii) the later of (x) the  expiration of
sixty (60) days from the date on which Hybridon has received Net Proceeds in the
New  Offering  equal  to or  exceeding  $20,000,000  in the  aggregate,  and (y)
November 16, 1998, and (B) the date on which shares of Series A Preferred  Stock
are first issued) a shelf registration statement (the "Registration  Statement")
pursuant to Rule 415 under the  Securities Act with respect to the resale of (a)
the shares of Series A Preferred Stock issuable in the

8

Offer and (b) the shares of Hybridon  Common Stock  issuable upon  conversion of
such Series A Preferred Stock or upon exercise of the Exchange Warrants,  except
to the  extent  that  any  such  securities  are  then  freely  tradeable  under
applicable  securities  laws or  tradable  subject to the  requirements  of Rule
144(k)  promulgated  under the Securities Act.  Furthermore,  Hybridon will also
agree to use its best  efforts  to have  such  Registration  Statement  declared
effective as soon as practicable after the filing.

Reset Warrants

The following  summary  description  of the Reset  Warrants (as defined  below),
which may be issued to the tendering Noteholders under certain circumstances, is
necessarily  incomplete  and thus is qualified in its entirety by the applicable
provisions  contained  in the  Letter of  Transmittal  and such  provisions  are
incorporated herein by reference.

Upon the  occurrence  of the Series A Reset,  the  holders of Series A Preferred
Stock will receive,  per share of Series A Preferred Stock,  additional warrants
("Reset Warrants") to purchase a number of shares of Hybridon Common Stock equal
to the quotient of (a) the number of shares of Hybridon Common Stock  underlying
the warrants  issuable to the holders of Series B Preferred  Stock, per share of
Series B Preferred Stock, upon the Series B One-Year Reset divided by (b) 2.125.
The Reset Warrants will be  substantially  in the form of the Exchange  Warrants
and be governed by a warrant agreement  substantially in the form of the Warrant
Agreement  (a form of  which is  attached  hereto  as Annex B) for the  Exchange
Warrants,  except as provided  above.  Without  limiting the  generality  of the
foregoing,  such Reset  Warrants  will be subject to redemption at the option of
Hybridon on the same terms applicable to the Exchange Warrants,  and may contain
any legends required by applicable laws.

Also see  "Purpose  of the  Offer;  Certain  Effects  of the Offer --  Ancillary
Agreements."

PROCEDURE FOR TENDERING NOTES

To validly tender the Notes pursuant to the Offer, the tendering Noteholder must
either:

(a) send to the  Depositary  (at one of its addresses set forth on the
back cover of this Offer to  Exchange) a properly  completed  and duly
executed  Letter of  Transmittal  for the Notes  tendered or facsimile
thereof, together with any required signature guarantees and any other
documents required by the Letter of Transmittal,  and either (i) cause
a certificate  representing the Notes to be tendered to be received by
the Depositary, at one of its addresses or (ii) cause such Notes to be
delivered pursuant to the procedures for book-entry transfer described
below (and a  confirmation  of such  delivery  must be received by the
Depositary), in each case on or prior to the Expiration Date; or

(b) comply with the guaranteed  delivery procedure described under "--
Guaranteed Delivery Procedure" below.

The Depositary  will  establish an account at The Depository  Trust Company (the
"Book-Entry  Transfer  Facility")  for  purposes  of the Offer  within  five (5)
business  days  after  the date of this  Offer to  Exchange,  and any  financial
institution  that is a  participant  in the  system of the  Book-Entry  Transfer
Facility  may make  delivery of the Notes by causing  such  Book-Entry  Transfer
Facility to transfer such Notes into the Depositary's account in accordance with
the procedures of such Book-Entry  Transfer  Facility.  ALTHOUGH DELIVERY OF THE
NOTES MAY BE EFFECTED THROUGH BOOK-ENTRY TRANSFER, A PROPERLY COMPLETED AND DULY
EXECUTED  LETTER OF  TRANSMITTAL  FOR THE NOTES  TENDERED OR FACSIMILE  THEREOF,
TOGETHER  WITH  ANY  REQUIRED  SIGNATURE   GUARANTEES  AND  ANY  OTHER  REQUIRED
DOCUMENTS,  MUST, IN ANY CASE, BE RECEIVED BY THE  DEPOSITARY AT ITS ADDRESS SET
FORTH ON THE BACK COVER OF THIS OFFER TO EXCHANGE ON OR PRIOR TO THE  EXPIRATION
DATE,  OR THE  TENDERING  NOTEHOLDER  MUST COMPLY WITH THE  GUARANTEED  DELIVERY
PROCEDURE DESCRIBED BELOW.

DELIVERY OF THE LETTER OF TRANSMITTAL  AND ANY OTHER  REQUIRED  DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Except as otherwise  provided  below,  all signatures on a Letter of Transmittal
must  be  guaranteed  by a  firm  that  is a  member  of a  registered  national
securities exchange or the National Association of Securities Dealers, Inc. (the
"NASD"),  or by a bank or trust company having an office or correspondent in the
United  States  which  is a  participant  in  an  approved  Signature  Guarantee
Medallion  Program  (each of the  foregoing  being  referred to as an  "Eligible
Institution").  Signatures on a Letter of Transmittal  need not be guaranteed if
(a) the Letter of Transmittal  is signed by the  registered  holder of the Notes
tendered  therewith,  or (b) such  Notes  are  tendered  for the  account  of an
Eligible Institution.

Guaranteed Delivery Procedure.

If a Noteholder desires to tender Notes pursuant to the Offer and cannot deliver
certificate for such Notes and all other required documents to the Depositary on
or prior to the Expiration Date, or the procedure for book-entry transfer cannot
be complied with in a timely manner,  such Notes may nevertheless be tendered if
all of the following conditions are met:

(i) such tender is made by or through an Eligible Institution;

(ii) a  properly  completed  and duly  executed  Notice of  Guaranteed
Delivery in the form provided by Hybridon (with any required signature
guarantees)  is received  by the  Depositary  as provided  below on or
prior to the Expiration Date; and

9

(iii)  the  certificate  for  such  Notes  (or  a  confirmation  of  a
book-entry transfer of such Notes into the Depositary's account at the
Book-Entry Transfer Facility),  together with a properly completed and
duly executed  Letter of Transmittal  for the Notes to be tendered (or
facsimile  thereof) and any other documents  required by the Letter of
Transmittal,  are received by the  Depositary no later than 5:00 P.M.,
New York  City  time,  on the  third  business  day  after the date of
execution of the Notice of Guaranteed Delivery.

The  Notice  of  Guaranteed  Delivery  may be  delivered  by  hand  or
transmitted  by facsimile  transmittal or mailed to the Depositary and
must  include a guarantee by an Eligible  Institution  in the form set
forth in such Notice of Guaranteed Delivery.

THE METHOD OF DELIVERY OF THE NOTES AND ALL OTHER  REQUIRED  DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING NOTEHOLDER.  IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT  REQUESTED,  PROPERLY INSURED,  IS RECOMMENDED.  IN ALL
CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.

NOTEHOLDERS  ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS  REGARDING THE TAX
CONSEQUENCES OF THE OFFER. SEE "CERTAIN INCOME TAX CONSEQUENCES."

All  questions  as to the  form  of  documents  and  the  validity,  eligibility
(including  time of receipt) and  acceptance  for payment of any tender of Notes
will be determined by Hybridon,  in its sole discretion,  and its  determination
shall be final and binding.  Hybridon  reserves the absolute right to reject any
or all tenders of Notes that (i) it  determines  are not in proper form, or (ii)
the  acceptance  for  payments  of or payment  for which may,  in the opinion of
Hybridon's  counsel,  be unlawful.  Hybridon also reserves the absolute right to
waive any defect or irregularity in any tender of Notes.  None of Hybridon,  the
Depositary  or any other  person  will be under  any duty to give  notice of any
defect or irregularity in tenders, nor shall any of them incur any liability for
failure to give any such notice.

WITHDRAWAL RIGHTS

Tenders of Notes made  pursuant to the Offer may be  withdrawn at any time prior
to the Expiration Date.  Thereafter,  such tenders are irrevocable,  except that
they may be  withdrawn  after April 6, 1998,  unless  theretofore  accepted  for
exchange as provided in this Offer to Exchange.  If, Hybridon extends the period
of time during which the Offer is open,  is delayed in accepting for exchange or
exchanging  for Notes or is unable to accept for  exchange or exchange for Notes
pursuant to the Offer for any reason,  then,  without  prejudice  to  Hybridon's
rights under the Offer,  the Depositary  may, on behalf of Hybridon,  retain all
Notes tendered, and such Notes may not be withdrawn except as otherwise provided
in this "Terms of the  Offer--Withdrawal  Rights,"  subject to Rule  13e-4(f)(5)
under the Securities  Exchange Act of 1934 (the "Exchange Act"),  which provides
that the issuer  "making  the tender  offer shall  either pay the  consideration
offered,  or return the tendered  securities,  promptly after the termination or
withdrawal of the tender offer."

To be effective,  a written or facsimile  transmission notice of withdrawal must
be timely  received  by the  Depositary  at one of its  addresses  or  facsimile
numbers set forth on the back cover of this Offer to Exchange  and must  specify
the name of the person who tendered the Notes to be withdrawn  and the amount of
Exchange  Value of the Notes to be withdrawn.  If the Notes to be withdrawn have
been delivered to the Depositary,  a signed notice of withdrawal with signatures
guaranteed by an Eligible  Institution  (except in the case of Notes tendered by
an Eligible  Institution)  must be submitted prior to the release of such Notes.
In addition, such notice must specify, in the case of Notes tendered by delivery
of  certificates,  the name of the registered  holder (if different from that of
the  tendering  Noteholder)  and the  serial  numbers  shown  on the  particular
certificates  evidencing  the  Notes to be  withdrawn  or,  in the case of Notes
tendered  by  book-entry  transfer,  the name and  number of the  account at the
Book-Entry  Transfer  Facility to be credited with the  withdrawn  Notes and the
name of the  registered  holder (if  different  from the name of such  account).
Withdrawals  may not be rescinded and Notes  withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However,  withdrawn Notes may be
retendered by again  following one of the procedures  described in "Terms of the
Offer--Procedure for Tendering Notes" at any time prior to the Expiration Date.

All  questions  as to the form and validity  (including  time of receipt) of any
notice of withdrawal will be determined by Hybridon in its sole discretion,  and
its  determination  shall  be  final  and  binding.  Neither  of  Hybridon,  the
Depositary  or any other person will be under any duty to give  notification  of
any defect or  irregularity  in any notice of  withdrawal or incur any liability
for failure to give any such notification.

ACCEPTANCE FOR EXCHANGE OF NOTES AND EXCHANGE

Upon the terms and  subject to the  conditions  of the Offer and as  promptly as
practicable  after the Expiration  Date (which is expected to be within four (4)
business days after the Expiration Date),  Hybridon will accept for exchange and
exchange the Notes  validly  tendered.  See "-- Amount of Notes;  Consideration;
Expiration Date;  Interest Payment";  "-- Extension;  Termination;  Amendments";
"--Certain  Conditions  of the Offer" and "Source and Amount of  Consideration."
Thereafter,  exchange  for  all  Notes  validly  tendered  on or  prior  to  the
Expiration Date and accepted for exchange  pursuant to the Offer will be made by
the  Depositary  as promptly  as  practicable.  In all cases,  payment for Notes
accepted  for  exchange  pursuant  to the Offer will be made only  after  timely
receipt by the Depositary of  certificates  for Notes (or of a confirmation of a
book-entry  transfer  of  such  Notes  into  the  Depositary's  account  at  the
Book-Entry Transfer Facility),  a properly completed and duly executed Letter of
Transmittal for the Notes tendered or facsimile thereof,  and any other required
documents.

For purposes of the Offer, Hybridon will be deemed to have accepted for exchange
(and thereby  exchanged) Notes that are validly tendered prior to the Expiration
Date and not  withdrawn  as, if and when it gives oral or written  notice to the
Depositary of its  acceptance  for exchange of such Notes.  Hybridon will effect
the  exchange  of the  Notes  that it has  accepted  pursuant  to the  Offer  by
depositing the consideration  therefor with the Depositary.  The Depositary will
act  as  agent  for   tendering   Noteholders   for  the  purpose  of  receiving
consideration from Hybridon and transmitting the same to tendering  Noteholders.
Under no circumstances  will interest be paid on the value of the  consideration
to be issued to tendering  Noteholders,  regardless  of any delay in making such
exchange.

No  Noteholder  may  tender any or all of the  Exchange  Value  attributable  to
accrued but unpaid interest on the principal  amount of the Notes being tendered
without also tendering the Exchange Value attributable to such principal amount,
and vice versa.

10

Certificates  for all  Notes not  accepted  for  exchange  by  Hybridon,  or the
Exchange  Value of the Notes not tendered by the  Noteholder or not accepted for
exchange by  Hybridon,  will be returned  (or, in the case of Notes  tendered by
book-entry transfer, such Notes or Exchange Value will be credited to an account
maintained  with the Book-Entry  Transfer  Facility) as promptly as practicable,
without expense to the tendering Noteholder.

If certain  events  occur,  Hybridon  may not be obligated to exchange the Notes
pursuant to the Offer.  See "--Certain  Conditions of the Offer."  Hybridon will
pay or cause to be paid any  transfer  taxes with  respect to the  exchange  and
transfer of any Notes to it or its order pursuant to the Offer.

CERTAIN CONDITIONS OF THE OFFER

Notwithstanding any other provision of the Offer,  Hybridon will not be required
to accept for  exchange or exchange  any Notes  tendered,  and may  terminate or
amend  the  Offer  with  respect  thereto,  and  may  postpone  (subject  to the
requirements  of the Exchange Act for prompt payment for or return of Notes) the
exchange of Notes  tendered,  if any of the following shall have occurred at any
time after the date of this Offer to Exchange and prior to the  Expiration  Date
(whether  or not  such  occurrence  shall  be  continuing  at the  time  of such
termination, amendment or postponement):

(a) any action or proceeding  shall have been  threatened,  instituted,
pending or taken,  or approval shall have been  withheld,  withdrawn or
abrogated,  or  any  statute,  rule,  regulation,  judgment,  order  or
injunction shall have been threatened,  proposed, sought,  promulgated,
enacted,  entered,  amended, enforced or deemed to be applicable to the
Offer or Hybridon, by any legislative body, court, authority, agency or
tribunal or any other  person,  including the  Securities  and Exchange
Commission   (the   "Commission")   or  the  States  of   Delaware   or
Massachusetts,  that,  in  Hybridon's  sole  judgment,  would  or might
directly or  indirectly  (i) make the  acceptance  for  exchange of, or
exchange  of,  some  or all of  the  Notes  illegal  or  challenge  the
acquisition  of such Notes or otherwise  or in any manner  relate to or
affect the Offer, (ii) materially  impair the contemplated  benefits of
the  Offer  to  Hybridon  or  (iii)  materially  affect  the  business,
condition  (financial  or other),  income,  operations  or prospects of
Hybridon,  or otherwise  materially  impair in any way the contemplated
future conduct of the business of Hybridon; and

(b) there shall have occurred (i) any general suspension of trading in,
or  limitation  on prices for,  securities  on any national  securities
exchange  or in the  over-the-counter  market,  (ii) any  change in the
general  political,  market,  economic or  financial  condition  in the
United  States or abroad that could have a material  adverse  effect on
Hybridon's  business,  operations,   prospects  or  ability  to  obtain
financing  generally  or  the  trading  in  the  equity  securities  of
Hybridon,  (iii)  the  declaration  of  a  banking  moratorium  or  any
suspension  of payments in respect of banks in the United States or any
limitation on, or any event which, in Hybridon's  sole judgment,  might
affect,  the extension of credit by lending  institutions in the United
States,  (iv) the  commencement  of a war,  armed  hostilities or other
international or national calamity directly or indirectly involving the
United States,  or (v) in the case of any of the foregoing  existing at
the time of the commencement of the Offer, in Hybridon's sole judgment,
a material acceleration or worsening thereof.

The  foregoing  conditions  are for the  sole  benefit  of  Hybridon  and may be
asserted by Hybridon  regardless of the  circumstances  (including any action or
inaction by Hybridon) giving rise to any such condition,  and any such condition
may be waived  by  Hybridon,  in whole or in part,  at any time and from time to
time in its sole discretion. The failure by Hybridon at any time to exercise any
of the foregoing  rights shall not be deemed a waiver of any such right and each
such right  shall be deemed an ongoing  right  which may be asserted at any time
and from time to time.  Any  determination  by  Hybridon  concerning  the events
described above will be final and binding on all parties.

EXTENSION; TERMINATION; AMENDMENTS

Prior to the  Expiration  Date,  Hybridon  may extend the period of time  during
which the Offer is open or otherwise amend or modify the Offer and may terminate
the Offer for any reason. There can be no assurance, however, that Hybridon will
extend the Offer. During any such extension,  all Notes previously tendered will
remain  subject  to the  Offer,  except to the  extent  that  such  Notes may be
withdrawn as set forth in "--Withdrawal Rights."

Prior to the  Expiration  Date,  Hybridon may, upon the occurrence of any of the
conditions specified in "--Certain  Conditions of the Offer" terminate the Offer
and not accept for exchange or exchange any Notes  tendered or,  subject to Rule
13e-4(f)(5)  under the Exchange Act (which  provides that the issuer "making the
tender offer shall either pay the consideration  offered, or return the tendered
securities,  promptly after the termination or withdrawal of the tender offer"),
postpone acceptance for exchange of Notes.

To  effect  any  such  extension,   amendment,   modification,   termination  or
postponement,  Hybridon  shall give oral or written notice to the Depositary and
make a  public  announcement  thereof.  Without  limiting  the  manner  in which
Hybridon may choose to make such a public  announcement,  Hybridon shall have no
obligation  (except  as  otherwise  required  by  applicable  law)  to  publish,
advertise or otherwise  communicate any such public announcement,  other than by
making  a  release  to the Dow  Jones  News  Service,  except  in the case of an
announcement  of an extension of the Offer, in which case Hybridon shall have no
obligation  to publish,  advertise or otherwise  communicate  such  announcement
other  than by  issuing a notice of such  extension  by press  release  or other
public  announcement,  which notice shall be issued no later than 9:00 A.M., New
York  City  time,  on the next  business  day  after  the  previously  scheduled
Expiration Date.

If  Hybridon  materially  changes  the  terms of the  Offer  or the  information
concerning  the  Offer,  or if it  waives a  material  condition  of the  Offer,
Hybridon will extend the Offer to the extent  required by Rules  13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Under these rules, the minimum period during
which an offer must remain open following  material  changes in the terms of the
offer or information  concerning the offer (other than a change in price, change
in dealer's  soliciting  fee or change in percentage of securities  sought) will
depend on the facts and  circumstances,  including the relative  materiality  of
such terms or  information.  In a published  release,  the Commission has stated
that,  in its view,  an offer should  remain open for a minimum of five business
days from the date that a notice of such a material  change is first  published,
sent or given.  The Offer will be extended for at least ten  business  days from
the time Hybridon publishes, sends or gives to Noteholders a notice that it will
(a)  increase or  decrease  the  consideration  it will pay for Notes or pay any
soliciting  fee or (b)  increase  (if  previously  decreased)  or  decrease  the
percentage of Exchange  Value of the Notes it seeks (except that the  acceptance
for payment of  additional  Exchange  Value of the Notes not to exceed 2% of the
outstanding Exchange Value of the Notes shall not be deemed to be an increase).

11

SELECTED CONSOLIDATED FINANCIAL INFORMATION
In thousands, except per share data

Years Ended
December 31,                             Nine Months Ended September 30,
------------------             ----------------------------------------------------

1995          1996             1996         1997            1997           1997
Pro Forma
Pro Forma(1)  As Adjusted(2)
------------------             ----------------------------------------------------

Revenues                                 $  1,405     $  4,009          $  2,946     $  3,143     $  3,143       $  3,143

Interest Expense                             (173)        (124)              (88)      (3,223)        (973)          (973)

Net Loss                                  (34,547)     (46,853)          (32,458)     (49,977)     (47,727)       (47,727)

Net Loss Applicable to Common                                                                                 
Stockholders (3)                          (34,547)     (46,853)          (32,458)     (49,977)     (49,352)       (49,352)

Basic loss per share (3)                 $ (10.67)    $  (9.66)         $  (6.77)    $  (9.90)    $  (9.78)      $  (9.78)

Diluted loss per share (3)               $ (10.67)    $  (9.66)         $  (6.77)    $  (9.90)    $  (9.78)      $  (9.78)

Shares used in basic and diluted                                                                      
loss per share                              3,239        4,852             4,798        5,047        5,047          5,047

Capitalization
As of September 30, 1997
------------------------
In thousands, except share data
Pro Forma
Actual             Pro Forma(1)      As Adjusted(2)
------             ------------      --------------

Current portion Long Term Debt                                       $   8,063          $   8,063          $   8,063

Long term debt, net of current portion                                   3,557              3,557              3,557

Subordinated Notes                                                      50,000                  -                  -

Stockholders' (Deficit) Equity

Series A Convertible Preferred Stock, $.01 par value
1,033,232 shares authorized; 522,500 issued and
outstanding pro forma and pro forma as adjusted                            -                  5                  5

Series B Convertible preferred Stock, $.01 par value,
2,616,918 shares authorized; 238,000 issued and
outstanding pro forma as adjusted                                          -                  -                  2

Common Stock, $.001 par value, 100,000,000 shares
authorized; issued and outstanding 5,058,450                               5                  5                  5

Additional Paid In Capital                                           173,692            223,321            243,325

Deficit Accumulated During Development Stage                        (199,171)          (199,171)          (199,171)

Deferred compensation                                                 (1,148)            (1,148)            (1,148)
---------

Total Stockholders' (Deficit) Equity                               (26,622)            23,012             43,018
---------

Total Capitalization                                           $  34,998          $  34,632          $  54,638
=========

12

OTHER FINANCIAL DATA:

Years ended                       Nine months ended
December 31,                         September 30,
-----------------------------------------------------------------------
1995            1996       1997            1997           1997
Pro Forma
Pro Forma (1)   As Adjusted (2)

Ratio of earnings to fixed charges (4)                     --            --            --             --             --

Book value per common share (5)                          3.84          4.54         (5.26)         (5.78)         (5.64)

(1)  Pro forma to give effect to the exchange of $50 million in principal amount
of the Notes and  $2,250,000  of  accrued  interest  thereon  for  Series A
Convertible  Preferred  Stock and the  writeoff of  $2,616,000  of deferred
financing  costs to additional  paid in capital.  There can be no assurance
that $50 million in principal  amount of the Notes will be exchanged.  Such
pro forma  adjustments do not reflect the impact of the New Offering or the
issuance of any Offering Notes.

(2)  Pro forma as  adjusted  to give  effect to the  exchange  of $50 million in
principal  amount of the Notes and $2,250,000 of accrued  interest  thereon
for Series A  Convertible  Preferred  Stock,  the writeoff of $2,616,000 of
deferred  financing costs to additional paid in capital and the issuance of
$23.8 million of Series B  Convertible  Preferred  Stock,  net of estimated
issuance costs of $3,794,000. There can be no assurance that $50 million in
principal amount of the Notes will be exchanged and $23.8 million of Series
B Convertible Preferred Stock will be issued.

(3)  Basic  EPS  is  computed  by  dividing  net  loss   applicable   to  common
stockholders  (net loss plus cumulative  preferred stock  dividends) by the
weighted-average  number of common  shares  outstanding  during the period.
Convertible  securities and common stock equivalents have not been included
in diluted EPS since the effect would be antidilutive.

(4)  For the purpose of  calculating  the ratio of  earnings  to fixed  charges,
earnings represent Hybridon's loss from continuing operations before income
taxes plus fixed charges.  Fixed charges consist of interest expense on all
indebtedness  plus the interest portion of rental expense on non-cancelable
leases  and   amortization  of  debt  issuance  costs  and  debt  discount.
Hybridon's  earnings have been inadequate to meet its fixed charges for the
years  ended  December  31,  1995 and 1996  and for the nine  months  ended
September 30, 1996 and 1997 by $33.9 million,  $46.4 million, $32.1 million
and $44.7 million,  respectively.  On a pro forma and pro forma as adjusted
basis as described in notes (1) and (2) above, Hybridon's earnings would be
inadequate  to meet its fixed  charges by $44.7  million in the nine months
ended September 30, 1997.

(5)  Book value per  common  share is  computed  by  dividing  net assets by the
number of common shares  outstanding.  Net assets is equal to stockholders'
(deficit) equity less the liquidation value of preferred stock.

13

RECENT DEVELOPMENTS

The  information  set forth in the Current Reports on Form 8-K dated December 3,
1997, January 11, 1998, January 13, 1998, January 22, 1998 and January 16, 1998,
attached hereto as Annex N through S, is incorporated herein by reference.

The Company recently commenced a private offering, on a "best efforts" basis, of
up to 550  Units (at  $100,000  per  Unit),  each Unit  consisting  of  $100,000
principal amount of the Offering Notes and certain warrants to purchase Hybridon
Common Stock (the "New  Offering").  See Annexes T and U for more information on
the New Offering.

Hybridon  has been  informed by Arthur  Andersen  LLP,  its  independent  public
accountants,  that  their  report on  Hybridon's  December  31,  1997  financial
statements  will  contain  an  explanatory   fourth  paragraph   addressing  the
significant  uncertainty regarding Hybridon's ability to continue operating as a
going  concern  unless  Hybridon  is able to raise  sufficient  capital  to fund
operations for 1998 prior to the release of the audit report.

PRICE RANGE OF HYBRIDON COMMON STOCK; DIVIDENDS

Although the Notes have been eligible for trading in the PORTAL market, Hybridon
has been advised by the National  Quotation Bureau that it has no records of any
reported transactions in the Notes on the PORTAL market. Moreover,  Hybridon has
no  pricing  information  with  respect  to  other  types  of  secondary  market
transactions  in the  Notes.  Hybridon  Common  Stock,  into which the Notes are
convertible  (at a  $35.0625  conversion  price,  after  giving  effect  to  the
five-for-one  reverse  stock  split),  is quoted  for  trading on the Nasdaq OTC
Bulletin  Board  under the  symbol  "HYBN".  Prior to  Hybridon's  delisting  on
December  2, 1997,  Hybridon  Common  Stock was quoted for trading on the Nasdaq
National Market System. See the information  incorporated by reference under the
caption "--Recent  Developments."  The last reported bid price on the Nasdaq OTC
Bulletin Board, as of the close of business on February 5, 1998 for the Hybridon
Common Stock is shown on the front cover of this Offer to Exchange.

NOTEHOLDERS  ARE URGED TO OBTAIN  CURRENT  MARKET  QUOTATIONS  FOR THE  HYBRIDON
COMMON STOCK.

The  following  table  sets  forth the high and low  sales or bid  prices of the
Hybridon Common Stock for the fiscal quarters  indicated (after giving effect to
the one-for-five reverse stock split).

High         Low
1996

First Quarter (from January 24, 1996)............      $71.250       $ 43.750
Second Quarter...................................       59.375         25.625
Third Quarter....................................       59.375         33.125
Fourth Quarter...................................       43.125         26.250

1997

First Quarter....................................       43.125         28.125
Second Quarter...................................       35.625         25.000
Third Quarter....................................       28.125          7.500
Fourth Quarter...................................        4.859          2.609

1998

First Quarter (through February 5, 1998).........        3.359          1.000

Hybridon  has never  declared or paid cash  dividends  on its capital  stock and
Hybridon  does not expect to pay any cash  dividends  on its Common Stock in the
foreseeable  future. The Indenture limits Hybridon's ability to pay dividends or
make other distributions on the Hybridon Common Stock. In addition,  Hybridon is
currently  prohibited  from paying cash dividends under a credit facility with a
commercial bank.

14

PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER

Purpose of the Offer; Certain Effects of the Offer

The Offer  constitutes a part of the  Restructuring of the capital  structure of
Hybridon to raise up to  $55,000,000  (less fees,  commissions  and expenses) in
cash for use in  Hybridon's  operations  and to reduce  Hybridon's  debt service
obligations.  In addition,  if successful,  the  Restructuring  will improve the
financial  position of Hybridon by reducing  the  indebtedness  of Hybridon  for
financial reporting purposes,  and thereby improve the chances of Hybridon being
able to comply with the quantitative criteria for the listing of Hybridon Common
Stock on the Nasdaq Stock Market.

Upon the  occurrence  of the  Restructuring  Trigger  (as  defined  below),  the
Offering  Notes  (which  currently  rank  senior to the  Consenting  Notes) will
automatically  be converted into shares of Series B Preferred  Stock of Hybridon
(with such powers,  preferences  and limitations as set forth in the Certificate
of Designation for Series B Preferred Stock, which is annexed hereto as Annex C)
which shall rank junior to the Series A Preferred  Stock  issuable in the Offer.
As a result,  the Offer  presents  the holders of the  Consenting  Notes with an
opportunity  effectively to nullify the subordination effected by the Consent if
the Net Proceeds Threshold (as defined below) is achieved.  Furthermore,  unless
the  Restructuring  Trigger occurs prior to the Termination  Date (as defined in
the Unit Purchase Agreement included as Annex T hereto) of the New Offering: (i)
purchasers of Units in the New Offering  will be entitled to receive  additional
warrants to purchase, at an exercise price of $.001 per share of Hybridon Common
Stock, a number of shares of Hybridon Common Stock equal to 100% (rounded to the
nearest whole share) of the Hybridon  Common Stock  underlying  their  purchased
Offering  Notes and (ii) the  interest  rate  borne by the  Offering  Notes will
increase  from 14% to 18% per  annum.  The Offer is open to all  holders  of the
Notes. See "Terms of the Offer -- Consideration  Being Offered." However, in the
event that a tender of Notes is accepted by Hybridon for exchange  into Series A
Preferred  Stock and Exchange  Warrants,  but the  Restructuring  Trigger is not
attained,  then such tendering Noteholder would be subordinated to all unsecured
creditors of Hybridon, whereas had such Noteholder not tendered, such Noteholder
would  have  ranked  pari  passu  with  respect  to  such  unsecured  creditors.
Furthermore,  any  tendering  Noteholder,  whose Notes are accepted for exchange
pursuant to the Offer,  will be subordinated to the other Noteholders who do not
tender their Notes in the Offer.

As used herein,  the  "Restructuring  Trigger"  means such time that both (a) at
least  $40,000,000  in principal  amount of the Notes  (together with all of the
then accrued but unpaid interest thereon) is irrevocably  exchanged in the Offer
for  Series A  Preferred  Stock and  Exchange  Warrants,  and (b)  Hybridon  has
received Net Proceeds in the New Offering equal to or exceeding $20,000,000 (the
"Net  Proceeds  Threshold").  There can be no assurance  that the  Restructuring
Trigger will occur.

The fair market value of the Series A Preferred Stock and Exchange Warrants will
be allocated  first to principal and then to accrued but unpaid  interest on the
principal amount of the Notes.

Limitations on Resale of Hybridon Stock

The Series A Preferred Stock and the Exchange  Warrants to be issued in exchange
for the Notes in the Offer,  the Reset  Warrants  (if any) and  Hybridon  Common
Stock issuable upon conversion or exercise of the Series A Preferred  Stock, the
Exchange  Warrants  or the Reset  Warrants  (if any),  shall  have the status of
securities   acquired  in  transaction  under  the  so-called  "exchange  offer"
exemption  under Section  3(a)(9) of the  Securities Act but cannot be resold by
the tendering  Noteholders  without  registration under the Securities Act or an
exemption  therefrom.  Hybridon has agreed to effect a shelf  registration under
the Securities Act of the Series A Preferred Stock and the Hybridon Common Stock
underlying the Series A Preferred Stock and the Exchange Warrants. See "Terms of
the Offer -- Consideration  Being Offered -- Registration  Rights." Prior to the
effectiveness of the registration  statement covering such securities,  however,
the holders thereof may not sell any such  securities  without an exemption from
registration  under the Securities Act. However,  for purposes of Rule 144 under
the  Securities  Act,  the holding  period of the Series A  Preferred  Stock and
Hybridon Common Stock issued upon  conversion  thereof may be "tacked" onto that
of the Notes exchanged in the Offer.

Each  certificate  representing  the  Series A  Preferred  Stock,  the  Exchange
Warrants and the Hybridon  Common Stock  issuable  upon  conversion  or exercise
thereof shall contain a legend to the effect that the securities  represented by
such certificate have the status of securities  acquired in transaction under an
exemption of Section  3(a)(9) of the Securities Act and cannot be resold without
registration under the Securities Act or an exemption therefrom.

Ancillary Agreements

AS SET FORTH IN MORE DETAIL IN THE LETTER OF TRANSMITTAL, BY SIGNING AND SENDING
SUCH  LETTER OF  TRANSMITTAL,  THE  TENDERING  NOTEHOLDERS  ARE  MAKING  CERTAIN
REPRESENTATIONS AND AGREEING TO BE BOUND BY CERTAIN COVENANTS CONTAINED THEREIN.
IN ADDITION,  HYBRIDON WILL MAKE CERTAIN  REPRESENTATIONS  AND  AGREEMENTS  WITH
RESPECT TO CERTAIN MATTERS PURSUANT TO THE LETTER OF TRANSMITTAL. SUCH COVENANTS
AND REPRESENTATIONS OF HYBRIDON WILL BECOME EFFECTIVE AND BINDING ON HYBRIDON AT
SUCH TIME THAT  HYBRIDON  ACCEPTS FOR EXCHANGE ANY OF THE EXCHANGE  VALUE OF THE
NOTES  TENDERED  BY A  TENDERING  NOTEHOLDER.  IN THE  EVENT  THAT THE  OFFER IS
TERMINATED  BY HYBRIDON OR HYBRIDON  DOES NOT ACCEPT FOR  EXCHANGE  ANY EXCHANGE
VALUE OF THE NOTES  VALIDLY  TENDERED  BY A  TENDERING  NOTEHOLDER,  NONE OF THE
COVENANTS,   AGREEMENTS  AND  REPRESENTATIONS  MADE  BY  EITHER  SUCH  TENDERING
NOTEHOLDER  OR HYBRIDON IN THE LETTER OF  TRANSMITTAL  WILL BE VALID  AGAINST OR
BINDING   UPON  THE  PARTY   WHO  MADE  ANY  SUCH   COVENANTS,   AGREEMENTS   OR
REPRESENTATIONS. ANY TENDER NOT ACCOMPANIED BY THE LETTER OF TRANSMITTAL WILL BE
DEEMED INVALID. PLEASE READ CAREFULLY THE LETTER OF TRANSMITTAL.

15

The following  description  summarizes the agreements contained in the Letter of
Transmittal. However, such description is qualified in its entirety by reference
to the Letter of Transmittal and the same is incorporated herein by reference.

Certain Sale Restrictions

By signing and returning the Letter of Transmittal, the tendering Noteholder and
each beneficial  owner of the Notes  tendered,  in  consideration  of Hybridon's
acceptance  of the Notes so  tendered,  will thereby  agree not to,  directly or
indirectly,  through related parties,  affiliates or otherwise, (i) sell "short"
or  "short  against  the box" (as  those  terms are  generally  understood)  any
security of Hybridon,  or (ii) otherwise engage in any  transaction,  except for
any transaction  approved by Hybridon in writing,  that involves hedging of such
holder's  position  in any  security  of  Hybridon;  provided,  however,  that a
tendering  Noteholder  or such a beneficial  owner may have an  aggregate  short
position  covering any number of shares of Hybridon  Common Stock fewer than the
quotient  of (a) the  product of (x) the number of shares of Series A  Preferred
Stock held by such holder multiplied by (y) the Dividend Base Amount (as defined
in the Certificate of Designation for the Series A Preferred Stock),  divided by
(b) the conversion  price of the Series A Preferred Stock as in effect from time
to time.

Restriction on Indebtedness and Senior Equity Issuances; Affiliate Transactions

Hybridon will agree that,  following  the  Restructuring  Trigger,  it will not,
without the consent of the Designated  Director (as defined below),  (i) for the
first 12 months, incur, assume or guarantee any additional  indebtedness (A) for
money borrowed,  (B) evidenced by a note,  debenture or similar instrument given
in connection with the acquisition of any business,  Property (as defined in the
Indenture) or assets,  (C) consisting of obligations of Hybridon as lessee under
leases  required to be capitalized on the balance sheet of the lessee under GAAP
(as defined in the Indenture) or (D) consisting of reimbursement obligations and
other  liabilities  (contingent or otherwise) with respect to letters of credit,
bank guarantees or bankers' acceptances (collectively, "Indebtedness"), or issue
any equity  securities  senior in dividends  or  liquidation  preference  to the
Series A  Preferred  Stock  other  than with  respect  to:  (a) any  amendments,
renewals, extensions, modifications, refinancings and refundings of the Loan and
Security  Agreement,  dated December 31, 1996,  between  Silicon Valley Bank and
Hybridon,  provided that the principal amount does not exceed $7,500,000 and the
maturity date is not advanced;  (b) capitalized leases with a capitalized amount
not exceeding  $3,000,000;  (c) the Offering  Notes  (including  Offering  Notes
issued as  interest  thereon);  and (d) any  amendments,  renewals,  extensions,
modifications,  refinancings  and  refundings  of the above  (provided  that the
maturity date is not advanced and the original amount thereof is not increased);
and (ii) for the  second 12 months,  (A) incur any  additional  Indebtedness  in
excess of $10 million over the permitted level for the first 12 months (provided
that  capitalized  leases entered into in the first 24 months will count against
the $10  million  threshold)  or (B)  issue  more than $15  million  liquidation
preference  of  any  equity   securities  senior  in  dividends  or  liquidation
preference  to the Series A Preferred  Stock.  Furthermore,  Hybridon will agree
that, for so long as the Series A Preferred Stock remains outstanding, following
the  Restructuring  Trigger,  it will not, without the consent of the Designated
Director,  enter into any  transaction  with any  Affiliate  (as  defined in the
Indenture) of Hybridon unless such  transaction is approved by a majority of the
independent directors of Hybridon.

Board Seat

Upon the occurrence of the Restructuring Trigger, for so long as at least 50% of
the Series A Preferred Stock initially issued in the Offer remains  outstanding,
the  holders  of  Series A  Preferred  Stock as a class  shall  be  entitled  to
designate  one member for  nomination to the Board of Directors of Hybridon (the
"Designated  Director"),  provided that such nominee is reasonably acceptable to
Hybridon.

Certain Additional Covenants and Representations of Hybridon

Effective upon its acceptance for exchange of Notes in the Offer,  Hybridon will
represent and warrant to tendering  Noteholders  that,  since March 26, 1997, no
event has occurred  which would change the  Conversion  Price (as defined in the
Indenture)  other than the reverse stock split  effected by Hybridon in December
1997. Furthermore, upon such acceptance, Hybridon will covenant not to engage in
any act that would change such Conversion Price without adjusting the conversion
price and  conversion  rate of the Series A  Preferred  Stock to the extent that
such adjustment would be required  pursuant to the Certificate of Designation of
the Series A Preferred Stock.

Also see "Terms of the Offer --  Consideration  Being  Offered  --  Registration
Rights."

Purchase of Notes After the Offer

After  the  consummation  of the  Offer,  Hybridon  may  determine  to  purchase
additional  Notes on the open  market,  in  privately  negotiated  transactions,
through one or more tender or exchange  offers or otherwise.  Any such purchases
may be on the same  terms as, or on terms  which are more or less  favorable  to
holders of Notes than, the terms of the Offer.  However,  Rule 13e-4(f)(6) under
the Exchange Act  prohibits  Hybridon and its  affiliates  from  purchasing  any
Notes,  other than pursuant to the Offer, until at least ten business days after
the Expiration  Date. Any future  purchases of Notes by Hybridon would depend on
many factors,  including  Hybridon's  business and financial  position,  capital
requirements of Hybridon, and general economic and market conditions.

The Offer Not Redemption

Noteholders  are not under any  obligation  to tender the Notes  pursuant to the
Offer. The Offer does not constitute  notice of redemption of any Notes pursuant
to the  Indenture,  nor does  Hybridon  intend to effect any such  redemption by
making the Offer.  The Indenture  does not permit  Hybridon to redeem any of the
Notes prior to April 1, 2000. The Offer does not constitute a waiver by Hybridon
of any option it has to redeem Notes and all Notes remaining  outstanding  after
the Offer will continue to be redeemable at the option of Hybridon in accordance
with the terms of the Notes and the  Indenture.  The Notes are redeemable at the
option of Hybridon on and after April 1, 2000  (provided that prior to March 31,
2001, the Notes may not be redeemed unless certain conditions are met) at 104.5%
of the principal amount thereof and thereafter at prices  declining  annually to
100% of the  principal  amount on and after  April 1, 2003  plus,  in each case,
dividends accrued to the redemption date.

16

Except  as set forth  elsewhere  in this  Offer to  Exchange  (and any  document
incorporated herein), Hybridon has no current plans or proposals which relate to
or would result in: (a) the  acquisition by any person of additional  securities
of Hybridon or the disposition of securities of Hybridon;  (b) an  extraordinary
corporate  transaction,   such  as  a  merger,  reorganization  or  liquidation,
involving  Hybridon  or any of its  subsidiaries;  (c) a sale or  transfer  of a
material amount of assets of Hybridon or any of its subsidiaries; (d) any change
in the present Board of Directors or  management  of Hybridon;  (e) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of Hybridon;  (f) any other material change in Hybridon's corporate structure or
business;  (g) any change in Hybridon's  Certificate of Incorporation or By-Laws
or any actions  which may impede the  acquisition  of control of Hybridon by any
person;  (h) a class of equity  securities  of Hybridon  becoming  eligible  for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(i) the suspension of Hybridon's  obligation to file reports pursuant to Section
15(d) of the Exchange Act.

NEITHER HYBRIDON, ITS BOARD OF DIRECTORS NOR ANY OF ITS EXECUTIVE OFFICERS MAKES
ANY  RECOMMENDATION  TO ANY NOTEHOLDER AS TO WHETHER TO TENDER ANY OR ALL OF THE
EXCHANGE  VALUE OF THE NOTES . EACH  NOTEHOLDER  MUST  MAKE HIS,  HER OR ITS OWN
DECISION  AS TO WHETHER TO TENDER  NOTES  AND,  IF SO, HOW MUCH IN THE  EXCHANGE
VALUE OF THE NOTES TO TENDER.

SOURCE AND AMOUNT OF CONSIDERATION

Assuming that Hybridon  exchanges all  outstanding  Notes pursuant to the Offer,
the total  amount of  consideration  to be paid by Hybridon  will consist in the
aggregate of (i) approximately 520,000 shares of Series A Preferred Stock, which
shall be issued  from  Hybridon's  authorized  but  unissued  shares of Hybridon
Preferred  Stock,  (ii)  Exchange  Warrants to purchase such number of shares of
Hybridon  Common  Stock equal to 15% of the number of shares of Hybridon  Common
Stock into which such shares of Series A Preferred Stock would be convertible at
the  Exercise  Price,  and (iii) to the extent  applicable,  Reset  Warrants  to
purchase shares of Hybridon Common Stock. In addition, Hybridon expects to incur
fees and other expenses. See "Fees and Expenses."

TRANSACTIONS AND AGREEMENTS CONCERNING THE NOTES

Based upon Hybridon's  records,  neither Hybridon nor, to Hybridon's  knowledge,
any  of its  associates,  subsidiaries,  directors,  executive  officers  or any
associate  of any such  director  or  executive  officer  owns any  Notes or has
engaged in any  transactions  involving  the Notes  during the 40 business  days
preceding the date hereof. Neither Hybridon nor, to Hybridon's knowledge, any of
its  directors or executive  officers is a party to any  contract,  arrangement,
understanding or relationship  relating directly or indirectly to the Offer with
any other  person  with  respect to any  securities  of  Hybridon  other than as
disclosed or incorporated by reference in this Offer to Exchange.  See "Fees and
Expenses."

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The  following  is a  discussion  of  anticipated  certain  federal  income  tax
consequences  to  Hybridon  and  holders of Notes of the  exchange  of Notes for
Series A Preferred Stock and Exchange  Warrants as part of the Restructuring and
to holders of Series A Preferred  Stock,  Exchange  Warrants and Hybridon Common
Stock. The discussion is based on the provisions of the Internal Revenue Code of
1986,  as  amended  (the  "Code"),   final,   temporary  and  proposed  Treasury
regulations thereunder, and administrative and judicial interpretations thereof,
all as in effect as of the date  hereof,  and all of which are subject to change
(perhaps  retroactively)  by  legislation,  administrative  action  or  judicial
decision.  There can be no  assurance  that the  Internal  Revenue  Service (the
"Service")  will  not  challenge  one or  more of the  tax  consequences  of the
exchange  described herein, and no opinion of counsel or ruling from the Service
has been or will be requested as to any of such tax consequences.

The discussion as to the tax consequences to holders relates to "U.S.  Holders".
For  purposes  of  this  discussion,  a "U.S.  Holder"  is a  holder  that is an
individual who is a citizen or resident of the United States, a corporation or a
partnership  that is organized  under the laws of the United States or any state
thereof  or an  estate  or trust  whose  income is  includible  in gross  income
regardless of its source.  For its taxable years  beginning  after  December 31,
1996,  a trust  generally  is a U.S.  Holder  only if a court  within the United
States is able to exercise primary  supervision over its  administration and one
or more United  States  persons have the  authority  to control all  substantial
decisions  of the trust.  The  discussion  also  assumes that holders hold their
Notes as capital  assets and will hold the Series A  Preferred  Stock,  Exchange
Warrants and Hybridon Common Stock as capital assets.

The  following  discussion  does not include all matters that may be relevant to
any  particular   holder  in  light  of  such  holder's   particular  facts  and
circumstances.    Certain    holders,    including    financial    institutions,
broker-dealers,  tax-exempt entities,  insurance companies and non-U.S.  Holders
may be subject to special treatment not described below.

THE FEDERAL INCOME TAX  CONSEQUENCES OF THE  TRANSACTIONS  DESCRIBED  HEREIN ARE
COMPLEX.  ALL HOLDERS OF NOTES SHOULD  CONSULT WITH THEIR OWN TAX ADVISORS AS TO
THE  PARTICULAR TAX  CONSEQUENCES  TO THEM OF THE EXCHANGE AND THE OWNERSHIP AND
DISPOSITION OF SERIES A PREFERRED STOCK,  EXCHANGE  WARRANTS AND HYBRIDON COMMON
STOCK,  INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX
LAWS.

17

Tax Consequences to Hybridon

Cancellation of Indebtedness

If a taxpayer  satisfies  its  outstanding  debt  obligations  for less than its
principal amount, such taxpayer generally realizes  cancellation of debt ("COD")
income  for  federal  income  tax  purposes.  In the case of an  exchange  where
outstanding  indebtedness  is canceled in exchange for stock and  warrants,  the
amount of such COD income is, in  general,  equal to the excess of the  adjusted
issue  price  (including  accrued  but  unpaid  interest)  of  the  indebtedness
satisfied over the fair market value of such stock and warrants.

Such COD income  generally  is  recognized  and  included  in the  corporation's
taxable  income,  except to the extent that the taxpayer is insolvent (or if the
taxpayer is in  bankruptcy).  Certain tax attributes of the taxpayer,  including
net  operating   loss   carryovers   ("NOLs"),   tax  credit  and  capital  loss
carryforwards  and tax basis in  property,  must be reduced by the amount of the
taxpayer's  COD  income  that is  excluded  due to  insolvency.  Such  attribute
reductions are made after the  determination of the taxpayer's tax liability for
the taxable year in which the debt cancellation occurs.

Whether  Hybridon  will  recognize  COD income  upon the  exchange of Notes will
depend upon the value of the Series A Preferred  Stock and Exchange  Warrants at
the time of the exchange.  Any such COD income will be excluded from  Hybridon's
taxable  income to the  extent,  if any,  of its  insolvency  at such time (with
correlative reduction of its tax attributes), and the remainder will be included
in Hybridon's  taxable  income.  In general,  Hybridon will be able to apply its
NOLs, to the extent thereof, against any such COD income that is not excludable.

Limitation on NOL Utilization

A corporation that undergoes an "ownership  change" is generally  limited in the
use of its pre-change  NOLs and certain  built-in  losses.  An ownership  change
generally occurs when the percentage of the corporation's stock by value held by
certain persons  (identified in the Code as "5% shareholders")  increases in the
aggregate by more than 50  percentage  points over the lowest level held by such
persons during a three-year  testing  period.  Hybridon  believes that while the
exchange of Notes for Series A Preferred  Stock and Exchange  Warrants  will not
result in an ownership change of Hybridon for these purposes,  the conversion of
the Offering Notes into Series B Preferred  Stock upon a  Restructuring  Trigger
may result in such an ownership change.

If an ownership change occurs, the corporation's  annual utilization of its NOLs
is limited (subject to special rules with respect to certain  built-in-gains) to
the product of the corporation's  equity value immediately  before the ownership
change  multiplied by the  applicable  long-term  federal  tax-exempt  rate. For
Federal income tax purposes,  net operating loss and tax credit carryforwards as
of  December  31,  1996  were   approximately   $138,191,000   and   $2,989,000,
respectively. An ownership change would severely limit Hybridon's ability to use
such carryforwards.

Tax Consequences to Holders of Notes

The Exchange

The  exchange  of Notes  for  shares of Series A  Preferred  Stock and  Warrants
pursuant  to the  Offer  should  constitute  a  recapitalization  under  Section
368(a)(1)(E) of the Code, and,  therefore,  except as provided below, no gain or
loss should be  recognized by the holders of Notes.  Notwithstanding  the above,
provided the exchange  occurs before March 9, 1998,  any realized gain should be
recognized  and  includable  in income to the extent of the fair market value of
the  Exchange  Warrants  (not  attributable  to  accrued  but  unpaid  interest)
received.  The amount of gain realized should equal the positive difference,  if
any,  between  (a) the fair  market  vale of the  Series A  Preferred  Stock and
Exchange  Warrants  received,  except  to the  extent  attributable  to  accrued
interest, and (b) the principal amount of the Notes exchanged.
Any such gain recognized generally should constitute short term capital gain.

In addition,  exchanging  holders of Notes who have not  previously  included in
income accrued but unpaid interest should recognize  ordinary interest income to
the extent that the Series A Preferred Stock and Exchange  Warrants  received is
attributable  to such accrued but unpaid  interest.  Holders who have previously
included  in  income  accrued  but  unpaid  interest  should  be  entitled  to a
deductible loss to the extent such previously  included  interest income exceeds
the  portion of the Series A  Preferred  Stock and  Exchange  Warrants  received
attributable  to such  interest.  The terms of the Offer  provide  that the fair
market  value of the Series A  Preferred  Stock and  Exchange  Warrants  will be
allocated  first to  principal  and then to accrued  but unpaid  interest on the
principal amount of the Notes.  Hybridon will report interest in its information
filings to holders  and to the  Service  in a manner  consistent  with the above
allocation.  However, there can be no assurance that the Service will agree with
such allocation.  If the Service were to successfully allocate a greater portion
of the exchange consideration to accrued but unpaid interest, cash basis holders
may recognize a greater amount of interest income.

Gain or loss  should be  recognized  to the  extent  that the amount of any cash
received in lieu of fractional  shares of Series A Preferred  Stock exceeds (or,
in the case of a loss, is less than) the holder's  basis in the Notes  allocable
to such fractional interests received.

The Exchange Warrants

Basis and Holding  Period.  In  general,  a holder's  tax basis in the  Exchange
Warrants received  pursuant to the Restructuring  should equal their fair market
value  (except  that,  if the  exchange  occurs on or after  March 9, 1998,  the
holder's basis in the Exchange Warrants (and not allocable to accrued and unpaid
interest)  should  equal the  holder's  adjusted tax basis in the portion of the
Notes  surrendered  allocable to the  Exchange  Warrants  received).  A holder's
holding  period  in the  Exchange  Warrants  should  begin on the day  after the
exchange  (except  that if the  exchange  occurs on or after March 9, 1998,  the
holding  period for the  Exchange  Warrants  (other than those  attributable  to
accrued but unpaid  interest)  should  include  the holding  period of the Notes
exchanged).

Exercise or Sale of an Exchange  Warrant.  The  exercise of an Exchange  Warrant
should not be taxable to the holder  thereof.  A holder of an  Exchange  Warrant
should  recognize gain or loss upon the sale of an Exchange Warrant in an amount
equal to the difference between the amount realized on the sale and the holder's
adjusted

18

tax basis in the Exchange Warrant. Such gain or loss generally should constitute
long term capital gain or loss if the holder's  holding  period for the Exchange
Warrants was more than one year, and with respect to individual holders,  should
be taxed at the lowest rates  applicable to capital gains if such holding period
was more than 18 months.

Expiration  of the Exchange  Warrants.  Upon the  expiration  of an  unexercised
Exchange  Warrant,  a holder  should  recognize  a loss  equal  to the  holder's
adjusted tax basis in the Exchange  Warrant.  Such loss generally should be long
term capital loss if the Exchange Warrant was held for more than one year.

Series A Preferred Stock and Hybridon Common Stock

Basis and  Holding  Period.  In  general,  a holder's  tax basis in the Series A
Preferred  Stock  received  pursuant  to the  Restructuring  (other  than  stock
received  attributable to accrued but unpaid  interest)  should equal the sum of
the  holder's  adjusted tax basis in the Notes  surrendered  (other than the tax
basis in the  portion  of the Notes  treated  as  exchanged  for cash in lieu of
fractional  shares of Series A Preferred  Stock),  decreased  by the fair market
value of the  Exchange  Warrants  received  and  increased by the amount of gain
recognized with respect to the receipt of the Exchange Warrants. However, if the
exchange  occurs on or after March 9, 1998,  the holder's  basis in the Series A
Preferred  Stock (that is not allocable to accrued but unpaid  interest)  should
equal the holder's  adjusted  tax basis in the portion of the Notes  surrendered
allocable to the Series A Preferred Stock  received).  A holder's holding period
in the Series A  Preferred  Stock  received  (and not  allocable  to accrued and
unpaid  interest)  should include its holding period for the Notes  surrendered.
The holder's tax basis in that portion of the Series A Preferred  Stock received
that is allocable to accrued and unpaid  interest  should be equal to the amount
of such  interest  deemed  received,  and the  holder's  holding  period in such
portion of the Series A Preferred Stock allocable to accrued and unpaid interest
should begin on the day after the exchange.

A  holder's  tax basis in shares of  Hybridon  Common  Stock  received  upon the
conversion  of  Series A  Preferred  Stock  should  be the same as the  holder's
adjusted  tax basis in the Series A Preferred  Stock  converted  (reduced by the
portion of such basis  allocable  to any  fractional  shares of Hybridon  Common
Stock for which the holder receives a cash payment from  Hybridon).  The holding
period of the Hybridon  Common Stock received in the  conversion  should include
the  holding  period  of the  shares  of  Series A  Preferred  Stock  that  were
converted.

A holder's basis in Hybridon  Common Stock acquired upon exercise of an Exchange
Warrant  should equal the sum of (a) its basis in the  Exchange  Warrant and (b)
the cash paid upon exercise of the Exchange Warrant.  The holding period for the
Hybridon Common Stock acquired upon exercise of an Exchange Warrant should begin
on the day following the day of exercise.

Dividends.  Dividends  paid on Series A Preferred  Stock  (whether in cash or in
kind) or on  Hybridon  Common  Stock  should be taxable to a holder as  ordinary
income, to the extent paid out of Hybridon's current or accumulated earnings and
profits.  Subject to certain  restrictions,  dividends  received  by a corporate
holder generally will be eligible for the 70% dividends received deduction.

Sale. A holder of Series A Preferred Stock or Hybridon Common Stock who sells or
otherwise  disposes  of such  stock in a taxable  transaction  should  recognize
capital  gain or loss  equal  to the  difference  between  the cash and the fair
market value of any property received on such sale and the holder's tax basis in
such  stock.  Such gain or loss  should be long term gain or loss if the holding
period for such  stock was more than one year and,  with  respect to  individual
holders, should be taxed at the lowest rates applicable to capital gains if such
holding period was more than 18 months.

Redemption.  A  redemption  by  Hybridon  of some or all of a holder's  Series A
Preferred  Stock or Hybridon Common Stock should be treated as a dividend to the
redeeming  holder to the extent of Hybridon's  current and accumulated  earnings
and profits unless the redemption meets one of the tests under Section 302(b) of
the Code. If one of the tests under Section 302(b) is met, the redemption should
be treated as an  exchange  giving  rise to  capital  gain or loss as  described
above,  except to the extent of  declared but unpaid  dividends.  Holders should
consult  their tax  advisors as to the  application  of Section  302(b) to their
particular circumstances.

Conversion of Series A Preferred  Stock. A holder generally should not recognize
gain or loss upon  conversion of Series A Preferred  Stock into Hybridon  Common
Stock  (except to the extent  that any cash paid in lieu of a  fractional  share
exceeds the holder's tax basis in the Series A Preferred Stock allocable to such
fractional share).

Adjustments to Conversion Price.  Pursuant to Treasury  Regulations  promulgated
under  Section  305 of the Code,  a holder of an  Exchange  Warrant  or Series A
Preferred  Stock may be treated as having  received a constructive  distribution
from Hybridon upon an adjustment in the  conversion  (or exercise)  price of the
Exchange  Warrants  or  Series A  Preferred  Stock  if (i) as a  result  of such
adjustment,  the proportionate interest of such holder in the assets or earnings
and  profits  of  Hybridon  is  increased  and (ii) the  adjustment  is not made
pursuant to a bona fide, reasonable, anti-dilution formula. An adjustment in the
conversion  price would not be considered made pursuant to such a formula if the
adjustment  were made to  compensate  for  certain  taxable  distributions  with
respect to the Hybridon Common Stock into which the Exchange Warrants and Series
A  Preferred  Stock  are  convertible  (or  exercisable).  Thus,  under  certain
circumstances,  a decrease in the conversion  price of the Exchange  Warrants or
Series A Preferred  Stock may be taxable to a holder of an  Exchange  Warrant or
Series  A  Preferred  Stock  as a  dividend  to the  extent  of the  current  or
accumulated  earnings and profits of Hybridon.  In  particular,  the issuance of
Reset  Warrants  and an  adjustment  to the  conversion  price  of the  Series A
Preferred  Stock may be  taxable  to holders  of Series A  Preferred  Stock.  In
addition,  the failure to adjust fully the conversion (or exercise) price of the
Exchange  Warrants or the Series A Preferred Stock to reflect  distributions  of
stock  dividends  with  respect  to the  Hybridon  Common  Stock may result in a
taxable dividend to the holders of Hybridon Common Stock.

Backup Withholding

A holder of Notes,  Series A Preferred Stock,  Hybridon Common Stock or Exchange
Warrants may, under certain circumstances, be subject to "backup withholding" at
the rate of 31% with respect to cash payments made in lieu of fractional  shares
of Series A Preferred Stock in the exchange,  dividends with respect to stock or
the

19

proceeds of a sale,  exchange  or  redemption  of stock or warrants  unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when  required,  demonstrates  this fact or (ii)  provides  a  correct  taxpayer
identification  number,  certifies  that such  holder is not  subject  to backup
withholding and otherwise  complies with  applicable  requirements of the backup
withholding  provisions.  A holder  who  does not  provide  a  correct  taxpayer
identification  number may be subject to penalties  imposed by the Service.  Any
amount  withheld  under these  rules will be  creditable  against  the  holder's
federal income tax liability.

THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF THE TENDERING NOTEHOLDER. NO INFORMATION IS PROVIDED
HEREIN AS TO THE STATE,  LOCAL OR FOREIGN TAX  CONSEQUENCES  OF THE OFFER.  EACH
NOTEHOLDER  IS URGED TO CONSULT SUCH  NOTEHOLDER'S  OWN TAX ADVISOR TO DETERMINE
THE  PARTICULAR  FEDERAL,  STATE,  LOCAL AND FOREIGN TAX  CONSEQUENCES  OF SALES
PURSUANT TO THE OFFER TO SUCH NOTEHOLDER.

FEES AND EXPENSES

Hybridon has retained ChaseMellon Shareholder Services, L.L.C., as Depositary in
connection with the Offer.  Hybridon or its agent or representative  may contact
Noteholders by mail, telephone,  telex,  telegraph and personal interviews,  and
may request  brokers,  dealers,  banks,  trust  companies and other  nominees to
forward  materials  relating to the Offer to beneficial  owners.  The Depositary
will receive  reasonable  and customary  compensation  for its services and will
also be reimbursed for certain  out-of-pocket  expenses.  Hybridon has agreed to
indemnify  the  Depositary  against  certain   liabilities,   including  certain
liabilities under the federal securities laws, in connection with the Offer. The
Depositary  has not been  retained for the purposes of making  solicitations  or
recommendations in connection with the Offer.

Other than as described above,  Hybridon will not pay any  solicitation  fees to
any broker,  dealer, bank, trust company or other person for any Notes exchanged
in connection with the Offer. Hybridon will reimburse such persons for customary
handling and mailing expenses incurred in connection with the Offer.

CERTAIN INFORMATION CONCERNING HYBRIDON

Hybridon, established in 1989, believes that it is a leader in the discovery and
development of novel genetic medicines based primarily on antisense  technology.
Antisense   technology   involves   the  use  of   synthetic   segments  of  DNA
(oligonucleotides)  constructed  through rational drug design to interact at the
genetic  level with target  messenger  RNA,  which codes for the  production  of
proteins.  In contrast to traditional drugs, which are designed to interact with
protein molecules associated with diseases,  antisense drugs work at the genetic
level to interrupt the process by which  disease-causing  proteins are produced.
Drugs based on  antisense  technology  may have broader  applicability,  greater
efficacy  and fewer side  effects  than  conventional  drugs  because  antisense
compounds are designed to intervene  early in the disease process at the genetic
level and in a highly specific fashion.

For the most recent developments concerning Hybridon, see "Recent Developments."

The principal  executive  offices of Hybridon are located at 620 Memorial Drive,
Cambridge, MA 02139; telephone number (617) 528-7000.

Business of Hybridon

The information set forth under Item 1, Part I of the Annual Report on Form 10-K
for the fiscal  year ended  December  31,  1996 of  Hybridon,  which is attached
hereto as Annex D (the "10-K"), is incorporated herein by reference.

Properties and Facilities

The  information  set  forth in Item 2, Part I of the  10-K,  which is  attached
hereto as Annex D, is incorporated herein by reference.

Legal Proceedings

The  information  set  forth in Item 3, Part I of the  10-K,  which is  attached
hereto as Annex D, is incorporated herein by reference.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

See "Price Range of Hybridon Common Stock; Dividends."

20

SELECTED FINANCIAL DATA

The  information  set forth in Item 6, Part II of the  10-K,  which is  attached
hereto as Annex D, is incorporated herein by reference.

SELECTED CONSOLIDATED FINANCIAL DATA
In thousands, except per share data
Years Ended                        Nine Months Ended
December 31,                         September 30,
-------------------------   ------------------------------------------------
1995       1996         1996        1997       1997       1997
Pro       Pro Forma
Forma(1)    As Adjusted(2)
Statement of Operations Data:

Revenues                                            $  1,405    $  4,009    $  2,946    $  3,143    $  3,143    $  3,143
Net Loss                                             (34,547)    (46,853)    (32,458)    (49,977)    (47,727)    (47,727)
Net Loss Applicable to Common
Stockholders (3)                                     (34,547)    (46,853)    (32,458)    (49,977)    (49,352)    (49,352)
Basic loss per share (3)                            $ (10.67)   $  (9.66)   $  (6.77)   $  (9.90)   $  (9.78)   $  (9.78)
Diluted loss per share (3)                          $ (10.67)   $  (9.66)   $  (6.77)   $  (9.90)   $  (9.78)   $  (9.78)
Shares used in basic and diluted loss per share        3,239       4,852       4,798       5,047       5,047       5,047

As of September 30, 1997
As of December 31,                                   Pro Forma
1995           1996          Actual     Pro Forma(1)  As Adjusted(2)
-------------------------------  ---------------------------------------

Balance Sheet Data:
Cash, cash equivalents and short-term
investments (4)                                               $   5,284      $  16,419      $  14,792      $  14,792      $  34,798

Working capital (deficit)                                           210          8,888         (2,623)          (373)        19,633
Total assets                                                     19,618         41,537         46,603         43,987         63,993
Long-term debt, net of current portion                            1,145          9,032          3,557          3,557          3,557
9% Convertible Subordinated Notes due 2004                            -              -         50,000              -              -

Deficit accumulated in the development stage                   (102,341)      (149,194)      (199,171)      (199,171)      (199,171)

Total stockholders' equity (deficit)                          $  12,447      $  22,855      $ (26,622)     $  23,012      $  43,018

QUARTERLY FINANCIAL DATA
s                       In thousands, except per share data

Three Months Ended
--------------------------------------------------------------
March 31,          June 30,           September 30,
1997               1997                 1997
--------------------------------------------------------------

Revenues                                                            $      1,059       $     1,415          $      668
Operating expenses                                                       (15,077)          (18,941)            (19,102)
Net loss                                                                 (14,018)          (17,525)            (18,434)
Basic loss per share (3)                                                   (2.78)            (3.47)              (3.65)
Diluted loss per share (3)                                                 (2.78)            (3.47)              (3.65)
Cash, cash equivalents and short-investments (4)                           2,490            28,648              14,792
Total Assets                                                              30,967            61,309              46,603
Total current liabilities                                                 12,302             9,571              19,668
Long-term debt and capital lease obligation, net of current portion        9,500            10,020               3,557
9% Convertible Subordinated Notes due 2004                                     -            50,000              50,000
Total stockholders' equity                                                 9,165            (8,281)            (26,622)

21

(1)       Pro forma to give effect to the  exchange of $50 million in  principal
amount of the Notes and  $2,250,000  of accrued  interest  thereon for
Series A Convertible Preferred Stock and the writeoff of $2,616,000 of
deferred  financing costs to additional paid in capital.  There can be
no assurance that $50 million in principal amount of the Notes will be
exchanged. Such pro forma adjustments do not reflect the impact of the
New Offering or the issuance of any Offering Notes.

(2)       Pro forma as adjusted to give effect to the exchange of $50 million in
principal  amount of the  Notes and  $2,250,000  of  accrued  interest
thereon for Series A Convertible  Preferred  Stock and the writeoff of
$2,616,000 of deferred  financing  costs to additional paid in capital
and the issuance of $23.8  million of Series B  Convertible  Preferred
Stock, net of estimated issuance costs of $3,794,000.  There can be no
assurance  that $50 million in  principal  amount of the Notes will be
exchanged and $23.8 million of Series B  Convertible  Preferred  Stock
will be issued.

(3)       Basic  EPS is  computed  by  dividing  net loss  applicable  to common
stockholders  (net loss plus cumulative  preferred stock dividends) by
the  weighted-average  number of common shares  outstanding during the
period.  Convertible  securities and common stock equivalents have not
been included in diluted EPS since the effect would be antidilutive.

(4)       Short-term  investments  consisted of U.S. government securities with 
maturities greater than three months  but less than one year from the 
purchase date.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The  information  set forth in Item 7, Part II of the  10-K,  which is  attached
hereto as Annex D, and in Item 2, Part I of the Current  Report on Form 10-Q for
the fiscal quarter ended  September 30, 1997 of Hybridon (the "10-Q"),  which is
attached hereto as Annex F, is incorporated herein by reference.

DIRECTORS AND EXECUTIVE OFFICERS OF HYBRIDON

The information set forth under the caption "Executive  Officers and Significant
Employees  of the  Company"  in Item 4A,  Part I of the 10-K,  which is attached
hereto as Annex D, and under the caption "Proposal  I--Election of Directors" in
the proxy  statement on Schedule 14A for the 1997 Annual Meeting of Stockholders
of Hybridon, attached hereto as Annex F (the "Proxy Statement"), is incorporated
herein by reference.

EXECUTIVE COMPENSATION

The information  under the caption  "Compensation of Executive  Officers" in the
Proxy Statement,  which is attached hereto as Annex F, is incorporated herein by
reference.

STOCK PERFORMANCE GRAPH

The information set forth under the caption  "Comparative  Stock Performance" in
the Proxy  Statement,  which is attached  hereto as Annex F, is  incorporated by
reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information  set forth under the  caption  "Security  Ownership  of Certain
Beneficial  Owners and  Management"  in the Proxy  Statement,  which is attached
hereto as Annex F, is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  set forth under the  caption  "Security  Ownership  of Certain
Beneficial  Owners and  Management"  in the Proxy  Statement,  which is attached
hereto as Annex F, is incorporated herein by reference.

22

ADDITIONAL INFORMATION

Hybridon is subject to the  informational  requirements of the Exchange Act and,
in accordance therewith,  files reports,  proxy statements and other information
with the Commission. Hybridon has also filed an Issuer Tender Offer Statement on
Schedule 13E-4 with the Commission which includes certain additional information
relating to the Offer.

Such material can be inspected and copied at the public reference  facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the public reference facilities in the Commission's  Regional Offices located at
Seven World Trade Center,  Suite 1300,  New York,  New York 10048,  and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained at prescribed  rates by writing to the Commission,  Public Reference
Section,  450 Fifth Street, N.W.,  Washington,  D.C. 20549. Copies of certain of
such  material can also be inspected at the offices of the Nasdaq Stock  Market,
Inc., 1735 K Street,  Washington, DC 20006-1500.  Hybridon's Schedule 13E-4 will
not be available at the Commission's  Regional Offices. The Commission maintains
a site  (http://www.sec.gov)  on the World Wide Web that contains reports, proxy
and information statements and other information regarding registrants,  such as
Hybridon, that file such documents electronically with the Commission.

MISCELLANEOUS

The  Offer  is not  being  made to,  nor  will  Hybridon  accept  tenders  from,
Noteholders in any  jurisdiction in which the Offer or its acceptance  would not
be in compliance  with the laws of such  jurisdiction.  Hybridon is not aware of
any jurisdiction  where the making of the Offer or the tender of the Notes would
not be in  compliance  with  applicable  law. If Hybridon  becomes  aware of any
jurisdiction  where the making of the Offer or the tender of the Notes is not in
compliance  with any applicable  law,  Hybridon will make a good faith effort to
comply with such law. If, after such good faith effort,  Hybridon  cannot comply
with such law, the Offer will not be made to (nor will tenders be accepted  from
or on behalf of) the holders of the Notes residing in such jurisdiction.  In any
jurisdiction in which the  securities,  blue sky or other laws require the Offer
to be made by a licensed  broker or dealer,  the Offer will be deemed to be made
on Hybridon's behalf by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.

Facsimile  copies of the Letter of Transmittal for the Notes to be tendered will
be accepted. The Letter of Transmittal and certificates for Notes (or in case of
book entry transfer of Notes, a copy of confirmation of such transfer) should be
sent or delivered by each  tendering  Noteholder  or such  Noteholder's  broker,
dealer,  bank or trust company to the Depositary at its address set forth on the
back cover of this Offer to Exchange.

23

The Depositary for the Offer is:

ChaseMellon Shareholder Services, L.L.C.

By Mail:                     By Overnight Delivery:      By Hand:

P.O. Box 3301                85 Challenger Road          120 Broadway
South Hackensack, NJ 07606   Mail Drop-Reorg             13th Floor
Ridgefield Park, NJ 07660   New York, NY  10271
Attn: Reorganization Dept.

Facsimile (for eligible institutions): (201) 329-8936
Confirm facsimile by telephone ONLY: (201) 296-4860

Any  questions  or requests  for  assistance  may be directed to Hybridon at its
telephone  number and address listed below.  Requests for  additional  copies of
this  Offer to  Exchange,  the  Letter  of  Transmittal  or other  tender  offer
materials may also be directed to, and such copies will be furnished promptly at
Hybridon's  expense.  Noteholders  may also contact their local broker,  dealer,
bank or trust company for assistance concerning the Offer.

Hybridon, Inc.
620 Memorial Drive
Cambridge, MA 02139
(617) 528-7000

24

ANNEX A
-------

CERTIFICATE OF DESIGNATION

for

SERIES A CONVERTIBLE PREFERRED STOCK

of

HYBRIDON INC.

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

HYBRIDON  INC., a corporation  organized and existing under the laws of
the State of Delaware (the "Corporation"),  does hereby certify that pursuant to
the authority conferred on the board of directors of the Corporation (the "Board
of Directors") by the Restated Certificate of Incorporation (the "Certificate of
Incorporation")  of the  Corporation  and in accordance  with Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors adopted
the following resolution  establishing a series of 1,033,232 shares of preferred
stock of the Corporation designated as "Series A Convertible Preferred Stock":

RESOLVED,  that  pursuant to the  authority  conferred on the Board of
Directors by the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share,  of the  Corporation  is hereby  established  and
created,  and that the  designation  and number of shares  thereof  and the
voting and other powers,  preferences and relative participating,  optional
or  other   special   rights  of,  the  shares  of  such   series  and  the
qualifications, limitations and restrictions thereof are as follows:

Series A Convertible Preferred Stock

1. Designation and Amount and Definitions.  (a) There shall be a series
of Preferred Stock designated as "Series A Convertible  Preferred Stock" and the
number of shares  constituting  such series shall be  1,033,232.  Such series is
referred to herein as the "Series A Preferred Stock".  Notwithstanding any other
provision in this  Certificate of  Designation  of the Series A Preferred  Stock
(the "Certificate of Designation") to the contrary,  such series shall be senior
to the Series B Convertible  Preferred  Stock,  par value $.01 per share, of the
Corporation  (the "Series B Preferred  Stock") and the common  stock,  par value
$.001  per  share of the  Corporation  (the  "Common  Stock")  with  respect  to
dividends  and the  distribution  of assets  upon  liquidation,  dissolution  or
winding up. Such number of shares may be increased or decreased by resolution of
the Board of Directors, subject to the provisions of Section 7 hereof; provided,

however,  that no  decrease  shall  reduce  the  number  of  shares  of Series A
Preferred Stock to fewer than the number of shares then issued and outstanding.

(b) As used in this  Certificate  of  Designation,  except as otherwise
provided in  Subsection  4(c),  the  following  terms  shall have the  following
meanings:

(i) The "Closing Bid Price" for any security for each trading day
shall be the  reported  per share  closing bid price of such  security
regular way on the Stock Market on such trading day, or, if there were
no  transactions  on such  trading  day,  the average of the  reported
closing bid and asked  prices,  regular  way, of such  security on the
relevant Stock Market on such trading day.

(ii) "Fair Market  Value" of any asset  (including  any security)
means the fair  market  value  thereof as mutually  determined  by the
Corporation  and the  holders of a majority  of the Series A Preferred
Stock  then  outstanding.  If the  Corporation  and the  holders  of a
majority of the Series A Preferred  Stock then  outstanding are unable
to reach  agreement on any valuation  matter,  such valuation shall be
submitted to and  determined  by a nationally  recognized  independent
investment  bank selected by the Board of Directors and the holders of
a majority of the Series A Preferred  Stock then  outstanding  (or, if
such selection cannot be agreed upon promptly,  or in any event within
ten days, then such valuation shall be made by a nationally recognized
independent   investment   banking  firm   selected  by  the  American
Arbitration  Association  in New  York  City in  accordance  with  its
rules),  the  costs  of  which  valuation  shall  be  paid  for by the
Corporation.

(iii) "Market Price" shall mean the average Closing Bid Price for
twenty  (20)  consecutive  trading  days,  ending with the trading day
prior to the date as of which  the  Market  Price is being  determined
(with  appropriate  adjustments  for  subdivisions  or combinations of
shares  effected  during  such  period),  provided  that if the prices
referred  to  in  the  definition  of  Closing  Bid  Price  cannot  be
determined  on any trading day, the Closing Bid Price for such trading
day will be deemed to equal Fair Market Value of such security on such
trading day.

(iv) "Registered Holders" shall mean, at any time, the holders of
record of the Series A Preferred Stock.

(v) The "Stock Market" shall mean,  with respect to any security,
the principal national  securities  exchange on which such security is
listed or admitted  to trading  or, if such  security is not listed or
admitted to trading on any national  securities  exchange,  shall mean
The Nasdaq  National  Market  System  ("NNM")  or The Nasdaq  SmallCap
Market ("SCM" and,  together with NNM,  "Nasdaq") or, if such security
is not quoted on Nasdaq, shall mean the OTC Bulletin Board or, if such
security is not quoted on the OTC Bulletin Board, shall mean the over-

-2-

the-counter  market as furnished by any NASD member firm selected from
time to time by the Corporation for that purpose.

(vi) A "trading day" shall mean a day on which the relevant Stock
Market is open for the transaction of business.

2.  Dividends and  Distributions.  (a) The holders,  as of the Dividend
Record  Date (as  defined  below),  of the  Series A  Preferred  Stock  shall be
entitled to receive semi-annual dividends on their respective shares of Series A
Preferred Stock (aggregating, for this purpose, all shares of Series A Preferred
Stock held of record or, to the  Corporation's  knowledge,  beneficially by such
holder), payable, at the option of the Corporation, in cash or additional shares
of Series A  Preferred  Stock,  at the rate of 6.5% per annum  (computed  on the
basis of a 360-day year of twelve 30 day months) of the Dividend Base Amount (as
defined below),  payable semi-annually in arrears;  provided that, to the extent
the  declaration  or payment of such dividend is  prohibited by applicable  law,
such dividend need not be paid but shall  nevertheless  accrue and shall be paid
promptly when applicable law permits.  Such dividends shall accrue from the date
of issuance of such share and shall be paid semi-annually on April 1 and October
1 of each year or, if any such day is not a business day, on the next succeeding
business day. Such dividends shall be paid, at the election of the  Corporation,
either in cash or  additional  duly  authorized,  fully paid and non  assessable
shares of Series A  Preferred  Stock.  In  calculating  the  number of shares of
Series A Preferred Stock to be paid with respect to each dividend,  the Series A
Preferred  Stock  shall be valued at $100.00 per share  (subject to  appropriate
adjustment  to  reflect  any  stock  split,  combination,   reclassification  or
reorganization of the Series A Preferred Stock).  Notwithstanding the foregoing,
the  Corporation  shall not be required to issue  fractional  shares of Series A
Preferred   Stock;   the  Corporation   may  elect,  in  its  sole   discretion,
independently  for each holder,  whether such number of shares (on an aggregated
basis)  will be rounded to the nearest  whole share (with .5 of a share  rounded
upward)  or whether  such  holder  will be given cash in lieu of any  fractional
shares.  The "Dividend Base Amount" of a share of Series A Preferred Stock shall
be  $100.00  plus all  accrued  but unpaid  dividends  (subject  to  appropriate
adjustment  to  reflect  any  stock  split,  combination,   reclassification  or
reorganization  of the Series A Preferred  Stock).  The  "Dividend  Record Date"
shall mean, for each semi-annual dividend,  the March 15 or September 15, as the
case may be, immediately preceding the dividend payment date.

(b) In addition to the foregoing,  subject to the rights of the holders
of any  shares of any  series  or class of  capital  stock  ranking  prior,  and
superior  to, or pari passu with,  the shares of Series A  Preferred  Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors,  out of
assets legally  available for that purpose,  dividends or distributions in cash,
stock or otherwise.

(c) The  Corporation  shall not declare any dividend or distribution on
any Junior  Stock (as defined  below) of the  Corporation  unless all  dividends
required by Section 2(a)

-3-

have been or  contemporaneously  are  declared  and paid,  or declared and a sum
sufficient for the payment  thereof set apart for such payment,  on the Series A
Preferred Stock.

(d) [Reserved]

(e) All dividends or distributions declared upon the Series A Preferred
Stock shall be declared pro rata per share.

(f) Any reference to  "distribution"  contained in this Section 2 shall
not be deemed to include any distribution  made in connection with or in lieu of
any Liquidation Event (as defined below).

(g) No interest, or sum of money in lieu of interest,  shall be payable
in respect of any dividend  payment or payments on the Series A Preferred  Stock
which may be in arrears (it being  understood that this provision does not alter
the Company's obligations under Section 2(a)).

(h) So  long  as any  shares  of  the  Series  A  Preferred  Stock  are
outstanding,  no dividends, except as described in the next succeeding sentence,
shall be  declared  or paid or set apart for  payment  on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series A
Preferred   Stock,   for  any  period   unless  all   dividends   have  been  or
contemporaneously  are declared and paid, or declared and a sum  sufficient  for
the payment thereof set apart for such payment, on the Series A Preferred Stock.
When  dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series A Preferred Stock and any
other  class or series of stock  ranking  on a parity as to  dividends  with the
Series A Preferred Stock, all dividends  declared upon such other stock shall be
declared  pro rata so that the amounts of  dividends  per share  declared on the
Series A  Preferred  Stock and such other  stock shall in all cases bear to each
other the same  ratio  that  accrued  dividends  per share on the  shares of the
Series A Preferred Stock and on such other stock bear to each other.

(i) So  long  as any  shares  of  the  Series  A  Preferred  Stock  are
outstanding,  no other  stock of the  Corporation  ranking on a parity  with the
Series A Preferred  Stock as to dividends or upon  liquidation,  dissolution  or
winding  up  shall  be  redeemed,   purchased  or  otherwise  acquired  for  any
consideration  (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation  unless the dividends,  if any, accrued on all outstanding shares of
the Series A Preferred Stock shall have been paid or set apart for payment.

(j)  "Junior  Stock"  shall  mean the  Common  Stock and any  shares of
preferred  stock of any series or class of the  Corporation,  whether  presently
outstanding  or  hereafter  issued,  which are  junior to the shares of Series A
Preferred Stock with respect to (i) the  distribution of assets on any voluntary
or involuntary liquidation, dissolution or winding up of the

-4-

Corporation,  (ii) dividends or (iii) voting.  The Junior Stock shall  expressly
include the Series B Preferred Stock.

3.  Liquidation  Preference.  (a) In the  event  of a (i)  liquidation,
dissolution or winding up of the Corporation,  whether voluntary or involuntary,
(ii) a sale or other  disposition of all or  substantially  all of the assets of
the Corporation or (iii) any consolidation, merger, combination,  reorganization
or other  transaction in which the  Corporation  is not the surviving  entity or
shares of Common Stock  constituting in excess of 50% of the voting power of the
Corporation  are  exchanged  for or changed into stock or  securities of another
entity, cash and/or any other property (a "Merger Transaction") (items (i), (ii)
and (iii) of this  sentence  being  collectively  referred to as a  "Liquidation
Event"),  after payment or provision for payment of debts and other  liabilities
of the Corporation, the holders of the Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation  available for
distribution to its stockholders,  whether such assets are capital,  surplus, or
earnings, before any payment or declaration and setting apart for payment of any
amount  shall be made in  respect  of any Junior  Stock of the  Corporation,  an
amount equal to the Dividend Base Amount at such time; provided, however, in the
case of a Merger Transaction, such payment may be made in cash, property (valued
as  provided  in  Subsection  3(b))  and/or  securities  (valued as  provided in
Subsection 3(b)) of the entity surviving such Merger Transaction. In the case of
property or in the event that any such  securities  are subject to an investment
letter  or other  similar  restriction  on  transferability,  the  value of such
property or securities shall be determined by agreement  between the Corporation
and the holders of a majority of the Series A Preferred Stock then  outstanding.
If upon any Liquidation Event,  whether voluntary or involuntary,  the assets to
be  distributed  to the  holders  of the  Series  A  Preferred  Stock  shall  be
insufficient to permit the payment to such shareholders of the full preferential
amounts  aforesaid,  then all of the assets of the Corporation to be distributed
shall be so distributed  ratably to the holders of the Series A Preferred  Stock
on the  basis of the  number  of  shares  of  Series  A  Preferred  Stock  held.
Notwithstanding  item (iii) of the first sentence of this  Subsection  3(a), any
consolidation, merger, combination, reorganization or other transaction in which
the  Corporation  is not  the  surviving  entity  but  the  stockholders  of the
Corporation  immediately  prior to such  transaction own in excess of 50% of the
voting power of the corporation surviving such transaction and own such interest
in substantially the same proportions as prior to such transaction, shall not be
considered a Liquidation  Event  provided that the surviving  corporation  shall
make  appropriate  provisions  to ensure that the terms of this  Certificate  of
Designation survive any such transaction. All shares of Series A Preferred Stock
shall rank as to payment upon the occurrence of any Liquidation  Event senior to
the shares of Series B Preferred  Stock,  senior to the Common Stock and, unless
the terms of such series shall provide otherwise,  senior to all other series of
the Corporation's preferred stock.

(b) Any  securities or other property to be delivered to the holders of
the Series A Preferred  Stock pursuant to Subsection 3(a) hereof shall be valued
as follows:

-5-

(i)  Securities  not  subject  to an  investment  letter or other
similar restriction on free marketability:

(A) If actively traded on a Stock Market, the per share
value  shall  be  deemed  to be the  Market  Price  of  such
securities  as of  the  third  day  prior  to  the  date  of
valuation.

(B) If not actively traded on a Stock Market, the value
shall be the Fair Market Value of such securities.

(ii) For  securities  for which there is an active  public market
but which are subject to an investment letter or other restrictions on
free marketability,  the value shall be the Fair Market Value thereof,
determined  by  discounting  appropriately  the per share Market Price
thereof.

(iii)  For all  other  securities,  the  value  shall be the Fair
Market Value thereof.

4. Conversion.

(a) Right of Conversion.  The shares of Series A Preferred  Stock shall
be  convertible,  in whole or in part,  at the option of the holder  thereof and
upon notice to the Corporation as set forth in Subsection  4(b), into fully paid
and nonassessable  shares of Common Stock and such other securities and property
as hereinafter provided.  The initial conversion price per share of Common Stock
(the "Conversion Price"), effective beginning on April 2, 2000 (or, with respect
to any  shares of Series A  Preferred  Stock  called  for  mandatory  redemption
pursuant to Subsection  5(b) prior to such date,  upon delivery of the notice of
such  redemption  by the  Corporation),  shall be equal to the  product of 2.125
multiplied by the initial  conversion price of the Series B Preferred Stock (the
initial  "Series B  Conversion  Price")  and shall be subject to  adjustment  as
provided  herein.  The rate at which  each  share  Series A  Preferred  Stock is
convertible  at any time into  Common  Stock (the  "Conversion  Rate")  shall be
determined  by  dividing  the then  existing  conversion  price  (determined  in
accordance  with this Section 4, including the last  paragraph  hereof) into the
Dividend Base Amount.

Subject to adjustment  pursuant to the  provisions  of Subsection  4(c)
below,  in the event that the Series B  Conversion  Price is  adjusted  upon the
initial  closing  date of the  issuance  and  sale,  as  contemplated  by a Unit
Purchase Agreement dated January [__], 1998 (the "Offering"),  of Notes due 2007
of the  Corporation  ("Offering  Notes") or Series B Preferred  Stock offered in
lieu of such Offering Notes (the "Initial  Closing  Date"),  any interim closing
date of the Offering (each an "Interim  Closing Date") or the final closing date
of the Offering (the "Final  Closing Date")  contemplated  by such Unit Purchase
Agreement  (the  "Purchase  Agreement"),  then  the  Conversion  Price  shall be
adjusted to equal 212.5% of such Series B

-6-

Conversion  Price. If there is any change in Conversion Price as a result of the
preceding sentence, then the Conversion Rate shall be changed accordingly as set
forth above.

If the Board of  Directors,  or a committee  designated  by it for such
purpose, pursuant to the provisions of the third paragraph of the Certificate of
Designation for the Series B Preferred  Stock,  specifies an initial  conversion
price  applicable  to the  shares of Series B  Preferred  Stock  lower  than the
initial  conversion  price that would otherwise obtain pursuant to the first two
paragraphs of Subsection 4(a) of the Certificate of Designation for the Series B
Preferred Stock, then the Board of Directors shall make a pro rata adjustment to
the Conversion Price hereunder.

The Corporation  shall prepare a certificate  signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary,  of the Corporation setting forth the Conversion Rate as of
the Final Closing Date,  showing in reasonable  detail the facts upon which such
adjusted Conversion Rate is based, and such certificate shall forthwith be filed
with the transfer  agent of the Series A Preferred  Stock. A notice stating that
the Conversion Rate has been adjusted  pursuant to the second  paragraph of this
Subsection  4(a),  or that no  adjustment  is  necessary,  and setting forth the
Conversion  Rate in  effect  as of the  Final  Closing  Date  shall be mailed as
promptly as practicable  after the Final Closing Date by the  Corporation to all
record  holders of the Series A Preferred  Stock at their last addresses as they
shall appear in the stock transfer books of the Corporation.

The Conversion Price (subject to adjustment  pursuant to the provisions
of Subsection  4(c)) in effect  immediately  prior to the date that is 12 months
after the Final  Closing  Date (the "Reset  Date")  shall be adjusted  and reset
effective as of the Reset Date if the conversion price of the Series B Preferred
Stock  (the  "Series B  Conversion  Price")  is reset at such time (a  "Series B
Reset")  pursuant to Subsection  4(a) of the  Certificate of Designation for the
Series B Preferred Stock. Upon any Series B Reset, the Conversion Price shall be
reset (a  "Reset  Event")  to equal  212.5%  of the  Series B  Conversion  Price
immediately following the Series B Reset. Furthermore,  upon the occurrence of a
Reset  Event,  each  Registered  Holder as of the Reset  Date  shall be issued a
warrant  (the "Reset  Warrant") to purchase the number of shares of Common Stock
equal to the quotient of (1) the difference  between (a) the quotient of (x) the
Dividend Base Amount divided by (y) the Series B Conversion  Price,  immediately
following  the Reset Event and (b) the quotient of (x) the Dividend  Base Amount
divided by (y) the Series B  Conversion  Price,  immediately  prior to the Reset
Event,  divided by (2) 2.125.  The Reset  Warrants  shall be  exercisable  for a
period of seven years from the Final Closing Date at an initial  exercise  price
equal to the  Conversion  Price  immediately  following  the  Reset  Event.  The
Corporation  shall not be required to issue any fractional  shares upon exercise
of the Reset  Warrants or pay any cash in lieu thereof.  The  Corporation  shall
prepare  a  certificate  signed  by  the  principal  financial  officer  of  the
Corporation  setting forth the Conversion Rate as of the Reset Date,  showing in
reasonable  detail the facts upon which such Conversion Rate is based,  and such
certificate  shall  forthwith be filed with the  transfer  agent of the Series A
Preferred  Stock. A notice  stating that the  Conversion  Rate has been adjusted
pursuant to this paragraph,

-7-

or that no  adjustment is necessary,  and setting forth the  Conversion  Rate in
effect as of the Reset Date shall be mailed as promptly as practicable after the
Reset Date by the  Corporation  to all record  holders of the Series A Preferred
Stock at their last  addresses as they shall appear in the stock  transfer books
of the Corporation.

Until  April 2,  2000  (or,  with  respect  to any  shares  of Series A
Preferred  Stock called for mandatory  redemption  pursuant to  Subsection  5(b)
prior to such date  ("Redemption  Shares"),  upon delivery of the notice of such
redemption by the  Corporation),  notwithstanding  any other provisions  hereof,
shares of Series A Preferred  Stock may only be  converted  into  Common  Stock,
other than at the election of the Corporation  pursuant to Section 5 hereof,  at
the following  conversion  prices (subject to appropriate  adjustment to reflect
any stock split,  combination,  reclassification or reorganization of the Common
Stock):  (1) through April 1, 2000,  $35.00 per share; and (2) thereafter (or at
any time with respect to the conversion of Redemption Shares), at the Conversion
Price.

(b) Conversion  Procedures.  Any holder of shares of Series A Preferred
Stock  desiring to convert  such shares into Common  Stock shall  surrender  the
certificate or  certificates  evidencing such shares of Series A Preferred Stock
at the office of the  transfer  agent for the Series A  Preferred  Stock,  which
certificate or certificates,  if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer to the  Corporation or in blank,  accompanied  by  irrevocable  written
notice to the  Corporation  that the holder  elects so to convert such shares of
Series A Preferred  Stock and  specifying  the name or names  (with  address) in
which a certificate or certificates  evidencing shares of Common Stock are to be
issued.  The  Corporation  need not deem a notice of  conversion  to be received
unless the holder complies with all the provisions  hereof. The Corporation will
instruct the transfer agent (which may be the Corporation) to make a notation of
the date that a notice of conversion is received, which date of receipt shall be
deemed to be the date of receipt for purposes hereof.

The  Corporation  shall,  as soon as practicable  after such deposit of
certificates  evidencing  shares of Series A Preferred Stock  accompanied by the
written  notice  and  compliance  with any other  conditions  herein  contained,
deliver at such office of such  transfer  agent to the person for whose  account
such shares of Series A Preferred Stock were so  surrendered,  or to the nominee
or nominees of such person, certificates evidencing the number of full shares of
Common  Stock to which such person  shall be entitled as  aforesaid,  subject to
Section  4(d).  Subject to the  following  provisions  of this  paragraph,  such
conversion shall be deemed to have been made as of the date of such surrender of
the  shares of  Series A  Preferred  Stock to be  converted,  and the  person or
persons entitled to receive the Common Stock deliverable upon conversion of such
Series A Preferred  Stock shall be treated for all purposes as the record holder
or  holders  of such  Common  Stock on such date;  provided,  however,  that the
Corporation  shall not be  required  to convert any shares of Series A Preferred
Stock  while the stock  transfer  books of the  Corporation  are  closed for any
purpose, but the surrender of Series A Preferred Stock for conversion during any
period while such books are so closed shall become effective for

-8-

conversion  immediately upon the reopening of such books as if the surrender had
been  made on the date of such  reopening,  and the  conversion  shall be at the
conversion  rate in  effect on such  date.  No  adjustments  in  respect  of any
dividends on shares  surrendered  for  conversion  or any dividend on the Common
Stock issued upon conversion  shall be made upon the conversion of any shares of
Series A Preferred Stock.

The Corporation  shall at all times,  reserve and keep available out of
its  authorized but unissued  shares of Common Stock,  solely for the purpose of
effecting the conversion of the shares of Series A Preferred Stock,  such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock.

All notices of conversion shall be irrevocable; provided, however, that
if the  Corporation  has sent  notice of an event  pursuant to  Subsection  4(g)
hereof,  a holder of Series A Preferred  Stock may, at its election,  provide in
its notice of conversion that the conversion of its shares of Series A Preferred
Stock  shall  be  contingent   upon  the   occurrence  of  the  record  date  or
effectiveness  of such event (as specified by such  holder),  provided that such
notice of conversion is received by the Corporation prior to such record date or
effective date, as the case may be.

(c) Adjustment of Conversion Rate and Conversion Price.

(i) As used in this  Subsection  4(c), the following  terms shall
have the following meanings:

"Capital Stock" of any Person means the Common Stock or Preferred
Stock of such Person.  Unless  otherwise  stated herein or the context
otherwise  requires,  "Capital  Stock"  means  Capital  Stock  of  the
Corporation;

"Common Stock" of any Person other than the Corporation means the
common equity (however  designated),  including,  without  limitation,
common  stock  or   partnership   or   membership   interests  of,  or
participation  or interests in such Person (or  equivalents  thereof).
"Common Stock" of the  Corporation  means the Common Stock,  par value
$.001 per share, of the Corporation, any successor class or classes of
common equity  (however  designated)  of the  Corporation  into or for
which such Common  Stock may  hereafter  be  converted,  exchanged  or
reclassified  and any  class or  classes  of  common  equity  (however
designated) of the Corporation which may be distributed or issued with
respect to such Common Stock or successor  class of classes to holders
thereof  generally.  Unless  otherwise  stated  herein or the  context
requires   otherwise,   "Common  Stock"  means  Common  Stock  of  the
Corporation;

-9-

"Current  Market  Price"  means,  when used with  respect  to any
security as of any date, the last sale price, regular way, or, in case
no such sale takes place on such date,  the average of the closing bid
and asked  prices,  regular  way,  of such  security in either case as
reported for consolidated  transactions on the New York Stock Exchange
or, if such  security  is not listed or admitted to trading on the New
York Stock Exchange,  as reported for consolidated  transactions  with
respect to  securities  listed on the  principal  national  securities
exchange  on which such  security is listed or admitted to trading or,
if such  security is not listed or admitted to trading on any national
securities exchange, as reported on the Nasdaq National Market, or, if
such  security  is not  listed or  admitted  to  trading on the Nasdaq
National Market, as reported on the Nasdaq SmallCap Market, or if such
security  is not  listed  or  admitted  to  trading  on  any  national
securities  exchange  or the  Nasdaq  National  Market  or the  Nasdaq
SmallCap  Market,  the average of the high bid and low asked prices of
such  security  in the  over-the-counter  market,  as  reported by the
National Association of Securities Dealers,  Inc. Automated Quotations
System or such other  system  then in use or, if such  security is not
quoted by any such  organization,  the  average of the closing bid and
asked prices of such security  furnished by a New York Stock  Exchange
member  firm  selected  by the  Corporation.  If such  security is not
quoted by any such  organization  and no such New York Stock  Exchange
member firm is able to provide such prices,  the Current  Market Price
of such security shall be the Fair Market Value thereof;

"Fair Market Value" means, at any date as to any asset,  Property
or right (including without  limitation,  Capital Stock of any Person,
evidence of indebtedness or other securities, but excluding cash), the
fair  market  value of such item as  determined  in good  faith by the
Board of Directors, whose determination shall be conclusive; provided,
however,   that  such  determination  is  described  in  an  Officers'
Certificate  filed  with the  transfer  agent and that,  if there is a
Current  Market Price for such item on such date,  "Fair Market Value"
means such Current  Market Price  (without  giving  effect to the last
sentence of the definition thereof);

"GAAP"  means,  as of any  date,  generally  accepted  accounting
principles   in  the   United   States  and  does  not   include   any
interpretations  or regulations  that have been proposed but that have
not become effective;

"Officer" means, with respect to any Person,  the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer,  the Chief Financial  Officer,  the Treasurer,  any Assistant
Treasurer,  the Controller,  the Secretary, any Assistant Secretary or
any Vice President of such Person;

-10-

"Officers'  Certificate"  means a certificate signed on behalf of
the  Corporation by two Officers,  one of whom must be the Chairman of
the Board,  the President,  the Treasurer or a  Vice-President  of the
Corporation;

"Person"   means  any   individual,   corporation,   partnership,
association,  trust or any other entity or  organization,  including a
government or political  subdivision or any agency or  instrumentality
thereof;

"Preferred  Stock" of any  Person  means the class or  classes of
equity,  ownership or participation  interests (however designated) in
such Person, including, without limitation,  stock, share, partnership
and  membership  interests,  which are  preferred as to the payment of
dividends or  distributions  by, or as to the  distribution  of assets
upon any voluntary or involuntary  liquidation or dissolution of, such
Person (or  equivalent  thereof) over  interests of any other class of
interests  of such  Person.  Unless  otherwise  stated  herein  or the
context otherwise requires, "Preferred Stock" means Preferred Stock of
the Corporation;

"Property"  of any  Person  means  any and  all  types  of  real,
personal, tangible,  intangible or mixed property owned by such Person
whether or not included on the most recent consolidated  balance sheet
of such Person in accordance with GAAP;

"Subsidiary"  of a Person on any date  means any other  Person of
whom such Person owns,  directly or indirectly through a Subsidiary or
Subsidiaries of such Person,  Capital Stock with voting power,  acting
independently and under ordinary circumstances,  entitling such person
to elect a majority of the board of directors or other  governing body
of such other Person.  Unless  otherwise  stated herein or the context
otherwise   requires,   "Subsidiary"   means  a   Subsidiary   of  the
Corporation.

(ii)  If the  Corporation  shall  (i)  pay a  dividend  or  other
distribution,  in Common  Stock,  on any class of Capital Stock of the
Corporation,  (ii)  subdivide  the  outstanding  Common  Stock  into a
greater number of shares by any means or (iii) combine the outstanding
Common Stock into a smaller  number of shares by any means  including,
without limitation, a reverse stock split), then in each such case the
Conversion Price in effect immediately prior thereto shall be adjusted
so that the  Registered  Holder of any  shares  of Series A  Preferred
Stock  thereafter  surrendered  for  conversion  shall be  entitled to
receive  the  number of shares of Common  Stock  that such  Registered
Holder  would have  owned or have been  entitled  to receive  upon the
happening  of such  event  had such  Series  A  Preferred  Stock  been
converted  immediately  prior to the relevant record date or, if there
is no  such  record  date,  the  effective  date  of  such  event.  An
adjustment  made  pursuant to this  Paragraph  4(c)(ii)  shall  become
effective immediately after the

-11-

record date for the determination of stockholders  entitled to receive
such dividend or distribution and shall become  effective  immediately
after the effective date of such  subdivision or  combination,  as the
case may be.

(iii) If the  Corporation  shall  (i) issue or  distribute  (at a
price per share less than the Current  Market  Price per share of such
Capital  Stock on the date of such issuance or  distribution)  Capital
Stock  generally to holders of Common Stock or to holders of any class
or series of Capital Stock which is convertible  into or  exchangeable
or exercisable for Common Stock (excluding an issuance or distribution
of Common  Stock  described  in  Paragraph  4(c)(ii)) or (ii) issue or
distribute  generally to such  holders  rights,  warrants,  options or
convertible or exchangeable securities entitling the holder thereof to
subscribe for, purchase, convert into or exchange for Capital Stock at
a price per share less than the Current Market Price per share of such
Capital Stock on the date of issuance or  distribution,  then, in each
such case, at the earliest of (A) the date the Corporation enters into
a firm contract for such issuance or distribution, (B) the record date
for the  determination  of  stockholders  entitled to receive any such
Capital Stock or any such rights, warrants,  options or convertible or
exchangeable  securities  or  (C)  the  date  of  actual  issuance  or
distribution  of any such Capital Stock or any such rights,  warrants,
options or  convertible  or  exchangeable  securities,  the Conversion
Price shall be reduced by multiplying  the Conversion  Price in effect
immediately prior to such earliest date by:

(A) if such Capital Stock is Common Stock, a
fraction  the  numerator  of which is the  number  of
shares of Common Stock outstanding,  on such earliest
date plus the number of shares of Common  Stock which
could be  purchased  at the Current  Market Price per
share of Common Stock on the date of such issuance or
distribution with the aggregate  consideration (based
on  the  Fair  Market  Value  thereof)   received  or
receivable   by  the   Corporation   either   (A)  in
connection  with such issuance or distribution or (B)
upon   the   conversion,    exchange,   purchase   or
subscription of all such rights, warrants, options or
convertible   or    exchangeable    securities   (the
"Aggregate  Consideration"),  and the  denominator of
which  is  the  number  of  shares  of  Common  Stock
outstanding  on such earliest date plus the number of
shares of Common Stock to be so issued or distributed
or  to  be  issued  upon  the  conversion,  exchange,
purchase  or   subscription   of  all  such   rights,
warrants,  options  or  convertible  or  exchangeable
securities; or

(B) if such  Capital  Stock  is  other  than
Common  Stock,  a fraction the  numerator of which is
the Current Market Price per share of Common Stock on
such  earliest  date minus an amount equal to (A) the
difference  between (1) the Current  Market Price per
share of such Capital

-12-

Stock  multiplied  by the  number  of  shares of such
Capital  Stock to be so issued and (2) the  Aggregate
Consideration, divided by (B) the number of shares of
Common  Stock  outstanding  on  such  date,  and  the
denominator  of which is the Current Market Price per
share of Common Stock on such earliest date.

Such adjustment shall be made  successively  whenever any such Capital
Stock,  rights,  warrants,  options  or  convertible  or  exchangeable
securities are so issued or  distributed.  In determining  whether any
rights,  warrants,  options or convertible or exchangeable  securities
entitle the holders thereof to subscribe for,  purchase,  convert into
or exchange for shares of such Capital Stock at less than such Current
Market Price,  there shall be taken into account the Fair Market Value
of any  consideration  received or receivable by the  Corporation  for
such  rights,   warrants,   options  or  convertible  or  exchangeable
securities.   If  any  right,   warrant,option   or   convertible   or
exchangeable security, the issuance of which resulted in an adjustment
in the Conversion  Price pursuant to this Paragraph  4(c)(iii),  shall
expire and shall not have been exercised,  the Conversion  Price shall
immediately upon such expiration be recomputed to the Conversion Price
which  would  have been in effect if such  right,  warrant,  option or
convertible or exchangeable  securities had never been  distributed or
issued.  Notwithstanding  anything  contained in this paragraph to the
contrary,  (i) the issuance of Capital Stock upon the exercise of such
rights,  warrants  or options or the  conversion  or  exchange of such
convertible or exchangeable securities will not cause an adjustment in
the Conversion Price if no such adjustment would have been required at
the time such right,  warrant,  option or convertible or  exchangeable
security was issued or distributed;  provided,  however,  that, if the
consideration  payable  upon such  exercise,  conversion  or  exchange
and/or the Capital  Stock  receivable  thereupon are changed after the
time of the issuance or distribution of such right, warrant, option or
convertible or exchangeable  security then such change shall be deemed
to be the  expiration  thereof  without  having been exercised and the
issuance  or  distribution  of  new  options,   rights,   warrants  or
convertible  or  exchangeable  securities  and  (ii) the  issuance  of
convertible  preferred  stock  of the  Corporation  as a  dividend  on
convertible  preferred  stock of the  Corporation  will  not  cause an
adjustment in the Conversion  Price if no such  adjustment  would have
been required at the time such underlying  convertible preferred stock
was issued (or as a result of any subsequent modification to the terms
thereof) and the conversion  provisions of such  convertible  stock so
issued as a dividend  are the same as in such  underlying  convertible
preferred stock.

Notwithstanding  any contained in this Certificate of Designation
to the contrary,  options, rights or warrants issued or distributed by
the Corporation,  including  options,  rights or warrants  distributed
prior to the date of filing of this  Certificate  of  Designation,  to
holders of Common Stock generally which, until the

-13-

occurrence of a specified event or events (a "Trigger Event"), (i) are
deemed to be transferred  with Common Stock,  (ii) are not exercisable
and (iii) are also  issued on a pro rata basis with  respect to future
issuances of Common Stock,  shall be deemed not to have been issued or
distributed for purposes of this Subsection 4(c) (and no adjustment to
the  Conversion  Price under this  Subsection  4(c) will be  required)
until  the  occurrence  of  the  earliest  Trigger  Event.   Upon  the
occurrence of a Trigger Event, such options,  rights or warrants shall
continue  to be deemed  not to have been  issued  or  distributed  for
purposes of this  Subsection 4(c) (and no adjustment to the Conversion
Price under this  Subsection 4(c) will be required) if and for so long
as each  Registered  Holder who  thereafter  converts such  Registered
Holder's  Series A Preferred  Stock shall be entitled to receive  upon
such  conversion,  in addition to the shares of Common Stock  issuable
upon such conversion, a number of such options, rights or warrants, as
the case may be, equal to the number of options, rights or warrants to
which a holder of the  number of shares of Common  Stock  equal to the
number of shares of Common  Stock  issuable  upon  conversion  of such
Registered Holder's Series A Preferred Stock is entitled to receive at
the time of such conversion in accordance with the terms and provision
of an  applicable  to such  options,  rights  or  warrants.  Upon  the
expiration of any such options, rights or warrants or at such time, if
any, as a Registered  Holder is not entitled to receive such  options,
rights or warrants upon conversion of such Registered  Holder's Series
A  Preferred  Stock,  an  adjustment  (if  any  is  required)  to  the
Conversion  Price  shall be made in  accordance  with  this  Paragraph
4(c)(iii) with respect to the issuance of all such options, rights and
warrants  as of the  date of  issuance  thereof,  but  subject  to the
provisions of the preceding  paragraph,  if any such option,  right or
warrant,  including  any such  options  right or warrants  distributed
prior to the date of filing of this  Certificate of  Designation,  are
subject to events,  upon the occurrence of which such options,  rights
or  warrants  become  exercisable  to purchase  different  securities,
evidence  of  indebtedness,   cash,  Properties  or  other  assets  or
different amounts thereof, then, subject to the preceding provision of
this paragraph,  the date of the occurrence of any and each such event
shall be deemed to be the date of  distribution  and record  date with
respect  to new  options,  right or  warrants  with such new  purchase
rights (and a  termination  or  expiration  of the  existing  options,
rights or warrants  without  exercise  thereof).  In addition,  in the
event of any distribution (or deemed distribution) of options,  rights
or warrants, or any Trigger Event or other event of the type described
in the preceding  sentence,  that required (or would have required but
for  the  provisions  of  Paragraph  4(c)(vi)  or this  paragraph)  an
adjustment to the Conversion Price under this Subsection 4(c) and such
options,  rights or warrants  shall  thereafter  have been redeemed or
repurchased  without having been exercised,  then the Conversion Price
shall be adjusted upon such redemption or repurchase to give effect to
such  distribution,  Trigger Event or other event, as the case may, as
though it had instead been a cash  distribution,  equal on a per share
basis to the result of the aggregate

-14-

redemption  or repurchase  price  received by holders of such options,
rights or  warrants  divided by the  number of shares of Common  Stock
outstanding as of the date of such  repurchase or redemption,  made to
holders of Common Stock generally as of the date of such redemption or
repurchase.

(iv) If the Corporation shall pay or distribute, as a dividend or
otherwise, generally to holders of Common Stock or any class or series
of  Capital  Stock  which  is  convertible   into  or  exercisable  or
exchangeable  for  Common  Stock  any  assets,  Properties  or  rights
(including,  without  limitation,  evidences  of  indebtedness  of the
Corporation, any Subsidiary or any other Person, cash or Capital Stock
or other  securities of the  Corporation,  any Subsidiary or any other
Person,  but  excluding  payments  and  distributions  as described in
Paragraphs   4(c)(ii)  or  (iii),   dividends  and   distributions  in
connection  with a  Liquidation  Event  and  distributions  consisting
solely of cash described in Paragraph 4(c)(v)), then in each such case
the Conversion  Price shall be reduced by  multiplying  the Conversion
Price in  effect  immediately  prior to the  date of such  payment  or
distribution  by a  fraction,  the  numerator  of which is the Current
Market  Price  per share of Common  Stock on the  record  date for the
determination  of  stockholders  entitled to receive  such  payment or
distribution  less the Fair Market  Value per share of Common Stock on
such  record  date of the  assets,  Properties  or  rights  so paid or
distributed,  and the denominator of which is the Current Market Price
per share of Common Stock on such record date. Such  adjustment  shall
become effective  immediately  after such record date. For purposes of
this Paragraph 4(c)(iv),  such Fair Market Value per share shall equal
the  aggregate  Fair  Market  Value on such record date of the assets,
Properties or rights so paid or  distributed  divided by the number of
shares  of Common  Stock  outstanding  on such  record  date.  For all
purposes  of  this  Certificate  of  Designation,  adjustments  to any
security's  conversion or exercise price  pursuant to such  security's
original  terms  shall not be deemed a  distribution  or  dividend  to
holders thereof.

(v) If the Corporation  shall,  by dividend or otherwise,  make a
distribution   (other  than  in  connection   with  the   liquidation,
dissolution  or  winding  up of  the  Corporation  in  its  entirety),
generally to holders of Common Stock or any class or series of Capital
Stock which is convertible  into or exercisable  or  exchangeable  for
Common Stock,  consisting  solely of cash where (x) the sum of (i) the
aggregate  amount for such cash plus (ii) the aggregate  amount of all
cash so distributed  (by dividend or otherwise) to such holders within
the  12-month  period  ending  on  the  record  date  for  determining
stockholder  entitled to receive  such  distribution  with  respect to
which no adjustment has been made to the Conversion  Price pursuant to
this  Paragraph   4(c)(v)  exceeds  (y)  10%  of  the  result  of  the
multiplication  of (1) the  Current  Market  Price per share of Common
Stock on such  record  date  times (2) the  number of shares of Common
Stock outstanding on such record date, then the Conversion Price shall
be reduced, effective

-15-

immediately prior to the opening of business on the day following such
record date, by multiplying the Conversion Price in effect immediately
prior to the close of business on the day prior to such record date by
a fraction,  the  numerator  of which is the Current  Market Price per
share of Common Stock on such record date less the aggregate amount of
cash per share so  distributed  and the  denominator  of which is such
Current Market Price; provided, however, that, if the aggregate amount
of cash per  share is equal to or  greater  than such  Current  Market
Price, then, in lieu of the foregoing adjustment,  adequate provisions
shall be made so that each  Registered  Holder shall have the right to
receive upon  conversion  (with  respect to each share of Common Stock
issued  upon such  conversion  and in  addition  to the  Common  Stock
issuable upon  conversion) the aggregate amount of cash per share such
Registered  Holder would have  received had such  Registered  Holder's
Series A  Preferred  Stock been  converted  immediately  prior to such
record  date.  In no event  shall the  Conversion  Price be  increased
pursuant to this Paragraph 4(c)(v);  provided,  however,  that if such
distribution is not so made, the Conversion Price shall be adjusted to
be the  Conversion  Price  which  would  have  been in  effect if such
distribution  had not been  declared.  For purposes of this  Paragraph
4(c)(v),  such aggregate amount of cash per share shall equal such sum
divided by the number of shares of Common  Stock  outstanding  on such
record date.

(vi) The provisions of this Subsection 4(c) shall similarly apply
to all  successive  events of the type  described  in this  Subsection
4(c).  Notwithstanding  anything contained herein to the contrary,  no
adjustment  in the  Conversion  Price  shall be  required  unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion  Price  then  in  effect;   provided,   however,  that  any
adjustments  which  by  reason  of  this  Paragraph  4(c)(vi)  are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 4 shall
be made by the Corporation and shall be made to the nearest cent or to
the  nearest  one  hundredth  of a share,  as the case may be, and the
transfer agent shall be entitled to rely conclusively thereon.  Except
as provided in this Section 4, no adjustment in the  Conversion  Price
will be made  for the  issuance  of  Common  Stock  or any  securities
convertible  into or  exchangeable  for Common  Stock or carrying  the
right to purchase  Common Stock or any  securities so  convertible  or
exchangeable.

(vii)  Whenever  the  Conversion  Price is  adjusted  as provided
herein, the Corporation shall promptly file with the transfer agent an
Officers'  Certificate  setting forth the  Conversion  Price in effect
after such adjustment and setting forth a brief statement of the facts
requiring such  adjustment.  Promptly after delivery of such Officers'
Certificate,  the Corporation  shall give or cause to be given to each
Registered Holder a notice of such adjustment of the Conversion Price

-16-

setting forth the adjusted Conversion Price and the date on which such
adjustment becomes effective.

(viii) Notwithstanding anything contained herein to the contrary,
in any case in which this  Subsection 4(c) provides that an adjustment
in the Conversion  Price shall become  effective  immediately  after a
record  date  for an  event,  the  Corporation  may  defer  until  the
occurrence of such event (i) issuing to the  Registered  Holder of any
Series A Preferred  Stock  converted after such record date and before
the  occurrence  of such event the  additional  shares of Common Stock
issuable upon such conversion by reason of the adjustment  required by
such  event  over and  above the  number  of  shares  of Common  Stock
issuable upon such conversion  before giving effect to such adjustment
and (ii) paying to such  Registered  Holder any amount in cash in lieu
of any fractional share of Common Stock pursuant to Subsection 4(d).

(ix) Notwithstanding any other provision hereof, no adjustment to
the  Conversion  Price shall be made upon the  issuance or exercise or
conversion of (1) options or warrants to purchase,  in the  aggregate,
up to  25% of the  securities  sold  in  the  Offering  issued  to any
placement  agent or financial  advisor in connection  with the private
placement of the Offering Notes or Series B Preferred Stock offered in
lieu of Offering Notes and, in each case,  warrants to purchase Common
Stock (such  options or warrants,  the "Offering  Warrants"),  (2) any
Offering  Notes,  including any Offering Notes issued  pursuant to the
exercise of the Offering  Warrants,  (3) any Series B Preferred Stock,
including  any  Series  B  Preferred  Stock  issued  in the  Offering,
pursuant to the exercise of any Offering  Warrants or upon  conversion
of any Offering  Notes,  (4) any equity  securities or warrants of the
Corporation  (including,  without  limitation,  the Series A Preferred
Stock,  warrants and equity securities  underlying warrants) issued in
exchange  for 9%  Convertible  Subordinated  Notes  due 2004  (the "9%
Notes") of the Corporation or accrued  interest thereon or pursuant to
the conversion or exercise provisions thereof, (5) any warrants issued
in  connection  with the  Offering or upon any Reset Event or Series B
Reset, (6) any warrants issued to Forum Capital Markets, LLC ("Forum")
in exchange for or in addition to, or any  amendment  to, any warrants
held by Forum,  in each case,  pursuant  to a letter  agreement  dated
January 5, 1998,  between the Corporation  and Forum,  (7) any Capital
Stock issued or cash paid as dividends on the Series A Preferred Stock
or (8) any  Capital  Stock  issued  or cash  paid  upon the  mandatory
conversion or  redemption of any Series A Preferred  Stock or Series B
Preferred  Stock in accordance  with Section 5 of this  Certificate of
Designation or Section 5 of the  Certificate  of  Designation  for the
Series B Preferred Stock.

(d) No Fractional  Shares. No fractional  shares or scrip  representing
fractional  shares of Common Stock shall be issued upon  conversion  of Series A
Preferred Stock. If more

-17-

than one  certificate  evidencing  shares of Series A  Preferred  Stock shall be
surrendered  for  conversion at one time by the same holder,  the number of full
shares  issuable upon  conversion  thereof shall be computed on the basis of the
aggregate  number of shares of Series A Preferred Stock so surrendered.  Instead
of any fractional  share of Common Stock which would  otherwise be issuable upon
conversion of such aggregate  number of shares of Series A Preferred  Stock, the
Corporation may elect, in its sole  discretion,  independently  for each holder,
whether  such  number of shares of Common  Stock will be rounded to the  nearest
whole share (with a .5 of a share rounded upward) or whether such holder will be
given cash,  in lieu of any  fractional  share,  in an amount  equal to the same
fraction of the Market  Price of the Common Stock as of the close of business on
the day of conversion.

(e) [Reserved]

(f) Reservation of Shares;  Transfer Taxes,  Etc. The Corporation shall
at all times  reserve and keep  available,  out of its  authorized  and unissued
shares of Common Stock,  solely for the purpose of effecting  the  conversion of
the Series A Preferred Stock,  such number of shares of its Common Stock free of
preemptive  rights as shall be sufficient to effect the conversion of all shares
of Series A Preferred Stock from time to time outstanding. The Corporation shall
use its best efforts from time to time, in accordance with the laws of the State
of Delaware to increase  the  authorized  number of shares of Common Stock if at
any time the number of shares of  authorized,  unissued  and  unreserved  Common
Stock  shall  not  be   sufficient   to  permit  the   conversion   of  all  the
then-outstanding shares of Series A Preferred Stock.

The Corporation  shall pay any and all issue or other taxes  (excluding
any income  taxes)  that may be payable in respect of any issue or  delivery  of
shares of Common  Stock on  conversion  of the  Series A  Preferred  Stock.  The
Corporation shall not, however,  be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of Common Stock (or
other  securities  or  assets)  in a name other than that in which the shares of
Series A Preferred  Stock so  converted  were  registered.  and no such issue or
delivery  shall be made  unless and until the person  requesting  such issue has
paid to the  Corporation  the  amount  of such  tax or has  established,  to the
satisfaction of the Corporation, that such tax has been paid.

(g) Prior Notice of Certain Events. In case:

(i) the  Corporation  shall  declare any  dividend  (or any other
distribution); or

(ii) the Corporation  shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or

-18-

(iii) of any  reclassification  of  Common  Stock  (other  than a
subdivision  or  combination  of the  outstanding  Common Stock,  or a
change in par value, or from par value to no par value, or from no par
value to par value); or

(iv) of any consolidation or merger to which the Corporation is a
party and for which approval of any  stockholders  of the  Corporation
shall be required,  or of the sale or transfer of all or substantially
all of  the  assets  of the  Corporation  or of any  compulsory  share
exchange whereby the Common Stock is converted into other  securities,
cash or other property; or

(v) of any Liquidation Event;

then the  Corporation  shall cause to be filed with the  transfer  agent for the
Series A  Preferred  Stock,  and  shall  cause to be  mailed  to the  Registered
Holders,  at their last  addresses as they shall appear upon the stock  transfer
books of the Corporation,  at least 20 days prior to the applicable  record date
hereinafter  specified, a notice stating (x) the date on which a record (if any)
is to be taken for the  purpose of such  dividend.  distribution  or granting of
rights or warrants or, if a record is not to be taken,  the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights  or  warrants  are  to be  determined  and a  description  of  the  cash,
securities or other  property to be received by such holders upon such dividend,
distribution  or  granting  of rights or  warrants or (y) the date on which such
reclassification,  consolidation,  merger,  sale,  transfer,  share  exchange or
Liquidation  Event is expected to become  effective,  the date as of which it is
expected  that  holders of Common  Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property  deliverable  upon
such exchange or Liquidation Event and the consideration,  including  securities
or other property, to be received by such holders upon such exchange;  provided,
however,  that no  failure to mail such  notice or any defect  therein or in the
mailing thereof shall affect the validity of the corporate action required to be
specified in such notice.

(h) Other Changes in Conversion Rate. The Corporation from time to time
may  increase  the  Conversion  Rate by any amount for any period of time if the
period is at least 20 days and if the increase is irrevocable during the period.
Whenever the Conversion Rate is so increased,  the Corporation shall mail to the
Registered Holders a notice of the increase at least 15 days before the date the
increased  Conversion  Rate  takes  effect,  and such  notice  shall  state  the
increased Conversion Rate and the period it will be in effect.

The  Corporation  may make such  increases in the  Conversion  Rate, in
addition to those  required or allowed by this Section 4, as shall be determined
by it, as evidenced by a resolution of the Board of  Directors,  to be advisable
in  order to avoid or  diminish  any  income  tax to  holders  of  Common  Stock
resulting  from any dividend or  distribution  of stock or issuance of rights or
warrants to purchase or  subscribe  for stock or from any event  treated as such
for income tax purposes.

-19-

Notwithstanding  the foregoing,  the Corporation shall not increase the
Conversion Rate, as provided in this Subsection 4(h), unless the Corporation, at
such time,  makes a pro rata increase to the conversion  rate of any outstanding
shares  of  Series  B  Preferred  Stock  pursuant  to  Subsection  4(h)  of  the
Certificate  of  Designation  for the Series B Preferred  Stock.  Moreover,  the
Corporation  shall not  increase the  conversion  rate of the Series B Preferred
Stock pursuant to Subsection  4(h) of the  Certificate  of  Designation  for the
Series B Preferred Stock, unless the Corporation, at such time, makes a pro rata
increase in the Conversion Rate applicable after April 1, 2000, pursuant to this
Subsection 4(h).

Notwithstanding  anything to the contrary herein,  in no case shall the
Conversion Price be adjusted to an amount less than $.001 per share, the current
par value of the  Common  Stock  into  which  the  Series A  Preferred  Stock is
convertible.

(i) Ambiguities/Errors. The Board of Directors of the Corporation shall
have the power to resolve any  ambiguity or correct any error in the  provisions
relating to the  convertibility of the Series A Preferred Stock, and its actions
in so doing shall be final and conclusive.

5. Mandatory Conversion and Redemption. (a) At any time after the Reset
Date, the  Corporation at its option,  may cause the Series A Preferred Stock to
be  converted  in whole or in part,  on a pro rata  basis,  into  fully paid and
nonassessable  shares of Common Stock using a conversion  price equal to 200% of
the then  effective  Series B Conversion  Price if the Closing Bid Price (or, if
the  price  referenced  in  the  definition  of  Closing  Bid  Price  cannot  be
determined,  the Fair Market Value) of the Common Stock shall have exceeded 250%
of the then applicable Series B Conversion Price for at least 20 trading days in
any 30  consecutive  trading day period  ending  three days prior to the date of
notice of conversion (such event, the "Market Trigger").  Any shares of Series A
Preferred Stock so converted shall be treated as having been  surrendered by the
holder  thereof  for  conversion  pursuant  to  Section  4 on the  date  of such
mandatory conversion (unless previously converted at the option of the holder).

(b) At any time after April 1, 2000,  the  Corporation,  at its option,
may redeem  the Series A  Preferred  Stock for cash equal to the  Dividend  Base
Amount at such time,  if the Market  Trigger has  occurred in the period  ending
three  days  prior  to the  date of  notice  of  redemption  (unless  previously
converted at the option of the holder).

(c)  If the  Corporation  elects  to  convert  or  redeem  (whether  by
conversion or redemption,  to "Take-Out") any shares of Series A Preferred Stock
pursuant  to this  Section  5, then the  Corporation  shall,  at the same  time,
mandatorily  convert shares of Series B Preferred Stock pursuant to Section 5 of
the Certificate of Designation for the Series B Preferred  Stock.  Moreover,  if
the  Corporation  elects to  Take-Out  any  shares of Series B  Preferred  Stock
pursuant  to  Section  5 of the  Certificate  of  Designation  for the  Series B
Preferred Stock, then the Corporation  shall, at the same time,  Take-Out shares
of Series A  Preferred  Stock  pursuant  to this  Section 5. If the  Corporation
chooses to Take-Out fewer than all of the shares of the Series

-20-

A Preferred Stock and the Series B Preferred  Stock,  then the Corporation  must
Take-Out  an equal  percentage  of the  outstanding  shares of both the Series A
Preferred Stock and the Series B Preferred Stock.

(d) No greater  than 60 nor fewer than 20 days prior to the date of any
such  mandatory  conversion or redemption,  notice by first class mail,  postage
prepaid, shall be given to the holders of record of the Series A Preferred Stock
to be converted or redeemed,  addressed to such holders at their last  addresses
as shown on the stock transfer books of the Corporation.  Each such notice shall
specify the date fixed for  conversion  or  redemption,  the place or places for
surrender  of  shares  of  Series  A  Preferred  Stock  and the  then  effective
Conversion Rate pursuant to Section 4.

Any notice  which is mailed as herein  provided  shall be  conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail,  whether or not the holder of the Series A Preferred  Stock  receives such
notice;  and failure properly to give such notice by mail, or any defect in such
notice,  to the  holders of the shares to be  converted  or  redeemed  shall not
affect the validity of the  proceedings  for the conversion or redemption of any
other  shares  of  Series A  Preferred  Stock.  On or after  the date  fixed for
conversion or redemption  (the "Take-Out  Date") as stated in such notice,  each
holder  of  shares  called to be  converted  or  redeemed  shall  surrender  the
certificate evidencing such shares to the Corporation at the place designated in
such notice for conversion or redemption.  After the mailing of such notice, but
before the Take-Out Date as stated therein,  all rights  whatsoever with respect
to the shares so called for  conversion or  redemption  (except the right of the
holders to convert  such  shares  pursuant  to Section 4 and to have such shares
converted or redeemed,  as the case may be, upon surrender of their certificates
therefor,  pursuant to this Section 5) shall terminate. On or after the Take-Out
Date,  notwithstanding  that the  certificates  evidencing  any shares  properly
called for conversion or redemption shall not have been surrendered, such shares
shall no longer be deemed  outstanding and all rights whatsoever with respect to
the shares so called  for  conversion  or  redemption  (except  the right of the
holders to have such  shares  converted  or  redeemed,  as the case may be, upon
surrender  of their  certificates  therefor,  pursuant to this  Section 5) shall
terminate.

6. Outstanding Shares. For purposes of this Certificate of Designation,
a share of Series A Preferred Stock,  when issued,  shall be deemed  outstanding
except (i) from the date,  or the deemed  date,  of  surrender  of  certificates
evidencing  shares of Series A Preferred Stock, all shares of Series A Preferred
Stock  converted  into Common  Stock or redeemed  pursuant to Section 5 and (ii)
from the date of  registration  of  transfer,  all shares of Series A  Preferred
Stock held of record by the Corporation or any subsidiary of the Corporation.

7.  Class  Voting  Rights.  The  Corporation  shall  not,  without  the
affirmative  vote or consent of the  holders of at least 50% of all  outstanding
Series A Preferred  Stock,  voting  separately as a class,  (i) amend,  alter or
repeal any provision of the  Certificate of  Incorporation  or the Bylaws of the
Corporation so as adversely to affect the relative rights, preferences,

-21-

qualifications,  limitations or restrictions of the Series A Preferred Stock (it
being understood that the issuance of securities ranking prior to, or pari passu
with,  the Series A  Preferred  Stock (A) upon a  Liquidation  Event or (B) with
respect to the payment of dividends  or  distributions  shall not be  considered
adversely  to  affect  such  relative   rights,   preferences,   qualifications,
limitations or restrictions;  provided, however, that the exchange of any shares
of Series B  Preferred  Stock for shares of a series of  preferred  stock of the
Corporation  ranking  prior to the Series A Preferred  Stock shall be considered
adversely  to  affect  such  relative   rights,   preferences,   qualifications,
limitations  or  restrictions)  or (ii)  authorize  or issue,  or  increase  the
authorized  amount of, Series A Preferred  Stock,  other than Series A Preferred
Stock issuable in exchange for 9% Notes or accrued  interest thereon or issuable
as dividends on Series A Preferred Stock.

8.  Status of  Acquired  Shares.  Shares of  Series A  Preferred  Stock
received upon  conversion  or  redemption  pursuant to Section 4 or Section 5 or
otherwise  acquired  by the  Corporation  will  be  restored  to the  status  of
authorized but unissued  shares of Preferred  Stock,  without  designation as to
class,  and may  thereafter  be issued,  but not as shares of Series A Preferred
Stock.

9. Preemptive  Rights.  The Series A Preferred Stock is not entitled to
any  preemptive  or  subscription  rights in  respect of any  securities  of the
Corporation.

10.  Severability  of  Provisions.  Whenever  possible,  each provision
hereof  shall be  interpreted  in a manner as to be  effective  and valid  under
applicable  law,  but if any  provision  hereof is held to be  prohibited  by or
invalid under  applicable law, such provision  shall be ineffective  only to the
extent of such  prohibition or  invalidity,  without  invalidating  or otherwise
adversely  affecting the remaining  provisions  hereof.  If a court of competent
jurisdiction  should  determine  that a  provision  hereof  would  be  valid  or
enforceable  if a period of time were  extended  or  shortened  or a  particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.

[Signature page follows]

-22-

IN WITNESS WHEREOF, ____________, __________ of the Corporation, acting
for and on behalf of the Corporation, has hereunto subscribed his name this ____
day of ________, 199_.

HYBRIDON, INC.

By:_____________________________
Name:
Title:

-23-

ANNEX B
-------

FORM OF WARRANT AGREEMENT

AGREEMENT,  dated as of this  ______th  day of ________,  1998,  by and
among  HYBRIDON,  INC.,  a Delaware  corporation  ("Company"),  and  CHASEMELLON
SHAREHOLDER SERVICES, L.L.C., a New Jersey limited liability company, as warrant
agent ("Warrant Agent").

W I T N E S S E T H

WHEREAS, the Company has accepted 9% Convertible Subordinated Notes Due
2004 ("9% Notes") of the Company in exchange for shares of Series A  Convertible
Preferred Stock, par value $0.01 per share,  (the "Series A Preferred Stock") of
the Company  and  warrants to be issued  pursuant  to this  Agreement  ("Class A
Warrants")  pursuant to an Offer to Exchange dated February 3, 1998 disseminated
to all of the  holders  of the 9%  Notes  (the  "Offer  to  Exchange,"  and such
exchange offer, the "Exchange Offer");

WHEREAS, pursuant to the Exchange Offer, the Company may issue a number
of Class A Warrants equal to the Warrant Coverage Quantity (as defined below);

WHEREAS,  each Class A Warrant initially entitles the Registered Holder
(as  defined  below)  thereof to purchase  one (1) share of Common  Stock at the
Exercise Price (as defined below);

WHEREAS,  the Company desires the Warrant Agent to act on behalf of the
Company,  and the  Warrant  Agent is willing so to act, in  connection  with the
issuance,  registration,  transfer,  exchange  and  redemption  of the  Class  A
Warrants,  the issuance of certificates  representing the Class A Warrants,  the
exercise of the Class A Warrants, and the rights of the holders thereof;

NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
agreements  hereinafter  set forth and for the purpose of defining the terms and
provisions of the Class A Warrants and the certificates representing the Class A
Warrants and the respective  rights and  obligations  thereunder of the Company,
the holders of  certificates  representing  the Class A Warrants and the Warrant
Agent, the parties hereto agree as follows:

SECTION 1. Definitions.  As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:

(a)  "Common  Stock"  shall  mean  stock of the  Company  of any class,
whether now or hereafter  authorized,  which has the right to participate in the
distribution of earnings and assets of the Company without limit as to amount or
percentage,   which  at  the  Initial  Closing  Date  consisted  of  100,000,000
authorized shares of Common Stock, par value $.001 per share.

(b) The  "Closing  Bid  Price,"  for  each  trading  day,  shall be the
reported  per share  closing  bid price of the Common  Stock  regular way on the
Stock  Market on such  trading  day or, if there  were no  transactions  on such
trading day,  shall mean the average of the  reported per share  closing bid and
asked  prices,  regular  way,  of the Common  Stock on the Stock  Market on such
trading day.

(c)  "Corporate  Office" shall mean the office of the Warrant Agent (or
its successor) at which, at any particular time, its principal business shall be
administered,  which  office  is  located  at the date  hereof  at 450 West 33rd
Street, New York, New York, 10001.

(d) "Exercise Date" shall mean, as to any Class A Warrant,  the date on
which the Warrant  Agent shall have  received  both (a) the Warrant  Certificate
representing  such Class A Warrant,  with the  subscription  form  thereon  duly
executed by the  Registered  Holder  thereof or his attorney duly  authorized in
writing,  and (b) payment in cash, or by official  bank or certified  check made
payable to the  Company,  of an amount in lawful  money of the United  States of
America equal to the applicable Exercise Price.

(e) "Exercise  Price" shall mean the exercise price per share of Common
Stock to be paid upon  exercise of any Class A Warrants in  accordance  with the
terms  hereof,  which  price  shall be as  follows:  (1)  through  April 1, 2000
(except,  with respect to any Class A Warrants  called for mandatory  redemption
pursuant to Section 8 prior to such date ("Redemption Warrants"), until delivery
of the notice of such  redemption by the Company),  $35.00 per share (subject to
appropriate adjustment to reflect any stock split, combination, reclassification
or reorganization of the Common Stock);  and (2) thereafter (or at any time with
respect to the exercise of Redemption Warrants), at the Purchase Price.

(f) "Fair Market  Value"  means,  with respect to any security or other
asset,  the fair market value set by, or determined in a manner  established by,
the Board of Directors of the Company.

(g)  "Final  Closing  Date"  shall mean the final  closing  date of the
Offering.

(h) "Initial  Closing Date" shall mean the date of the initial  closing
of the Offering.

(i)  "Initial  Warrant  Exercise  Date" shall mean,  as to each Class A
Warrant, the Final Closing Date.

(j) "Interim Closing Date" shall mean, as to each Class A Warrant,  any
closing date of the Offering  other than the Initial  Closing Date and the Final
Closing Date.

(k) "Market Price" shall mean the average Closing Bid Price, for twenty
(20) consecutive  trading days, ending with the trading day prior to the date as
of which the Market Price is being determined (with appropriate  adjustments for
subdivisions or  combinations  of shares effected during such period),  provided
that if the prices  referred to in the definition of Closing Bid Price cannot be
determined for such period, "Market Price" shall mean Fair Market Value.

-2-

(l) "Offering"  shall mean the New Offering (as defined in the
Offer to  Exchange) of units each  consisting  of $100,000  principal  amount of
Notes due 2007 ("Offering Notes") of the Company and warrants to purchase Common
Stock ("Class B Warrants").

(m) The "Purchase  Price" per share of Common Stock shall mean
the  lesser  of (i)  $6.375  and (ii)  170% of the  Trading  Price as of the day
immediately  preceding  (a) the Initial  Closing Date,  (b) any Interim  Closing
Date,  or (c) the Final  Closing  Date of the  Offering,  whichever  is  lowest,
subject to adjustment from time to time pursuant to the provisions of Section 9,
and subject to the Company's  right to reduce the Purchase  Price upon notice to
all Registered  Holders (which may be given,  without  limitation,  prior to the
Final Closing Date).

(n)  "Redemption  Price"  shall  mean the  price at which  the
Company may, at its option in accordance with the terms hereof, redeem the Class
A Warrants,  which price shall be $.01 per share of Common Stock subject to such
Class A Warrants, as adjusted as provided in Section 8.

(o) "Registered  Holder" shall mean, as to any Class A Warrant
and as of any  particular  date,  the  person  in  whose  name  the  certificate
representing  the Class A Warrant  shall be registered on that date on the books
maintained by the Warrant Agent pursuant to Section 6.

(p)  "Series  A  Preferred  Stock"  shall  mean  the  Series A
Convertible Preferred Stock of the Company,  stated value $100.00 per share, par
value $.01 per share.

(q)  "Series  B  Preferred  Stock"  shall  mean  the  Series B
Convertible Preferred Stock of the Company,  stated value $100.00 per share, par
value $.01 per share.

(r) The  "Stock  Market"  shall  mean the  principal  national
securities  exchange on which the Common  Stock is listed or admitted to trading
or, if the Common  Stock is not listed or  admitted  to trading on any  national
securities exchange,  shall mean The Nasdaq National Market System or The Nasdaq
SmallCap Market  (collectively,  "Nasdaq") or, if the Common Stock is not quoted
on Nasdaq,  shall  mean the OTC  Bulletin  Board or, if the Common  Stock is not
quoted on the OTC  Bulletin  Board,  shall mean the  over-the-counter  market as
furnished by any NASD member firm  selected from time to time by the Company for
that purpose.

(s)  "Trading  Price"  shall mean the lower of (i) the average
Closing Bid Price (with appropriate adjustments for subdivisions or combinations
of shares effected during such period) for thirty (30) consecutive trading days,
ending  with the  trading  day  immediately  prior  to the date as of which  the
Trading Price is being determined,  and (ii) the average Closing Bid Price (with
appropriate  adjustments  for  subdivisions  or  combinations of shares effected
during  such  period) for five (5)  consecutive  trading  days,  ending with the
trading day immediately prior to the date as of which the Trading Price is being
determined.

(t) A "trading day" shall mean a day on which the Stock Market
is open for the transaction of business.

-3-

(u)  "Transfer  Agent"  shall  mean  ChaseMellon   Shareholder
Services,  L.L.C., as the Company's transfer agent, or its authorized successor,
as such.

(v) "Warrant Coverage Quantity" shall mean 15% of the quotient
of (i) the initial aggregate Dividend Base Amount (as defined in the Certificate
of Designation for the Series A Preferred Stock) of the Series A Preferred Stock
issued  pursuant  to the  Exchange  Offer,  divided by (ii) the  Purchase  Price
without giving effect to any  adjustments to such Purchase Price occurring after
the Final Closing Date.

(w) "Warrant  Expiration  Date" shall mean 5:00 P.M. (New York
time) on (a) the day prior to the seventh  anniversary of the Final Closing Date
or (b) the  Redemption  Date as  defined in Section  8,  whichever  is  earlier;
provided  that if such date shall in the State of New York be a holiday or a day
on which banks are  authorized or required to close,  then  "Warrant  Expiration
Date" shall mean 5:00 P.M.  (New York time) on the next  following  day which in
the  State  of New York is  neither  a  holiday  nor a day on  which  banks  are
authorized  or required to close.  Upon notice to all  Registered  Holders,  the
Company shall have the right to extend the Warrant Expiration Date.

(x) Unless otherwise  stated,  section  references used within
this Warrant Agreement refer to sections of this Warrant Agreement.

SECTION 2.  Warrants and Issuance of Warrant Certificates.

(a) A Class A Warrant  initially  shall entitle the Registered
Holder of the Warrant Certificate  representing such Class A Warrant to purchase
one share of Common  Stock upon the exercise  thereof,  in  accordance  with the
terms hereof, subject to modification and adjustment as provided in Section 9.

(b) The Class A Warrants issued pursuant to the Exchange Offer
will  immediately be detachable and separately  transferable  from the shares of
Series A Preferred Stock also issued pursuant thereto.

(c) Within five business days after the later of (i) the Final
Closing Date and (ii) the date that 9% Notes are irrevocably  exchanged pursuant
to the Exchange Offer, Warrant  Certificates  representing the number of Class A
Warrants to be issued  pursuant to the  Exchange  Offer shall be executed by the
Company and delivered to the Warrant Agent. Within five business days of receipt
of the Warrant  Certificates by the Warrant Agent,  the Warrant Agent shall send
the Warrant  Certificates to the Registered  Holders.  The Company shall issue a
written  order,  signed by its  Chairman  of the  Board,  President  or any Vice
President and by its Secretary or an Assistant  Secretary,  to the Warrant Agent
directing  that the  Warrant  Certificates  shall be  countersigned,  issued and
delivered by the Warrant Agent in accordance with the preceding sentence.

(d) From time to time, until the Warrant  Expiration Date, the
Transfer  Agent shall  countersign  and deliver stock  certificates  in required
whole number denominations of

-4-

Common Stock,  subject to adjustment as described  herein,  upon the exercise of
Class A Warrants in accordance with this Agreement.

(e) From time to time,  until the Warrant  Expiration Date, the Warrant
Agent shall  countersign  and deliver  Warrant  Certificates  in required  whole
number  denominations  to the persons  entitled  thereto in connection  with any
transfer or exchange  permitted under this  Agreement;  provided that no Warrant
Certificates  shall be issued except (i) those initially issued hereunder,  (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Class A  Warrants  represented  by any  Warrant  Certificate,  to
evidence any  unexercised  Class A Warrants  held by the  exercising  Registered
Holder,  (iii) those issued upon any transfer or exchange pursuant to Section 6;
(iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7 and (v) at the option of the Company, in such
form as may be approved by its Board of Directors, to reflect any adjustment to,
or change  in:  the  Purchase  Price;  the  number  of  shares  of Common  Stock
purchasable  upon exercise of the Class A Warrants;  the Redemption Price of the
Class A Warrants; or the Warrant Expiration Date.

SECTION 3. Form and Execution of Warrant Certificates.

(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A (the provisions of which are hereby incorporated herein) and
may have such letters,  numbers or other marks of  identification or designation
and such legends,  summaries or endorsements  printed,  lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions  of this  Agreement,  or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Class A Warrants may be listed, or to conform
to usage or to the requirements of Section 2. The Warrant  Certificates shall be
dated the date of issuance  thereof  (whether upon initial  issuance,  transfer,
exchange  or  in  lieu  of  mutilated,   lost,   stolen,  or  destroyed  Warrant
Certificates)  and issued in  registered  form.  Warrant  Certificates  shall be
numbered serially with the letters AW on Class A Warrants of all denominations.

(b) Warrant  Certificates shall be executed on behalf of the Company by
its Chairman of the Board,  President or any Vice President and by its Secretary
or an Assistant  Secretary,  by manual  signatures  or by  facsimile  signatures
printed thereon.  Warrant  Certificates  shall be manually  countersigned by the
Warrant 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  Warrant
Certificates  shall  cease  to be an  officer  of the  Company  or to  hold  the
particular  office  referenced  in the  Warrant  Certificate  before the date of
issuance of the Warrant  Certificates or before  countersignature by the Warrant
Agent  and  issuance  and  delivery  thereof,   such  Warrant  Certificates  may
nevertheless be  countersigned  by the Warrant Agent,  issued and delivered with
the same  force  and  effect  as though  the  person  who  signed  such  Warrant
Certificates  had not  ceased to be an  officer  of the  Company or to hold such
office. After  countersignature by the Warrant Agent, Warrant Certificates shall
be delivered  by the Warrant  Agent to the  Registered  Holder  without  further
action by the Company, except as otherwise provided herein.

-5-

SECTION 4.  Exercise.  Each  Class A Warrant  may be  exercised  by the
Registered Holder thereof at any time on or after the Initial Exercise Date, but
not after the  Warrant  Expiration  Date,  upon the  terms  and  subject  to the
conditions set forth herein and in the applicable Warrant Certificate. A Class A
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the Exercise Date and the person  entitled to receive the securities
deliverable  upon such exercise  shall be treated for all purposes as the holder
of those  securities upon the exercise of the Class A Warrant as of the close of
business on the Exercise  Date. As soon as  practicable on or after the Exercise
Date, the Warrant Agent shall deposit the proceeds received from the exercise of
a Class A Warrant and shall notify the Company in writing of the exercise of the
Class A Warrants. Promptly following, and in any event within five business days
after the date of such notice  from the Warrant  Agent,  the Warrant  Agent,  on
behalf of the  Company,  shall cause to be issued and  delivered by the Transfer
Agent,  to the person or persons  entitled to receive the same, a certificate or
certificates  for  the  securities  deliverable  upon  such  exercise,  (plus  a
certificate  for any remaining  unexercised  Class A Warrants of the  Registered
Holder).  In the case of payment made in the form of a check drawn on an account
of such  investment  banks and brokerage  houses as the Company shall approve in
writing to the Warrant  Agent,  certificates  shall  promptly be issued  without
prior  notice to the  Company  nor any delay.  Upon the  exercise of any Class A
Warrant and clearance of the funds  received,  the Warrant Agent shall  promptly
remit the payment  received for the Class A Warrant (the "Warrant  Proceeds") to
the Company or as the Company may otherwise direct in writing.

SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.

(a) The Company  covenants  that it will at all times  reserve and keep
available out of its  authorized  Common Stock,  solely for the purpose of issue
upon  exercise  of Class A Warrants,  such  number of shares of Common  Stock as
shall then be issuable  upon the exercise of all  outstanding  Class A Warrants.
The Company  covenants  that all shares of Common  Stock which shall be issuable
upon exercise of the Class A Warrants shall,  at the time of delivery  (assuming
full payment of the Exercise Price thereof),  be duly and validly issued,  fully
paid,  nonassessable  and free from all issuance  taxes,  liens and charges with
respect to the issue  thereof  including,  without  limitation,  adverse  claims
whatsoever  (with  the  exception  of  claims  arising  through  the acts of the
Registered  Holders themselves and except as arising from applicable Federal and
state  securities  laws) and that the Company shall have paid all taxes, if any,
in respect of the original  issuance  thereof  (except as otherwise  provided in
Subsection 5(c)).

(b)  The  Registered  Holders  of  Class  A  Warrants  shall  have  the
registration  rights  provided  in  Article  II of the  Letters  of  Transmittal
referred  to in the  Offer  to  Exchange.  The  Class A  Warrants  shall  not be
exercisable in any state where such exercise would be unlawful.

(c) The Company shall pay all  documentary,  stamp or similar taxes and
other  similar  governmental  charges (but in no case income  taxes) that may be
imposed  with  respect to the  issuance of Class A Warrants,  or the issuance or
delivery of any shares upon exercise of the Class A Warrants; provided, however,
that if the shares of Common  Stock are to be delivered in a name other than the
name of the Registered Holder of the Warrant Certificate

-6-

representing any Class A Warrant being exercised, then no such delivery shall be
made unless the person  requesting  the same has paid to the  Warrant  Agent the
amount of transfer taxes or charges incident thereto, if any.

(d) The Warrant Agent is hereby  irrevocably  authorized to requisition
the Company's  Transfer  Agent from time to time for  certificates  representing
shares of Common Stock  issuable upon exercise of the Class A Warrants,  and the
Company  will  authorize  the  Transfer  Agent to  comply  with all such  proper
requisitions.  The Company will file with the Warrant Agent a statement  setting
forth the name and  address of the  Transfer  Agent of the Company for shares of
Common Stock issuable upon exercise of the Class A Warrants.

SECTION 6. Exchange and Registration of Transfer.

(a)  Warrant   Certificates   may  be  exchanged   for  other   Warrant
Certificates  representing an equal aggregate  number of Class A Warrants of the
same class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute,
and the Warrant Agent shall countersign, issue and deliver in exchange therefor,
the Warrant  Certificate  or Warrant  Certificates  that the  Registered  Holder
making the exchange shall be entitled to receive.

(b) The Warrant Agent shall keep at its office books in which,  subject
to such reasonable  regulations as it may prescribe,  it shall register  Warrant
Certificates and any transfers  thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant  Certificate at
such office,  the Company  shall  execute and the Warrant  Agent shall issue and
deliver to the transferee or transferees,  a new Warrant  Certificate or Warrant
Certificates representing an equal aggregate number of Class A Warrants.

(c) With respect to all Warrant Certificates presented for registration
or transfer,  or for exchange or exercise,  the subscription form on the reverse
thereof shall be duly endorsed,  or be  accompanied  by a written  instrument or
instruments of transfer and  subscription,  in form  satisfactory to the Company
and  the  Warrant  Agent,   duly  executed  by  the  Registered  Holder  or  his
attorney-in-fact duly authorized in writing.

(d) A service charge may be imposed by the Warrant Agent on holders for
any  exchange  or  registration  of  transfer  of Warrant  Certificates  of such
holders.  In addition,  the Company may require  payment by such holder of a sum
sufficient to cover any tax or  governmental or other charge that may be imposed
in connection therewith.

(e) All Warrant Certificates  surrendered for exercise, or for exchange
in case of mutilated Warrant  Certificates,  shall be promptly  cancelled by the
Warrant  Agent  and  thereafter  retained  by  the  Warrant  Agent  in a  manner
consistent  with its  customary  practices  until  termination  of this  Warrant
Agreement  or  resignation  as Warrant  Agent or disposed of or destroyed at the
direction of the Company.

-7-

(f) Prior to due presentment for registration of transfer thereof,  the
Company and the Warrant  Agent may deem and treat the  Registered  Holder of any
Warrant  Certificate  as the absolute  owner thereof and of each Class A Warrant
represented  thereby  (notwithstanding  any  notations  of  ownership or writing
thereon  made by anyone other than a duly  authorized  officer of the Company or
the Warrant  Agent) for all  purposes and shall not be affected by any notice to
the contrary.

SECTION 7. Loss or  Mutilation.  Upon  receipt by the Warrant  Agent of
evidence satisfactory to it of the ownership of and loss, theft,  destruction or
mutilation  of  any  Warrant   Certificate  and  (in  case  of  loss,  theft  or
destruction)  of indemnity  satisfactory  to it, and (in the case of mutilation)
upon  surrender  and  cancellation  thereof,  the Company  shall execute and the
Warrant  Agent shall ( in the absence of notice to the  Company  and/or  Warrant
Agent that the Warrant  Certificate  has been acquired by a bona fide purchaser)
countersign  and deliver to the Registered  Holder in lieu thereof a new Warrant
Certificate  of like tenor  representing  an equal  aggregate  number of Class A
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other  reasonable  regulations  and pay such  other  reasonable  charges  as the
Warrant Agent may prescribe.

SECTION 8. Redemption.

(a) At any time after the first  anniversary of the Final Closing Date,
on no fewer than sixty (60) days' prior written notice to Registered  Holders of
the Class A Warrants being redeemed,  the Company may, at its option, redeem the
Class A Warrants at the Redemption Price, provided the Closing Bid Price exceeds
250% of the conversion price per share of Common Stock of the Series B Preferred
Stock for at least 20  trading  days in any 30  consecutive  trading  day period
ending three days prior to the date of notice of redemption  (which shall be the
date of mailing  of such  notice).  All  outstanding  Class A  Warrants  must be
redeemed  if any are  redeemed.  The date  fixed for  redemption  of the Class A
Warrants is the "Redemption Date."

(b) If the  conditions  set forth in  Subsection  8(a) are met, and the
Company  desires to exercise its right to redeem the Class A Warrants,  it shall
request  the  Warrant  Agent  to  mail a  notice  of  redemption  to each of the
Registered Holders of the Class A Warrants to be redeemed,  first class, postage
prepaid,  not later than the sixtieth day before the date fixed for  redemption,
at their last  address as shall  appear on the  records  maintained  pursuant to
Subsection  6(b).  Any notice  mailed in the  manner  provided  herein  shall be
conclusively  presumed  to have been duly given  whether  or not the  Registered
Holder receives such notice.

(c) The notice of redemption  shall specify (i) the  Redemption  Price,
(ii) the Redemption Date, (iii) the place where the Warrant  Certificates  shall
be delivered and the  Redemption  Price paid and (iv) that the right to exercise
the Class A Warrant shall terminate at 5:00 P.M. (New York time) on the business
day  immediately  preceding the Redemption  Date. No failure to mail such notice
nor any defect  therein or in the mailing  thereof  shall affect the validity of
the proceedings for such redemption except as to a Registered Holder (a) to whom
notice was not mailed or (b) whose  notice was  defective.  An  affidavit of the
Warrant Agent or

-8-

of the  Secretary  or an  Assistant  Secretary  of the  Company  that  notice of
redemption  has been  mailed  shall,  in the  absence of fraud,  be prima  facie
evidence of the facts stated therein.

(d) Any right to  exercise a Class A Warrant  shall  terminate  at 5:00
P.M. (New York time) on the business day  immediately  preceding the  Redemption
Date. On and after the  Redemption  Date,  Holders of the Class A Warrants shall
have no further rights except to receive, upon surrender of the Class A Warrant,
the Redemption Price.

(e) From and after the Redemption Date, the Company shall, at the place
specified in the notice of redemption,  upon  presentation  and surrender to the
Company by or on behalf of the Registered  Holder thereof of one or more Warrant
Certificates evidencing Class A Warrants to be redeemed,  deliver or cause to be
delivered to or upon the written order of such  Registered  Holder a sum in cash
equal to the  Redemption  Price of such  Class A  Warrants.  From and  after the
Redemption  Date and upon the  deposit or setting  aside by the Company of a sum
sufficient to redeem all the Class A Warrants called for redemption,  such Class
A Warrants  shall expire and become void and all rights  hereunder and under the
Warrant  Certificates,  except  the right to receive  payment of the  Redemption
Price, shall cease.

(f) The Redemption  Price is subject to adjustment upon any issuance of
dividends  consisting  of Common Stock with respect to the Common  Stock,  stock
splits or  combinations  of the  outstanding  Common Stock and the like (each, a
"Division  Event").  Upon any  Division  Event,  the  Redemption  Price shall be
adjusted  to equal the  product of the  Redemption  Price in effect  immediately
prior to the Division  Event  multiplied  by a fraction,  the numerator of which
shall be the number of outstanding shares of Common Stock immediately  preceding
the  Division  Event,  and the  denominator  of  which  shall be the  number  of
outstanding shares of Common Stock immediately following the Division Event.

SECTION 9.  Adjustment of Purchase Price and Number of Shares of Common
Stock or Class A Warrants.  Upon, and only upon, each adjustment of the Purchase
Price  pursuant to this  Section 9, the total  number of shares of Common  Stock
purchasable  upon the  exercise  of each Class A Warrant  shall  (subject to the
provisions contained in Subsection 9(c)) be such number of shares (calculated to
the nearest tenth) purchasable at the Purchase Price in effect immediately prior
to such adjustment multiplied by a fraction, the numerator of which shall be the
Purchase  Price  in  effect   immediately  prior  to  such  adjustment  and  the
denominator  of which shall be the Purchase  Price in effect  immediately  after
such adjustment.

(a) The Company may elect,  upon any  adjustment of the Purchase  Price
hereunder, to adjust the number of Class A Warrants outstanding,  in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each  Class A  Warrant  as  herein  provided,  so that  each  Class A Warrant
outstanding  after such  adjustment  shall  represent  the right to purchase one
share of  Common  Stock.  Each  Class A  Warrant  held of  record  prior to such
adjustment of the number of Class A Warrants shall become that number of Class A
Warrants (calculated to the nearest tenth) equal to a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the  denominator of which shall be the Purchase Price in effect  immediately
after such  adjustment.  Upon each  adjustment of the number of Class A Warrants
pursuant to this Section 9, the Company shall,

-9-

as promptly as practicable, cause to be distributed to each Registered Holder of
Warrant  Certificates  on the  date  of  such  adjustment  Warrant  Certificates
evidencing,  subject to Section 10, the number of additional Class A Warrants to
which such Holder  shall be entitled as a result of such  adjustment  or, at the
option of the Company,  cause to be distributed  to such Holder in  substitution
and  replacement for the Warrant  Certificates  held by him prior to the date of
adjustment (and upon surrender thereof,  if required by the Company) new Warrant
Certificates  evidencing  the  number of Class A Warrants  to which such  Holder
shall be entitled after such adjustment.

(b) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock  purchasable  upon  exercise of the Class A
Warrants,  the Warrant  Certificates  theretofore  and thereafter  issued shall,
unless the Company shall  exercise its option to issue new Warrant  Certificates
pursuant to Subsection  2(e),  continue to express the same  Purchase  Price per
share, number of shares purchasable  thereunder and Redemption Price therefor as
when the same were originally issued.

(c) As used in this  Section  9, the  following  terms  shall  have the
following meanings:

"Capital Stock" of any Person means the Common Stock or Preferred
Stock of such Person.  Unless  otherwise  stated herein or the context
otherwise  requires,  "Capital  Stock"  means  Capital  Stock  of  the
Company;

"Common  Stock" of any Person  other than the  Company  means the
common equity (however  designated),  including,  without  limitation,
common  stock  or   partnership   or   membership   interests  of,  or
participation  or interests in such Person (or  equivalents  thereof).
"Common Stock" of the Company means the Common Stock,  par value $.001
per share,  of the Company,  any successor  class or classes of common
equity  (however  designated)  of the  Company  into or for which such
Common Stock may hereafter be converted, exchanged or reclassified and
any class or  classes of common  equity  (however  designated)  of the
Company which may be distributed or issued with respect to such Common
Stock or  successor  class of classes to  holders  thereof  generally.
Unless  otherwise  stated  herein or the context  requires  otherwise,
"Common Stock" means Common Stock of the Company;

"Current  Market  Price"  means,  when used with  respect  to any
security as of any date, the last sale price, regular way, or, in case
no such sale takes place on such date,  the average of the closing bid
and asked  prices,  regular  way,  of such  security in either case as
reported for consolidated  transactions on the New York Stock Exchange
or, if such  security  is not listed or admitted to trading on the New
York Stock Exchange,  as reported for consolidated  transactions  with
respect to  securities  listed on the  principal  national  securities
exchange  on which such  security is listed or admitted to trading or,
if such  security is not listed or admitted to trading on any national
securities exchange, as reported on the Nasdaq National Market, or, if
such security is not listed or admitted to trading

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on the Nasdaq  National  Market,  as reported  on the Nasdaq  SmallCap
Market,  or if such  security  is not listed or admitted to trading on
any national  securities exchange or the Nasdaq National Market or the
Nasdaq  SmallCap  Market,  the  average  of the high bid and low asked
prices of such security in the over-the-counter market, as reported by
the  National  Association  of  Securities  Dealers,   Inc.  Automated
Quotations  System  or such  other  system  then  in use  or,  if such
security  is not quoted by any such  organization,  the average of the
closing bid and asked prices of such security  furnished by a New York
Stock Exchange  member firm selected by the Company.  If such security
is not  quoted  by any such  organization  and no such New York  Stock
Exchange  member  firm is able to provide  such  prices,  the  Current
Market Price of such security shall be the Fair Market Value thereof;

"Fair Market Value" means, at any date as to any asset,  Property
or right (including without  limitation,  Capital Stock of any Person,
evidence of indebtedness or other securities, but excluding cash), the
fair  market  value of such item as  determined  in good  faith by the
Board of Directors, whose determination shall be conclusive; provided,
however,   that  such  determination  is  described  in  an  Officers'
Certificate  filed  with the  transfer  agent and that,  if there is a
Current  Market Price for such item on such date,  "Fair Market Value"
means such Current  Market Price  (without  giving  effect to the last
sentence of the definition thereof);

"GAAP"  means,  as of any  date,  generally  accepted  accounting
principles   in  the   United   States  and  does  not   include   any
interpretations  or regulations  that have been proposed but that have
not become effective;

"Officer" means, with respect to any Person,  the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer,  the Chief Financial  Officer,  the Treasurer,  any Assistant
Treasurer,  the Controller,  the Secretary, any Assistant Secretary or
any Vice President of such Person;

"Officers'  Certificate"  means a certificate signed on behalf of
the Company by two  Officers,  one of whom must be the Chairman of the
Board,  the  President,  the  Treasurer  or a  Vice-President  of  the
Company;

"Person"   means  any   individual,   corporation,   partnership,
association,  trust or any other entity or  organization,  including a
government or political  subdivision or any agency or  instrumentality
thereof;

"Preferred  Stock" of any  Person  means the class or  classes of
equity,  ownership or participation  interests (however designated) in
such Person, including, without limitation,  stock, share, partnership
and  membership  interests,  which are  preferred as to the payment of
dividends or  distributions  by, or as to the  distribution  of assets
upon any voluntary or involuntary  liquidation or dissolution of, such
Person (or equivalent thereof) over interests of any other

-11-

class of interests of such Person.  Unless  otherwise stated herein or
the context  otherwise  requires,  "Preferred  Stock" means  Preferred
Stock of the Company;

"Property"  of any  Person  means  any and  all  types  of  real,
personal, tangible,  intangible or mixed property owned by such Person
whether or not included on the most recent consolidated  balance sheet
of such Person in accordance with GAAP;

"Subsidiary"  of a Person on any date  means any other  Person of
whom such Person owns,  directly or indirectly through a Subsidiary or
Subsidiaries of such Person,  Capital Stock with voting power,  acting
independently and under ordinary circumstances,  entitling such person
to elect a majority of the board of directors or other  governing body
of such other Person.  Unless  otherwise  stated herein or the context
otherwise requires, "Subsidiary" means a Subsidiary of the Company.

(d) If the Company shall (i) pay a dividend or other  distribution,  in
Common Stock,  on any class of Capital Stock of the Company,  (ii) subdivide the
outstanding  Common Stock into a greater  number of shares by any means or (iii)
combine  the  outstanding  Common  Stock into a smaller  number of shares by any
means including,  without limitation,  a reverse stock split), then in each such
case the Purchase Price in effect immediately prior thereto shall be adjusted so
that the Registered  Holder of any Class A Warrants  thereafter  surrendered for
exercise  shall be entitled to receive the number of shares of Common Stock that
such  Registered  Holder would have owned or have been  entitled to receive upon
the happening of such event had such Class A Warrants been exercised immediately
prior to the  relevant  record  date or, if there is no such  record  date,  the
effective  date of such event.  An adjustment  made pursuant to this  Subsection
9(d)  shall  become  effective   immediately  after  the  record  date  for  the
determination of stockholders  entitled to receive such dividend or distribution
and  shall  become  effective  immediately  after  the  effective  date  of such
subdivision or combination, as the case may be.

(e) If the Company shall (i) issue or distribute  (at a price per share
less than the Current  Market Price per share of such Capital  Stock on the date
of such issuance or  distribution)  Capital Stock generally to holders of Common
Stock or to holders of any class or series of Capital Stock which is convertible
into or exchangeable  or exercisable for Common Stock  (excluding an issuance or
distribution  of Common  Stock  described  in  Subsection  9(d) or (ii) issue or
distribute generally to such holders rights, warrants, options or convertible or
exchangeable securities entitling the holder thereof to subscribe for, purchase,
convert  into or exchange  for Capital  Stock at a price per share less than the
Current  Market Price per share of such Capital Stock on the date of issuance or
distribution,  then,  in each such  case,  at the  earliest  of (A) the date the
Company enters into a firm contract for such issuance or  distribution,  (B) the
record date for the  determination of stockholders  entitled to receive any such
Capital  Stock  or  any  such  rights,  warrants,   options  or  convertible  or
exchangeable  securities or (C) the date of actual  issuance or  distribution of
any such Capital Stock or any such rights,  warrants,  options or convertible or
exchangeable securities,  the Purchase Price shall be reduced by multiplying the
Purchase Price in effect immediately prior to such earliest date by:

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(i) if such Capital Stock is Common Stock, a fraction the numerator of
which is the number of shares of Common Stock outstanding, on such earliest
date plus the number of shares of Common  Stock which could be purchased at
the  Current  Market  Price per  share of Common  Stock on the date of such
issuance or  distribution  with the aggregate  consideration  (based on the
Fair Market Value thereof) received or receivable by the Company either (A)
in  connection   with  such  issuance  or  distribution  or  (B)  upon  the
conversion,   exchange,  purchase  or  subscription  of  all  such  rights,
warrants, options or convertible or exchangeable securities (the "Aggregate
Consideration"),  and the  denominator  of which is the number of shares of
Common Stock outstanding on such earliest date plus the number of shares of
Common  Stock to be so  issued  or  distributed  or to be  issued  upon the
conversion,   exchange,  purchase  or  subscription  of  all  such  rights,
warrants, options or convertible or exchangeable securities; or

(ii) if such Capital Stock is other than Common Stock,  a fraction the
numerator of which is the Current Market Price per share of Common Stock on
such earliest date minus an amount equal to (A) the difference  between (1)
the Current Market Price per share of such Capital Stock  multiplied by the
number  of  shares  of  such  Capital  Stock  to be so  issued  and (2) the
Aggregate  Consideration,  divided  by (B) the  number  of shares of Common
Stock outstanding on such date, and the denominator of which is the Current
Market Price per share of Common Stock on such earliest date.

Such adjustment  shall be made  successively  whenever any such Capital
Stock, rights,  warrants,  options or convertible or exchangeable securities are
so issued or distributed.  In determining whether any rights, warrants,  options
or  convertible  or  exchangeable  securities  entitle  the  holders  thereof to
subscribe  for,  purchase,  convert  into or exchange for shares of such Capital
Stock at less than such Current Market Price,  there shall be taken into account
the Fair Market Value of any consideration received or receivable by the Company
for such rights, warrants, options or convertible or exchangeable securities. If
any right, warrant, option or convertible or exchangeable security, the issuance
of which  resulted  in an  adjustment  in the  Purchase  Price  pursuant to this
Subsection  9(e),  shall expire and shall not have been exercised,  the Purchase
Price shall immediately upon such expiration be recomputed to the Purchase Price
which would have been in effect if such right, warrant, option or convertible or
exchangeable  securities had never been  distributed or issued.  Notwithstanding
anything  contained  in this  paragraph  to the  contrary,  (i) the  issuance of
Capital  Stock upon the  exercise  of such  rights,  warrants  or options or the
conversion or exchange of such  convertible or exchangeable  securities will not
cause an adjustment in the Purchase Price if no such adjustment  would have been
required at the time such right, warrant,  option or convertible or exchangeable
security  was  issued  or   distributed;   provided,   however,   that,  if  the
consideration  payable upon such  exercise,  conversion  or exchange  and/or the
Capital Stock receivable thereupon are changed after the time of the issuance or
distribution  of such right,  warrant,  option or  convertible  or  exchangeable
security then such change shall be deemed to be the expiration  thereof  without
having been exercised and the issuance or distribution  of new options,  rights,
warrants or  convertible  or  exchangeable  securities  and (ii) the issuance of
convertible  preferred  stock  of  the  Company  as a  dividend  on  convertible
preferred  stock of the Company  will not cause an  adjustment  in the  Purchase
Price if no such adjustment would have been required at the time such underlying

-13-

convertible  preferred  stock  was  issued  (or as a  result  of any  subsequent
modification  to the  terms  thereof)  and  the  conversion  provisions  of such
convertible  stock so issued as a  dividend  are the same as in such  underlying
convertible preferred stock.

Notwithstanding  anything  contained in this  Warrant  Agreement to the
contrary,  options,  rights or warrants  issued or  distributed  by the Company,
including  options,  rights or  warrants  distributed  prior to the date of this
Warrant  Agreement,  to  holders  of Common  Stock  generally  which,  until the
occurrence of a specified event or events (a "Trigger Event"), (i) are deemed to
be transferred  with Common Stock,  (ii) are not  exercisable and (iii) are also
issued on a pro rata basis with  respect to future  issuances  of Common  Stock,
shall be deemed not to have been  issued or  distributed  for  purposes  of this
Section 9 (and no adjustment to the Purchase  Price under this Section 9 will be
required)  until  the  occurrence  of  the  earliest  Trigger  Event.  Upon  the
occurrence of a Trigger Event,  such options,  rights or warrants shall continue
to be deemed not to have been issued or distributed for purposes of this Section
9 (and  no  adjustment  to the  Purchase  Price  under  this  Section  9 will be
required) if and for so long as each Registered Holder who thereafter  exercises
such Registered Holder's Class A Warrants shall be entitled to receive upon such
exercise, in addition to the shares of Common Stock issuable upon such exercise,
a number of such options,  rights or warrants,  as the case may be, equal to the
number of options,  rights or warrants to which a holder of the number of shares
of Common  Stock  equal to the number of shares of Common  Stock  issuable  upon
exercise of such Registered  Holder's Class A Warrants is entitled to receive at
the time of such  exercise in  accordance  with the terms and  provision of, and
applicable to, such options, rights or warrants. Upon the expiration of any such
options,  rights or warrants or at such time, if any, as a Registered  Holder is
not entitled to receive such  options,  rights or warrants upon exercise of such
Registered Holder's Class A Warrants,  an adjustment (if any is required) to the
Purchase  Price  shall be made in  accordance  with  this  Subsection  9(e) with
respect to the issuance of all such options,  rights and warrants as of the date
of issuance thereof,  but subject to the provisions of the preceding  paragraph,
if any such  option,  right or  warrant,  including  any such  options  right or
warrants distributed prior to the date of this Warrant Agreement, are subject to
events,  upon the  occurrence of which such options,  rights or warrants  become
exercisable to purchase different  securities,  evidence of indebtedness,  cash,
Properties or other assets or different  amounts thereof,  then,  subject to the
preceding  provision of this  paragraph,  the date of the  occurrence of any and
each such event shall be deemed to be the date of  distribution  and record date
with respect to new  options,  right or warrants  with such new purchase  rights
(and a termination  or expiration  of the existing  options,  rights or warrants
without  exercise  thereof).  In addition,  in the event of any distribution (or
deemed  distribution)  of options,  rights or warrants,  or any Trigger Event or
other event of the type described in the preceding  sentence,  that required (or
would  have  required  but  for the  provisions  of  Subsection  9(h) or of this
paragraph)  an  adjustment  to the Purchase  Price under this Section 9 and such
options,  rights or warrants shall  thereafter have been redeemed or repurchased
without  having been  exercised,  then the Purchase Price shall be adjusted upon
such redemption or repurchase to give effect to such distribution, Trigger Event
or  other  event,  as  the  case  may,  as  though  it had  instead  been a cash
distribution,  equal  on a per  share  basis  to the  result  of  the  aggregate
redemption or repurchase  price  received by holders of such options,  rights or
warrants  divided by the number of shares of Common Stock  outstanding as of the
date of such repurchase or redemption, made to holders of Common Stock generally
as of the date of such redemption or repurchase.

-14-

(f) If the Company shall pay or distribute, as a dividend or otherwise,
generally  to  holders of Common  Stock or any class or series of Capital  Stock
which is convertible  into or exercisable or  exchangeable  for Common Stock any
assets,  Properties  or rights  (including,  without  limitation,  evidences  of
indebtedness of the Company, any Subsidiary or any other Person, cash or Capital
Stock or other  securities of the Company,  any  Subsidiary or any other Person,
but excluding  payments and  distributions  as described in Subsections  9(d) or
(e),  dividends and  distributions  in connection  with a Liquidation  Event (as
defined in the Certificate of Designation for the Series A Preferred  Stock) and
distributions  consisting  solely of cash described in Subsection  9(g), then in
each such case the Purchase Price shall be reduced by  multiplying  the Purchase
Price in effect immediately prior to the date of such payment or distribution by
a fraction,  the  numerator  of which is the Current  Market  Price per share of
Common Stock on the record date for the  determination of stockholders  entitled
to receive such payment or distribution  less the Fair Market Value per share of
Common Stock on such record date of the assets,  Properties or rights so paid or
distributed,  and the denominator of which is the Current Market Price per share
of Common  Stock on such record date.  Such  adjustment  shall become  effective
immediately  after such record date. For purposes of this Subsection  9(f), such
Fair Market Value per share shall equal the aggregate  Fair Market Value on such
record date of the assets,  Properties or rights so paid or distributed  divided
by the number of shares of Common Stock outstanding on such record date. For all
purposes of this Warrant  Agreement,  adjustments to any security's  exercise or
exercise price pursuant to such security's  original terms shall not be deemed a
distribution or dividend to holders thereof.

(g) If the Company shall, by dividend or otherwise, make a distribution
(other than in connection with the liquidation, dissolution or winding up of the
Company in its  entirety),  generally to holders of Common Stock or any class or
series of Capital Stock which is convertible into or exercisable or exchangeable
for  Common  Stock,  consisting  solely  of  cash  where  (x) the sum of (i) the
aggregate  amount  for such cash plus (ii) the  aggregate  amount of all cash so
distributed  (by  dividend or  otherwise)  to such  holders  within the 12-month
period ending on the record date for determining stockholder entitled to receive
such  distribution  with  respect  to which no  adjustment  has been made to the
Purchase Price pursuant to this Subsection 9(g) exceeds (y) 10% of the result of
the  multiplication of (1) the Current Market Price per share of Common Stock on
such record date times (2) the number of shares of Common Stock  outstanding  on
such  record  date,  then  the  Purchase  Price  shall  be  reduced,   effective
immediately  prior to the opening of business on the day  following  such record
date, by multiplying the Purchase Price in effect immediately prior to the close
of business on the day prior to such record date by a fraction, the numerator of
which is the Current  Market Price per share of Common Stock on such record date
less the aggregate  amount of cash per share so distributed  and the denominator
of which is such Current Market Price; provided, however, that, if the aggregate
amount of cash per share is equal to or greater than such Current  Market Price,
then, in lieu of the foregoing adjustment,  adequate provisions shall be made so
that each Registered  Holder shall have the right to receive upon exercise (with
respect to each share of Common Stock issued upon such  exercise and in addition
to the Common Stock  issuable upon  exercise)  the aggregate  amount of cash per
share such Registered  Holder would have received had such  Registered  Holder's
Class A Warrant been  exercised  immediately  prior to such record  date.  In no
event shall the Purchase Price be increased  pursuant to this  Subsection  9(g);
provided,  however, that if such distribution is not so made, the Purchase Price
shall be adjusted to be the

-15-

Purchase Price which would have been in effect if such distribution had not been
declared.  For purposes of this Subsection  9(g), such aggregate  amount of cash
per share shall  equal such sum divided by the number of shares of Common  Stock
outstanding on such record date.

(h) The  provisions  of this  Section  9 shall  similarly  apply to all
successive  events of the type  described  in this  Section  9.  Notwithstanding
anything  contained herein to the contrary,  no adjustment in the Purchase Price
shall be required unless such  adjustment  would require an increase or decrease
of at least 1% in the Purchase Price then in effect; provided, however, that any
adjustments  which by reason of this Subsection 9(h) are not required to be made
shall be carried  forward and taken into account in any  subsequent  adjustment.
All calculations  under this Section 9 shall be made by the Company and shall be
made to the nearest cent or to the nearest one hundredth of a share, as the case
may be, and the Transfer Agent shall be entitled to rely  conclusively  thereon.
Except as provided in this Section 9, no adjustment  in the Purchase  Price will
be made for the issuance of Common Stock or any securities  convertible  into or
exchangeable  for Common Stock or carrying the right to purchase Common Stock or
any securities so convertible or exchangeable.

(i)  Whenever the Purchase  Price is adjusted as provided  herein,  the
Company  shall  promptly  file with the Warrant  Agent an Officers'  Certificate
setting  forth the Purchase  Price in effect after such  adjustment  and setting
forth a brief statement of the facts requiring such  adjustment.  Promptly after
delivery of such  Officers'  Certificate,  the Company shall give or cause to be
given to each  Registered  Holder a notice of such  adjustment  of the  Purchase
Price  setting  forth the  adjusted  Purchase  Price and the date on which  such
adjustment becomes  effective.  The Warrant Agent may rely on the information in
such  Officers'  Certificate  as true and correct and has no duty or  obligation
independently to verify the amounts or calculations set forth therein.

(j) Notwithstanding  anything contained herein to the contrary,  in any
case in which this Section 9 provides that an  adjustment in the Purchase  Price
shall become effective immediately after a record date for an event, the Company
may  defer  (and  shall  promptly  give the  Warrant  Agent  notice  of any such
deferral)  until the  occurrence  of such event (i)  issuing  to the  Registered
Holder of any Class A Warrants  exercised  after such record date and before the
occurrence  of such event the  additional  shares of Common Stock  issuable upon
such exercise by reason of the adjustment  required by such event over and above
the number of shares of Common Stock  issuable upon such exercise  before giving
effect to such adjustment and (ii) paying to such  Registered  Holder any amount
in cash in lieu of any fractional share of Common Stock pursuant to Section 10.

(k)  Notwithstanding  any other provision  hereof, no adjustment to the
Purchase  Price shall be made upon the issuance or exercise or conversion of (1)
options or warrants to purchase,  in the aggregate,  up to 25% of the securities
sold in the  Offering  issued to any  placement  agent or  financial  advisor in
connection  with  the  private  placement  of the  Offering  Notes  or  Series B
Preferred Stock offered in lieu of Offering Notes and, in each case, warrants to
purchase Common Stock (such options or warrants,  the "Offering Warrants"),  (2)
any Offering Notes, including any Offering Notes issued pursuant to the exercise
of the Offering Warrants, (3) any Series B Preferred Stock, including any Series
B Preferred Stock issued in the

-16-

Offering,  pursuant to the exercise of any Offering  Warrants or upon conversion
of any  Offering  Notes,  (4) any equity  securities  or warrants of the Company
(including,  without  limitation,  the Series A Preferred  Stock,  warrants  and
equity  securities  underlying  warrants)  issued  in  exchange  for 9% Notes or
accrued  interest  thereon or pursuant to the conversion or exercise  provisions
thereof,  (5) any warrants  issued in  connection  with the Offering or upon any
Reset  Event (as  defined in the  Certificate  of  Designation  for the Series A
Preferred Stock) or Series B Reset (as defined in the Certificate of Designation
for the Series A Preferred  Stock),  (6) any  warrants  issued to Forum  Capital
Markets,  LLC  ("Forum") in exchange for or in addition to, or any amendment to,
any warrants held by Forum, in each case,  pursuant to a letter  agreement dated
January 5, 1998,  between the Company and Forum, (7) any Capital Stock issued or
cash paid as dividends on the Series A Preferred  Stock or (8) any Capital Stock
issued or cash paid upon the mandatory  conversion or redemption of any Series A
Preferred  Stock or Series B Preferred Stock in accordance with Section 5 of the
Certificate of Designation  for the Series A Preferred Stock or Section 5 of the
Certificate of Designation for the Series B Preferred Stock.

(l) Any determination as to whether an adjustment in the Purchase Price
in effect  hereunder  is required  pursuant to Section 9, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the Class
A Warrants  and the Company if made in good faith by the Board of  Directors  of
the Company.

SECTION 10.  Fractional  Warrants and Fractional  Shares. No fractional
shares or scrip  representing  fractional shares of Common Stock shall be issued
upon exercise of Class A Warrants. If more than one certificate evidencing Class
A Warrants shall be surrendered for exercise at one time by the same holder, the
number of full shares  issuable upon  exercise  thereof shall be computed on the
basis of the aggregate number of Class A Warrants so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon exercise
of such aggregate number of Class A Warrants,  the Company may elect in its sole
discretion,  independently  for each  holder,  whether  such number of shares of
Common  Stock will be rounded to the  nearest  whole  share  (with .5 of a share
rounded  upward) or  whether  such  holder  will be given  cash,  in lieu of any
fractional share, in an amount equal to the same fraction of the Market Price of
the Common Stock as of the Exercise Date.

SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Class
A Warrants  shall,  as such,  be entitled to vote or to receive  dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such  Class A  Warrants  for  any  purpose  whatsoever,  nor  shall  anything
contained herein be construed to confer upon the holder of Class A Warrants,  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 (whether
upon any  recapitalization,  issue or  reclassification  of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise),  or to  receive  notice of  meetings,  or to  receive  dividends  or
subscription  rights,  until  such  Holder  shall  have  exercised  such Class A
Warrants  and  been  issued  shares  of  Common  Stock  in  accordance  with the
provisions hereof.

SECTION 12. Rights of Action. All rights of action with respect to this
Agreement  are  vested  in the  respective  Registered  Holders  of the  Class A
Warrants, and any

-17-

Registered Holder of a Class A Warrant,  without consent of the Warrant Agent or
of the holder of any other  Class A Warrant,  may, in his own behalf and for his
own  benefit,  enforce  against the  Company  his right to exercise  his Class A
Warrants for the  purchase of shares of Common  Stock in the manner  provided in
the Warrant Certificate and this Agreement.

SECTION 13. Agreement of Warrant  Holders.  Every holder of any Class A
Warrant,  by his acceptance thereof,  consents and agrees with the Company,  the
Warrant Agent and every other holder of any Class A Warrant that:

(a) The Class A Warrants are transferable only on the registry books of
the Warrant Agent by the  Registered  Holder  thereof in person or by his or her
attorney  duly  authorized  in  writing  and  only if the  Warrant  Certificates
representing  such Class A Warrants are surrendered at the office of the Warrant
Agent,  duly  endorsed  or  accompanied  by  a  proper  instrument  of  transfer
satisfactory to the Warrant Agent, in its sole discretion, together with payment
of any applicable transfer taxes; and

(b) The Company and the Warrant  Agent may deem and treat the person in
whose  name the  Warrant  Certificate  is  registered  as the  holder and as the
absolute,  true and lawful owner of the Class A Warrants represented thereby for
all purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary,  except as otherwise expressly provided
in Section 6.

SECTION 14. Cancellation of Warrant Certificates.  If the Company shall
purchase  or  acquire  any  Class A Warrant  or Class A  Warrants,  the  Warrant
Certificate  or Warrant  Certificates  evidencing  the same,  by  redemption  or
otherwise,  shall thereupon be delivered to the Warrant Agent and canceled by it
and  retired.  The Warrant  Agent shall also cancel the Warrant  Certificate  or
Warrant  Certificates  following  exercise of any or all of the Class A Warrants
represented  thereby or delivered to it for transfer,  split up,  combination or
exchange.

SECTION 15.  Concerning  the  Warrant  Agent.  The  Warrant  Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions  hereof. The Warrant Agent does not
hereby assume any obligation,  relationship,  agency or trust for or with any of
the holders of Warrant  Certificates  or beneficial  owners of Class A Warrants.
The Warrant Agent shall not, by issuing and delivering Warrant Certificates,  or
by any other act  hereunder,  be  deemed to make any  representations  as to the
validity,  value or  authorization  of the Warrant  Certificates  or the Class A
Warrants  represented  thereby or of any securities or other property  delivered
upon  exercise of any Class A Warrant or whether any stock issued upon  exercise
of any Class A Warrant is fully paid and nonassessable.

The  Warrant  Agent  shall  not  at any  time  be  under  any  duty  or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase  Price or the  Redemption  Price provided in this
Agreement,  or to  determine  whether  any fact exists that may require any such
adjustments,  or with  respect to the  nature or extent of any such  adjustment,
when made, or with respect to the method employed in making the same. It shall

-18-

not (i) be liable for any recital or statement of facts contained  herein or for
any  action  taken,  suffered  or  omitted  by it in  reliance  on  any  Warrant
Certificate or other  document or instrument  believed by it in good faith to be
genuine and to have been  signed or  presented  by the proper  party or parties,
(ii) be  responsible  for any  failure on the part of the Company to comply with
any of its  covenants  and  obligations  contained  in this  Agreement or in any
Warrant  Certificate,  or (iii) be liable for any act or omission in  connection
with this Agreement except for its own negligence or willful misconduct.

The Warrant Agent may at any time consult with counsel  satisfactory to
it (who  may be  counsel  for the  Company)  and  shall  incur no  liability  or
responsibility for any action taken,  suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.

Any notice, statement, instruction, request, direction, order or demand
of the Company shall be  sufficiently  evidenced by an instrument  signed by the
Chairman of the Board,  President,  or any Vice President and the Secretary,  or
any  Assistant  Secretary  (unless other  evidence in respect  thereof is herein
specifically  prescribed).  The Warrant Agent shall not be liable for any action
taken,  suffered or omitted by it in  accordance  with such  notice,  statement,
instruction, request, direction, order or demand believed by it to be genuine.

The Company agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses hereunder
as governed by a separate agreement to be entered into between the Warrant Agent
and the Company;  the Company  further agrees to indemnify the Warrant Agent and
save it harmless against any and all losses, expenses and liabilities, including
judgments,  costs and reasonable counsel fees and expenses, for anything done or
omitted by the Warrant Agent in the execution of its duties and powers hereunder
except  losses,  expenses  and  liabilities  arising as a result of the  Warrant
Agent's negligence or willful misconduct.

The  Warrant  Agent may resign its  duties and be  discharged  from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant  Agent's own negligence or willful  misconduct),  after giving 30
days' prior  written  notice to the Company.  At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such  notice  of  resignation  to be mailed to the  Registered  Holders  of each
Warrant  Certificate at the Company's  expense.  Upon such  resignation,  or any
inability  of the Warrant  Agent to act as such  hereunder,  the  Company  shall
appoint a new warrant  agent in writing.  If the Company shall fail to make such
appointment  within a period of 15 days after it has been notified in writing of
such resignation by the resigning  Warrant Agent,  then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent,  whether appointed by
the Company or by such a court,  shall be a bank or trust company having capital
and surplus,  as shown by its last published report to its stockholders,  of not
less than $10,000,000 or a stock transfer  company.  After acceptance in writing
of such  appointment  by the new warrant agent is received by the Company,  such
new  warrant  agent  shall be vested with the same  powers,  rights,  duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be

-19-

necessary or expedient to execute and deliver any further assurance, conveyance,
act or deed,  the same shall be done at the  expense of the Company and shall be
legally and validly  executed and delivered by the resigning  Warrant Agent. Not
later than the effective  date of any such  appointment,  the Company shall file
notice thereof with the resigning Warrant Agent and shall forthwith cause a copy
of  such  notice  to  be  mailed  to  the  Registered  Holder  of  each  Warrant
Certificate.

Any entity into which the Warrant Agent or any new warrant agent may be
converted or merged or any entity resulting from any  consolidation to which the
Warrant Agent or any new warrant agent shall be a party or any entity succeeding
to the trust  business of the Warrant  Agent shall be a successor  warrant agent
under this  Agreement  without any  further  act,  provided  that such entity is
eligible for  appointment as successor to the Warrant Agent under the provisions
of the preceding  paragraph.  Any such  successor  warrant agent shall  promptly
cause notice of its  succession as warrant agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate.

The Warrant Agent, its  subsidiaries and affiliates,  and any of its or
their officers or directors,  may buy and hold or sell Class A Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same  extent  and with like  effects  as  though it were not  Warrant
Agent.  Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.

SECTION 16.  Modification  of  Agreement.  The  parties  hereto and the
Company may by  supplemental  agreement  make any changes or corrections in this
Agreement  (i) that they  shall deem  appropriate  to cure any  ambiguity  or to
correct any  defective or  inconsistent  provision or manifest  mistake or error
herein contained;  (ii) to reflect an increase in the number of Class A Warrants
which are to be governed by this Agreement  resulting from a subsequent offering
of Company  securities which includes Class A Warrants having the same terms and
conditions as the Class A Warrants,  originally covered by or subsequently added
to this  Agreement  under this Section 16; or (iii) that they may deem necessary
or desirable and that shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, that this Agreement shall not otherwise
be modified,  supplemented  or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing more than
50% of the Class A Warrants then  outstanding;  and provided,  further,  that no
change in the number or nature of the securities  purchasable  upon the exercise
of any Class A Warrant,  or the Exercise Price therefor,  or the acceleration of
the Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate  representing such Class A Warrant,
other than such  changes as are  specifically  prescribed  by this  Agreement as
originally executed or are made in compliance with applicable law.

SECTION  17.  Notices.  All  notices,  requests,   consents  and  other
communications  hereunder  shall be in writing  and shall be deemed to have been
made when  delivered or mailed by means of first class  registered  or certified
mail,  postage  prepaid as  follows:  if to the  Registered  Holder of a Warrant
Certificate,  at the  address  of such  holder  as shown on the  registry  books
maintained by the Warrant Agent;  and if to the Company,  at 620 Memorial Drive,
Cambridge,  Massachusetts,  02139,  or at such  other  address  as may have been
furnished

-20-

to the Warrant Agent in writing by the Company;  if to the Warrant Agent, at its
Corporate Office, Attention: Relationship Manager.

SECTION 18.  Governing  Law. This  Agreement  shall be governed by, and
construed  in  accordance  with,  the  laws of the  State of New  York,  without
reference to principles of conflict of laws.

SECTION 19. Binding  Effect.  This Agreement  shall be binding upon and
inure to the  benefit of the  Company,  the Warrant  Agent and their  respective
successors  and  assigns,   and  the  holders  from  time  to  time  of  Warrant
Certificates.  Nothing in this  Agreement  is intended nor shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.

SECTION 20. Termination. This Agreement shall terminate at the close of
business  on the  Warrant  Expiration  Date of all the Class A Warrants  or such
earlier  date upon which all Class A Warrants  have been  exercised or redeemed,
except that the Warrant  Agent shall  account to the Company for cash held by it
and Section 15 shall survive such termination.

SECTION 21.  Counterparts.  This  Agreement  may be executed in several
counterparts, which taken together shall constitute a single document.

-21-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

HYBRIDON, INC.

By:_______________________
Authorized Officer

CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent

By:_______________________
Authorized Officer

-22-

EXHIBIT A

[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]

THE TERMS OF THIS  WARRANT  ARE SUBJECT TO THE TERMS OF A WARRANT  AGREEMENT,  A
COPY OF WHICH IS AVAILABLE FROM HYBRIDON,  INC. (THE "COMPANY").  THE SECURITIES
REPRESENTED  BY THIS WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE UNITED  STATES
SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  OR ANY APPLICABLE
STATE  SECURITIES  LAWS,  AND MAY NOT BE SOLD,  OFFERED  FOR  SALE,  PLEDGED  OR
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN  EFFECT  WITH  RESPECT  TO THE  SECURITIES  UNDER  THE  SECURITIES  ACT OR AN
EXEMPTION  FROM THE  SECURITIES  ACT.  ANY SUCH  TRANSFER MAY ALSO BE SUBJECT TO
COMPLIANCE  WITH  APPLICABLE  STATE  SECURITIES  LAWS  AND  THE  LAWS  OF  OTHER
APPLICABLE JURISDICTIONS.

No. __ _______________ Class A Warrants

VOID AFTER __________________, 2005

CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK

HYBRIDON, INC.

This certifies that FOR VALUE RECEIVED
________________________________________________________________________________
____________________________  or registered assigns (the "Registered Holder") is
the owner of the  number of Class A  Warrants  ("Class  A  Warrants")  specified
above. Each Class A Warrant represented hereby initially entitles the Registered
Holder  to  purchase,  subject  to the terms  and  conditions  set forth in this
Warrant  Certificate  and the Warrant  Agreement (as hereinafter  defined),  one
fully paid and  nonassessable  share of Common Stock,  par value $.001 per share
("Common Stock"), of Hybridon, Inc., a Delaware corporation (the "Company"),  at
any time between _______________,  1998, and the Expiration Date (as hereinafter
defined),  upon the presentation and surrender of this Warrant  Certificate with
the  Subscription  Form on the reverse  hereof duly  executed,  at the corporate
office of ChaseMellon  Shareholder  Services,  L.L.C.,  as Warrant Agent, or its
successor  (the "Warrant  Agent"),  accompanied by payment of the Exercise Price
(as defined in the Warrant  Agreement)  in lawful money of the United  States of
America in cash or by  official  bank or  certified  check  made  payable to the
Company.

This Warrant  Certificate and each Class A Warrant  represented  hereby
are issued  pursuant  to,  and are  subject  in all  respects  to, the terms and
conditions set forth in the Warrant Agreement (the "Warrant  Agreement"),  dated
________ _____, 1998, by and among the Company and the Warrant Agent.

In the  event of  certain  contingencies  provided  for in the  Warrant
Agreement,  the Exercise  Price,  Purchase  Price and/or the number of shares of
Common  Stock  subject to  purchase  upon the  exercise  of each Class A Warrant
represented hereby are subject to modification or adjustment.

Each Class A Warrant represented hereby is exercisable at the option of
the Registered  Holder, but no fractional shares of Common Stock will be issued.
In the case of the  exercise  of fewer  than every  Class A Warrant  represented
hereby,  the Company  shall cancel this Warrant  Certificate  upon the surrender
hereof  and shall  execute  and  deliver a new  Warrant  Certificate  or Warrant
Certificates of like tenor, which the Warrant Agent shall  countersign,  for the
balance of such Class A Warrants.

The term  "Expiration  Date"  shall  mean 5:00 P.M.  (New York time) on
____________,  2005,  or such  earlier  date as the  Class A  Warrants  shall be
redeemed.  If such date  shall in the State of New York be a holiday or a day on
which banks are authorized to close,  then the  Expiration  Date shall mean 5:00
P.M.  (New York time) the next  following  day which in the State of New York is
not a holiday or a day on which banks are  authorized  to close.  Upon notice to
all Registered Holders of the Class A Warrants, the Company shall have the right
to extend the Expiration Date.

The Class A Warrants represented hereby shall not be exercisable in any
state where such exercise would be unlawful.

This Warrant Certificate is exchangeable,  upon the surrender hereof by
the Registered  Holder at the corporate  office of the Warrant Agent,  for a new
Warrant Certificate or Warrant  Certificates of like tenor representing an equal
aggregate number of Class A Warrants,  each of such new Warrant  Certificates to
represent  such  number  of Class A  Warrants  as shall  be  designated  by such
Registered  Holder at the time of such surrender.  Upon due presentment with any
applicable  transfer  fee  per  certificate  in  addition  to any  tax or  other
governmental  charge  imposed  in  connection  therewith,  for  registration  of
transfer of this Warrant  Certificate at such office, a new Warrant  Certificate
or  Warrant  Certificates  representing  an equal  aggregate  number  of Class A
Warrants will be issued to the transferee in exchange  therefor,  subject to the
limitations provided in the Warrant Agreement.

The  Registered  Holder  shall  not  be  entitled  to any  rights  of a
stockholder of the Company in respect of any  unexercised  Class A Warrants held
by such Registered Holder, including,  without limitation,  the right to vote or
to  receive  dividends  or other  distributions,  and shall not be  entitled  to
receive any notice of any proceedings of the Company,  except as provided in the
Warrant Agreement.

The Class A Warrants  represented  hereby may be redeemed at the option
of the Company,  at a redemption  price of $.01 per Class A Warrant  (subject to
adjustment  under  the  circumstances  set  forth in  Section  8 of the  Warrant
Agreement) (the  "Redemption  Price").  Notice of redemption  shall be given not
later  than the  sixtieth  day  before  the date  fixed for  redemption,  all as
provided in the Warrant  Agreement.  On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to the Class A Warrants

represented hereby except to receive the Redemption Price upon surrender of this
Warrant Certificate.

Prior to due  presentment  for  registration  of transfer  hereof,  the
Company and the Warrant  Agent may deem and treat the  Registered  Holder as the
absolute  owner  hereof  and  of  each  Class  A  Warrant   represented   hereby
(notwithstanding  any  notations of  ownership or writing  hereon made by anyone
other than a duly  authorized  officer of the Company or the Warrant  Agent) for
all purposes and shall not be affected by any notice to the contrary.

This  Warrant  Certificate  shall  be  governed  by  and  construed  in
accordance with the laws of the State of New York.

This  Warrant  Certificate  is not valid  unless  countersigned  by the
Warrant Agent.

IN WITNESS WHEREOF,  the Company has caused this Warrant Certificate to
be duly  executed,  manually or in facsimile,  by two of its officers  thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.

HYBRIDON, INC.

Dated:  _____________________                         By:_______________________

By:_______________________

[seal]

Countersigned:

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Warrant Agent

By:  ______________________________
Authorized Officer

[FORM OF REVERSE OF WARRANT CERTIFICATE]

TRANSFER FEE: $___________ PER CERTIFICATE ISSUED

SUBSCRIPTION FORM

To Be Executed by the Registered Holder
in Order to Exercise Class A Warrants

The undersigned Registered Holder hereby irrevocably elects to exercise
_________  Class A Warrants  represented  by this  Warrant  Certificate,  and to
purchase the securities issuable upon the exercise of such Class A Warrants, and
requests that certificates for such securities shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

___________________________________
___________________________________
___________________________________
___________________________________
[please print or type name and address]

and be delivered to

___________________________________
___________________________________
___________________________________
___________________________________
[please print or type name and address]

and if such  number of Class A  Warrants  shall not be all the Class A  Warrants
evidenced by this Warrant  Certificate,  that a new Warrant  Certificate for the
balance of such Class A Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.

The  undersigned  represents that the exercise of the within Class A Warrant was
solicited by a member of the National Association of Securities Dealers, Inc. If
not solicited by an NASD member, please write "unsolicited" in the space below.

------------------------------------
(Name of NASD Member)

Dated: __________________________           X___________________________________
___________________________________
___________________________________
Address

___________________________________
Taxpayer Identification Number

___________________________________
Signature Guaranteed

___________________________________

ASSIGNMENT

To Be Executed by the Registered Holder
in Order to Assign Class A Warrants

FOR VALUE RECEIVED, _______________________________________________ hereby
sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

___________________________________
___________________________________
___________________________________
___________________________________
[please print or type name and address]

________________________________  of the Class A  Warrants  represented  by this
Warrant   Certificate,   and  hereby   irrevocably   constitutes   and  appoints
______________________________

________________________________________________________________________________
Attorney to transfer this Warrant Certificate on the books of the Company,  with
full power of substitution in the premises.

Dated: __________________________     X_________________________________________
Signature Guaranteed

_________________________________________

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION  FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT  CERTIFICATE IN EVERY  PARTICULAR,
WITHOUT  ALTERATION  OR  ENLARGEMENT  OR ANY  CHANGE  WHATSOEVER,  AND  MUST  BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.

ANNEX C
-------

CERTIFICATE OF DESIGNATION

for

SERIES B CONVERTIBLE PREFERRED STOCK

of

HYBRIDON INC.

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

HYBRIDON  INC., a corporation  organized and existing under the laws of
the State of Delaware (the "Corporation"),  does hereby certify that pursuant to
the authority conferred on the board of directors of the Corporation (the "Board
of Directors") by the Restated Certificate of Incorporation (the "Certificate of
Incorporation")  of the  Corporation  and in accordance  with Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors adopted
the following resolution  establishing a series of 2,616,918 shares of preferred
stock of the Corporation designated as "Series B Convertible Preferred Stock":

RESOLVED,  that  pursuant to the  authority  conferred on the Board of
Directors by the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share,  of the  Corporation  is hereby  established  and
created,  and that the  designation  and number of shares  thereof  and the
voting and other powers,  preferences and relative participating,  optional
or  other   special   rights  of,  the  shares  of  such   series  and  the
qualifications, limitations and restrictions thereof are as follows:

Series B Convertible Preferred Stock

1. Designation and Amount and Definitions.  (a) There shall be a series
of Preferred Stock designated as "Series B Convertible  Preferred Stock" and the
number of shares  constituting  such series shall be  2,616,918.  Such series is
referred to herein as the "Series B Preferred Stock".  Notwithstanding any other
provision in this  Certificate of  Designation  of the Series B Preferred  Stock
(the "Certificate of Designation") to the contrary,  such series shall be junior
to the Series A Convertible  Preferred Stock of the Corporation,  par value $.01
per share, (the "Series A Preferred Stock"), and senior to the common stock, par
value $.001 per share, of the  Corporation  (the "Common Stock") with respect to
dividends and the distribution of assets

upon  liquidation,  dissolution  or  winding  up.  Such  number of shares may be
increased or decreased by resolution  of the Board of Directors,  subject to the
provisions of Section 6 hereof, provided, however, that no decrease shall reduce
the  number of shares of Series B  Preferred  Stock to fewer  than the number of
shares then issued and outstanding.

(b) As used in this  Certificate of  Designation,  the following  terms
shall have the following meanings:

(i) The "Closing Bid Price" for any security for each trading day
shall be the  reported  per share  closing bid price of such  security
regular way on the Stock Market on such trading day, or, if there were
no  transactions  on such  trading  day,  the average of the  reported
closing bid and asked  prices,  regular  way, of such  security on the
relevant Stock Market on such trading day.

(ii) "Fair Market  Value" of any asset  (including  any security)
means the fair  market  value  thereof as mutually  determined  by the
Corporation  and the  holders of a majority  of the Series B Preferred
Stock  then  outstanding.  If the  Corporation  and the  holders  of a
majority of the Series B Preferred  Stock then  outstanding are unable
to reach  agreement on any valuation  matter,  such valuation shall be
submitted to and  determined  by a nationally  recognized  independent
investment  bank selected by the Board of Directors and the holders of
a majority of the Series B Preferred  Stock then  outstanding  (or, if
such selection cannot be agreed upon promptly,  or in any event within
ten days, then such valuation shall be made by a nationally recognized
independent   investment   banking  firm   selected  by  the  American
Arbitration  Association  in New  York  City in  accordance  with  its
rules),  the  costs  of  which  valuation  shall  be  paid  for by the
Corporation.

(iii) "Market Price" shall mean the average Closing Bid Price for
twenty  (20)  consecutive  trading  days,  ending with the trading day
prior to the date as of which  the  Market  Price is being  determined
(with  appropriate  adjustments  for  subdivisions  or combinations of
shares  effected  during  such  period);  provided  that if the prices
referred  to  in  the  definition  of  Closing  Bid  Price  cannot  be
determined  on any trading day, the Closing Bid Price for such trading
day will be deemed to equal Fair Market Value of such security on such
trading day.

(iv) "Registered Holders" shall mean, at any time, the holders of
record of the Series B Preferred Stock.

(v) The "Stock Market" shall mean,  with respect to any security,
the principal national  securities  exchange on which such security is
listed or admitted  to trading  or, if such  security is not listed or
admitted to trading on any national  securities  exchange,  shall mean
The Nasdaq  National  Market  System  ("NNM")  or The Nasdaq  SmallCap
Market ("SCM" and, together with NNM, "Nasdaq")

-2-

or, if such  security  is not  quoted on  Nasdaq,  shall  mean the OTC
Bulletin  Board or, if such security is not quoted on the OTC Bulletin
Board, shall mean the over-the-counter market as furnished by any NASD
member firm  selected  from time to time by the  Corporation  for that
purpose.

(vi)  "Trading  Price"  shall  mean the lower of (i) the  average
Closing Bid Price of the Common  Stock (with  appropriate  adjustments
for  subdivisions  or  combinations  of shares  effected  during  such
period)  for thirty (30)  consecutive  trading  days,  ending with the
trading day prior to the date as of which the  Trading  Price is being
determined, and (ii) the average Closing Bid Price of the Common Stock
(with  appropriate  adjustments  for  subdivisions  or combinations of
shares effected  during such period) for five (5) consecutive  trading
days,  ending  with the  trading day prior to the date as of which the
Trading  Price  is  being  determined,  provided  that  if the  prices
referred  to  in  the  definition  of  Closing  Bid  Price  cannot  be
determined  for any of such periods,  "Trading  Price" shall mean Fair
Market Value.

(vii) A  "trading  day"  shall  mean a day on which the  relevant
Stock Market is open for the transaction of business.

2.  Dividends  and  Distributions.  (a)  Subject  to the  rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior  to, or pari passu with,  the shares of Series B  Preferred  Stock with
respect to dividends  (including the Series A Preferred Stock, which ranks prior
and superior to the Series B Preferred Stock in such  respects),  the holders of
shares of Series B Preferred Stock shall be entitled to receive, as, when and if
declared by the Board of  Directors,  out of assets  legally  available for that
purpose, dividends or distributions in cash, stock or otherwise.

(b) [Reserved]

(c) The  Corporation  shall not declare any dividend or distribution on
any Junior Stock (as defined below) of the Corporation (other than a dividend or
distribution  payable solely in Junior Stock) unless all dividends have been, or
contemporaneously  are,  declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series B Preferred Stock.

(d) [Reserved]

(e) All dividends or distributions declared upon the Series B Preferred
Stock shall be declared pro rata per share.

-3-

(f) Any reference to  "distribution"  contained in this Section 2 shall
not be deemed to include any distribution  made in connection with or in lieu of
any Liquidation Event (as defined below).

(g) [Reserved]

(h) So  long  as any  shares  of  the  Series  B  Preferred  Stock  are
outstanding,  no dividends, except as described in the next succeeding sentence,
shall be  declared  or paid or set apart for  payment  on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series B
Preferred   Stock,   for  any  period   unless  all   dividends   have  been  or
contemporaneously  are declared and paid, or declared and a sum  sufficient  for
the payment thereof set apart for such payment, on the Series B Preferred Stock.
When  dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series B Preferred Stock and any
other  class or series of stock  ranking  on a parity as to  dividends  with the
Series B Preferred Stock, all dividends  declared upon such other stock shall be
declared  pro rata so that the amounts of  dividends  per share  declared on the
Series B  Preferred  Stock and such other  stock shall in all cases bear to each
other the same  ratio  that  accrued  dividends  per share on the  shares of the
Series B Preferred Stock and on such other stock bear to each other.

(i) So  long  as any  shares  of  the  Series  B  Preferred  Stock  are
outstanding,  no other  stock of the  Corporation  ranking on a parity  with the
Series B Preferred  Stock as to dividends or upon  liquidation,  dissolution  or
winding  up  shall  be  redeemed,   purchased  or  otherwise  acquired  for  any
consideration  (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation  unless the dividends,  if any, accrued on all outstanding shares of
the Series B Preferred Stock shall have been paid or set apart for payment.

(j)  "Junior  Stock"  shall  mean the  Common  Stock and any  shares of
preferred  stock of any series or class of the  Corporation,  whether  presently
outstanding  or  hereafter  issued,  which are  junior to the shares of Series B
Preferred Stock with respect to (i) the  distribution of assets on any voluntary
or involuntary liquidation,  dissolution or winding up of the Corporation,  (ii)
dividends  or (iii)  voting.  The Junior Stock shall  expressly  not include the
Series A Preferred Stock.

3.  Liquidation  Preference.  (a) In the  event  of a (i)  liquidation,
dissolution or winding up of the Corporation,  whether voluntary or involuntary,
(ii) a sale or other  disposition of all or  substantially  all of the assets of
the Corporation or (iii) any consolidation, merger, combination,  reorganization
or other  transaction in which the  Corporation  is not the surviving  entity or
shares of Common Stock  constituting in excess of 50% of the voting power of the
Corporation  are  exchanged  for or changed into stock or  securities of another
entity, cash and/or any other property (a "Merger Transaction") (items (i), (ii)
and (iii) of this  sentence  being  collectively  referred to as a  "Liquidation
Event"), after payment or provision for payment of

-4-

debts and other  liabilities  of the  Corporation,  and  subject  to the  senior
liquidation  preference  of the Series A  Preferred  Stock,  the  holders of the
Series B Preferred  Stock then  outstanding  shall be entitled to be paid out of
the assets of the Corporation  available for  distribution to its  stockholders,
whether such assets are  capital,  surplus,  or earnings,  before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of any Junior  Stock of the  Corporation,  an amount  equal to $125.00 per share
(or, after the first  anniversary of the Final Closing Date (as defined  below),
$100.00 per share) plus, in either case, an amount equal to all declared  and/or
accrued unpaid dividends  thereon;  provided,  however,  in the case of a Merger
Transaction,  such  $125.00 or $100.00  per share may be paid in cash,  property
(valued as provided in Subsection 3(b)) and/or securities (valued as provided in
Subsection 3(b)) of the entity surviving such Merger Transaction. In the case of
property or in the event that any such  securities  are subject to an investment
letter  or other  similar  restriction  on  transferability,  the  value of such
property or securities shall be determined by agreement  between the Corporation
and the holders of a majority of the Series B Preferred Stock then  outstanding.
If upon any Liquidation Event,  whether voluntary or involuntary,  the assets to
be  distributed  to the  holders  of the  Series  B  Preferred  Stock  shall  be
insufficient to permit the payment to such shareholders of the full preferential
amounts  aforesaid,  then all of the assets of the Corporation to be distributed
shall be so distributed  ratably to the holders of the Series B Preferred  Stock
on the  basis of the  number  of  shares  of  Series  B  Preferred  Stock  held.
Notwithstanding  item (iii) of the first sentence of this  Subsection  3(a), any
consolidation, merger, combination, reorganization or other transaction in which
the  Corporation  is not  the  surviving  entity  but  the  stockholders  of the
Corporation  immediately  prior to such  transaction own in excess of 50% of the
voting power of the corporation surviving such transaction and own such interest
in substantially the same proportions as prior to such transaction, shall not be
considered a Liquidation  Event  provided that the surviving  corporation  shall
make  appropriate  provisions  to ensure that the terms of this  Certificate  of
Designation survive any such transaction as provided in Subsection 4(c)(ii). All
shares of Series B Preferred  Stock shall rank as to payment upon the occurrence
of any Liquidation  Event senior to the Common Stock as provided herein,  junior
to the shares of Series A Preferred  Stock and,  unless the terms of such series
shall  provide  otherwise,  senior  to all  other  series  of the  Corporation's
preferred stock.

(b) Any  securities or other property to be delivered to the holders of
the Series B Preferred  Stock pursuant to Subsection 3(a) hereof shall be valued
as follows:

(i)  Securities  not  subject  to an  investment  letter or other
similar restriction on free marketability:

(A) If  actively  traded on a Stock  Market,
the per share  value shall be deemed to be the Market
Price of such securities as of the third day prior to
the date of valuation.

(B)  If  not  actively  traded  on  a  Stock
Market,  the value shall be the Fair Market  Value of
such securities.

-5-

(ii) For  securities  for which there is an active  public market
but which are subject to an investment letter or other restrictions on
free marketability,  the value shall be the Fair Market Value thereof,
determined  by  discounting  appropriately  the per share Market Price
thereof.

(iii)  For all  other  securities,  the  value  shall be the Fair
Market Value thereof.

4. Conversion.

(a) Right of Conversion.  The shares of Series B Preferred  Stock shall
be  convertible,  in whole or in part,  at the option of the holder  thereof and
upon notice to the Corporation as set forth in Subsection  4(b), into fully paid
and nonassessable  shares of Common Stock and such other securities and property
as hereinafter provided.  The initial conversion price per share of Common Stock
shall be equal to  $3.00  (the  "Conversion  Price")  and  shall be  subject  to
adjustment as provided  herein.  The rate at which each share Series B Preferred
Stock is convertible at any time into Common Stock (the "Conversion Rate") shall
be determined by dividing the then existing Conversion Price into $100.00.

Subject to adjustment  pursuant to the  provisions  of Subsection  4(c)
below,  in the  event  that the  Conversion  Price in  effect at the time of the
Initial  Closing Date (as defined  below),  any Interim Closing Date (as defined
below) or the Final  Closing Date (as defined  below) is greater than 80% of the
Trading  Price of the Common  Stock as of (x) the  initial  closing  date of the
issuance and sale, as  contemplated  by a Unit Purchase  Agreement dated January
__,  1998  (the  "Offering"),  of Notes due 2007 of the  Corporation  ("Offering
Notes") or Series B Preferred  Stock offered in lieu of such Offering Notes (the
"Initial  Closing Date"),  (y) any interim closing date of the Offering (each an
"Interim  Closing  Date") or (z) the final  closing  date of the  Offering  (the
"Final  Closing  Date")  contemplated  by  such  Unit  Purchase  Agreement  (the
"Purchase Agreement"),  then the Conversion Price shall be adjusted to equal 80%
of the lesser of any such Trading  Price.  If there is any change in  Conversion
Price as a result of the preceding  sentence,  then the Conversion Rate shall be
changed accordingly as set forth above.

The  Board  of  Directors,  or a  committee  designated  by it for such
purpose, may, until the Termination Date (as defined in the Purchase Agreement),
specify  an  initial  conversion  price  applicable  to the  shares  of Series B
Preferred  Stock issued at any closing lower than the initial  conversion  price
that  would  otherwise  obtain  pursuant  to the  preceding  paragraphs  of this
Subsection 4(a) and, in the event an initial  conversion  price is so specified,
it shall be applicable to all shares of the Series B Preferred Stock.

The Corporation  shall prepare a certificate  signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary,  of the Corporation setting forth the Conversion Rate as of
the Final Closing Date,  showing in reasonable  detail the facts upon which such
adjusted Conversion Rate is based, and such

-6-

certificate  shall  forthwith be filed with the  transfer  agent of the Series B
Preferred  Stock. A notice  stating that the  Conversion  Rate has been adjusted
pursuant to the second  preceding  paragraph of this Subsection 4(a), or that no
adjustment is necessary,  and setting forth the Conversion  Rate in effect as of
the Final  Closing  Date shall be mailed as  promptly as  practicable  after the
Final  Closing  Date by the  Corporation  to all record  holders of the Series B
Preferred  Stock at their  last  addresses  as they  shall  appear  in the stock
transfer books of the Corporation.

The Conversion Price (subject to adjustment  pursuant to the provisions
of Subsection  4(c)) in effect  immediately  prior to the date that is 12 months
after the Final  Closing  Date (the "Reset  Date")  shall be adjusted  and reset
effective as of the Reset Date if the Market Price of the Common Stock as of the
Reset  Date  (the  "12-Month  Trading  Price")  is less  than  125% of the  then
applicable  Conversion  Price (a "Reset Event").  Upon the occurrence of a Reset
Event,  the Conversion  Price shall be reduced to be equal to the greater of (A)
the 12- Month Trading Price divided by 1.25, and (B) 50% of the then  applicable
Conversion  Price. If there is any change in the Conversion Price as a result of
the preceding sentence, then the Conversion Rate shall be changed accordingly as
set forth above.  The  Corporation  shall  prepare a  certificate  signed by the
principal financial officer of the Corporation setting forth the Conversion Rate
as of the Reset  Date,  showing in  reasonable  detail the facts upon which such
Conversion Rate is based, and such certificate shall forthwith be filed with the
transfer  agent of the  Series B  Preferred  Stock.  A notice  stating  that the
Conversion  Rate  has  been  adjusted  pursuant  to this  paragraph,  or that no
adjustment is necessary,  and setting forth the Conversion  Rate in effect as of
the Reset Date shall be mailed as promptly as  practicable  after the Reset Date
by the  Corporation  to all record  holders of the Series B  Preferred  Stock at
their last  addresses  as they shall appear in the stock  transfer  books of the
Corporation.

(b) Conversion  Procedures.  Any holder of shares of Series B Preferred
Stock  desiring  to convert  such shares  into  Common  Stock shall  comply with
Section 12 to the extent  applicable and then shall surrender the certificate or
certificates evidencing such shares of Series B Preferred Stock at the office of
the  transfer  agent for the Series B  Preferred  Stock,  which  certificate  or
certificates, if the Corporation shall so require, shall be duly endorsed to the
Corporation or in blank, or accompanied by proper instruments of transfer to the
Corporation  or in  blank,  accompanied  by  irrevocable  written  notice to the
Corporation  that the  holder  elects  so to  convert  such  shares  of Series B
Preferred  Stock and  specifying  the name or names  (with  address)  in which a
certificate or certificates  evidencing shares of Common Stock are to be issued.
The  Corporation  need not deem a notice of conversion to be received unless the
holder complies with all the provisions  hereof.  The Corporation  will instruct
the transfer agent (which may be the Corporation) to make a notation of the date
that a notice of conversion  is received,  which date of receipt shall be deemed
to be the date of receipt for purposes hereof.

The  Corporation  shall,  as soon as practicable  after such deposit of
certificates  evidencing  shares of Series B Preferred Stock  accompanied by the
written  notice  and  compliance  with any other  conditions  herein  contained,
deliver at such office of such  transfer  agent to the person for whose  account
such shares of Series B Preferred Stock were so surrendered, or to

-7-

the nominee or nominees of such person,  certificates  evidencing  the number of
full shares of Common Stock to which such person shall be entitled as aforesaid,
subject to Section 4(d). Subject to the following  provisions of this paragraph,
such  conversion  shall  be  deemed  to have  been  made as of the  date of such
surrender  of the shares of Series B Preferred  Stock to be  converted,  and the
person or  persons  entitled  to  receive  the  Common  Stock  deliverable  upon
conversion of such Series B Preferred Stock shall be treated for all purposes as
the  record  holder or  holders of such  Common  Stock on such  date;  provided,
however,  that the  Corporation  shall not be  required to convert any shares of
Series B Preferred  Stock while the stock transfer books of the  Corporation are
closed  for any  purpose,  but the  surrender  of Series B  Preferred  Stock for
conversion  during  any  period  while  such  books are so closed  shall  become
effective for conversion  immediately upon the reopening of such books as if the
surrender had been made on the date of such reopening,  and the conversion shall
be at the  conversion  rate in effect on such date. No adjustments in respect of
any dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion  shall be made upon the conversion of any shares of
Series B Preferred Stock.

The Corporation  shall at all times,  reserve and keep available out of
its  authorized but unissued  shares of Common Stock,  solely for the purpose of
effecting the conversion of the shares of Series B Preferred Stock,  such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred Stock.

All notices of conversion shall be irrevocable; provided, however, that
if the  Corporation  has sent  notice of an event  pursuant to  Subsection  4(g)
hereof,  a holder of Series B Preferred  Stock may, at its election,  provide in
its notice of conversion that the conversion of its shares of Series B Preferred
Stock  shall  be  contingent   upon  the   occurrence  of  the  record  date  or
effectiveness  of such event (as specified by such  holder),  provided that such
notice of conversion is received by the Corporation prior to such record date or
effective date, as the case may be.

(c) Adjustment of Conversion Rate and Conversion Price.

(i) Except as otherwise  provided herein,  in the event the Corporation
shall, at any time or from time to time after the date hereof, (1) sell or issue
any shares of Common  Stock for a  consideration  per share less than either (i)
the Conversion  Price in effect on the date of such sale or issuance or (ii) the
Market  Price of the Common  Stock as of the date of the sale or  issuance,  (2)
issue any shares of Common  Stock as a stock  dividend  to the holders of Common
Stock, or (3) subdivide or combine the outstanding shares of Common Stock into a
greater or lesser  number of shares  (any such sale,  issuance,  subdivision  or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares,  the Conversion Price in effect immediately prior
to such  Change of Shares  shall be changed to a price  (rounded  to the nearest
cent) determined by multiplying the Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of the number

-8-

of shares of Common Stock outstanding  immediately prior to the sale or issuance
of such additional  shares or such  subdivision or combination and the number of
shares of Common Stock which the aggregate consideration received (determined as
provided in Subparagraph  4(c)(v)(F)) for the issuance of such additional shares
would purchase at the greater of (i) the Conversion  Price in effect on the date
of such  issuance or (ii) the Market  Price of the Common Stock as of such date,
and the  denominator  of which  shall be the  number of  shares of Common  Stock
outstanding  immediately after the sale or issuance of such additional shares or
such  subdivision or  combination.  Such adjustment  shall be made  successively
whenever such an issuance is made.

(ii) In case of any reclassification,  capital  reorganization or other
change of outstanding shares of Common Stock, or in case of any consolidation or
merger  of  the   Corporation   with  or  into  another  entity  (other  than  a
consolidation  or merger in which the  Corporation is the continuing  entity and
which does not result in any reclassification,  capital  reorganization or other
change of outstanding shares of Common Stock other than the number thereof),  or
in case of any sale or  conveyance  to  another  entity of the  property  of the
Corporation as, or substantially  as, an entirety (other than a  sale/leaseback,
mortgage or other financing transaction),  the Corporation shall cause effective
provision to be made so that each holder of a share of Series B Preferred  Stock
shall be  entitled  to  receive,  upon  conversion  of such  share  of  Series B
Preferred  Stock,  the kind and number of shares of stock or other securities or
property  (including  cash)  receivable  upon  such  reclassification,   capital
reorganization or other change,  consolidation,  merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such share of Series B
Preferred  Stock was  convertible  immediately  prior to such  reclassification,
capital  reorganization  or  other  change,   consolidation,   merger,  sale  or
conveyance.  Any such provision  shall include  provision for  adjustments  that
shall be as nearly equivalent as may be practicable to the adjustments  provided
for in  this  Subsection  4(c).  The  Corporation  shall  not  effect  any  such
consolidation,  merger  or sale  unless  prior  to or  simultaneously  with  the
consummation  thereof the  successor (if other than the  Corporation)  resulting
from  such  consolidation  or merger or the  entity  purchasing  assets or other
appropriate entity shall assume, by written instrument executed and delivered to
the transfer agent for the Series B Preferred Stock (the "Transfer Agent"),  the
obligation  to deliver to the holder of each share of Series B  Preferred  Stock
such shares of stock,  securities or assets as, in accordance with the foregoing
provisions,  such  holders may be entitled to receive and the other  obligations
under  this  Agreement.  The  foregoing  provisions  shall  similarly  apply  to
successive  reclassifications,  capital  reorganizations  and other  changes  of
outstanding  shares of Common Stock and to successive  consolidations,  mergers,
sales or conveyances.

(iii)  Notwithstanding   anything  contained  in  this  Certificate  of
Designation to the contrary,  options,  rights or warrants issued or distributed
by the Corporation,  including options,  rights or warrants distributed prior to
the  date of this  Certificate  of  Designation,  to  holders  of  Common  Stock
generally which, until the occurrence of a specified event or events (a "Trigger
Event"),  (i) are  deemed to be  transferred  with  Common  Stock,  (ii) are not
exercisable and (iii) are also issued on a pro rata basis with respect to future
issuances

-9-

of Common  Stock,  shall be deemed not to have been  issued or  distributed  for
purposes of this  Subsection  4(c) (and no  adjustment to the  Conversion  Price
under  this  Subsection  4(c)  will be  required)  until the  occurrence  of the
earliest  Trigger Event.  Upon the occurrence of a Trigger Event,  such options,
rights  or  warrants  shall  continue  to be deemed  not to have been  issued or
distributed  for  purposes of this  Subsection  4(c) (and no  adjustment  to the
Conversion Price under this Subsection 4(c) will be required) if and for so long
as each  Registered  Holder who  thereafter  converts such  Registered  Holder's
Series B Preferred Stock shall be entitled to receive upon such  conversion,  in
addition to the shares of Common Stock issuable upon such  conversion,  a number
of such options,  rights or warrants, as the case may be, equal to the number of
options,  rights or warrants to which a holder of the number of shares of Common
Stock equal to the number of shares of Common Stock issuable upon  conversion of
such Registered  Holder's Series B Preferred Stock is entitled to receive at the
time of such  conversion in  accordance  with the terms and  provisions  of, and
applicable to, such options,  rights or warrants.  If any such option,  right to
warrant is subject to events, upon the occurrence of which such options,  rights
or warrants become  exercisable to purchase different  securities,  evidences of
indebtedness,  cash,  properties or other assets or different  amounts  thereof,
then,  subject to the preceding  provisions of this  paragraph,  the date of the
occurrence  of any and  each  such  event  shall  be  deemed  to be the  date of
distribution  and record date with  respect to new  options,  rights or warrants
with such new purchase  rights (and a termination  or expiration of the existing
options, rights or warrants without exercise thereof). In addition, in the event
of any distribution (or deemed distribution) of options,  rights or warrants, or
any  Trigger  Event  or  other  event of the  type  described  in the  preceding
sentence,  that  required  (or would have  required  but for the  provisions  of
Subparagraph 4(c)(v)(B) of this paragraph) an adjustment to the Conversion Price
under this Subsection 4(c) and such options, rights or warrants shall thereafter
have been  redeemed  or  repurchased  without  having been  exercised,  then the
Conversion  Price shall be adjusted  upon such  redemption or repurchase to give
effect to such  distribution,  Trigger Event or other event, as the case may be,
as though it had instead been a cash distribution, equal on a per share basis to
the result of the aggregate  redemption or repurchase  price received by holders
of such  options,  rights or warrants  divided by the number of shares of Common
Stock  outstanding  as of the date of such  repurchase  or  redemption,  made to
holders  of  Common  Stock  generally  as of the  date  of  such  redemption  or
repurchase.

(iv) After each  adjustment of the  Conversion  Price  pursuant to this
Subsection 4(c), the Corporation  will promptly prepare a certificate  signed by
the Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant  Secretary,  of the Corporation setting forth: (i) the
Conversion Price as so adjusted,  (ii) the Conversion Rate corresponding to such
Conversion  Price and (iii) a brief  statement of the facts  accounting for such
adjustment.  The  Corporation  will  promptly  file  such  certificate  with the
Transfer  Agent and cause a brief summary  thereof to be sent by ordinary  first
class mail to each  registered  holder of Series B Preferred Stock at his or her
last address as it shall appear on the registry books of the Transfer  Agent. No
failure to mail such  notice nor any defect  therein or in the  mailing  thereof
shall affect the validity of such adjustment. The affidavit of an officer of the
Transfer  Agent or the  Secretary or an Assistant  Secretary of the  Corporation
that such notice

-10-

has been mailed shall,  in the absence of fraud,  be prima facie evidence of the
facts stated  therein.  The Transfer  Agent may rely on the  information  in the
certificate  as true and correct and has no duty or obligation to  independently
verify the amounts or calculations set forth therein.

(v) For purposes of Subsection 4(c)(i) hereof, the following provisions
(A) to (F) shall also be applicable:

(A) The  number of  shares  of Common  Stock
deemed  outstanding  at any given time shall  include
all  shares of capital  stock  convertible  into,  or
exchangeable  for,  Common  Stock (on an as converted
basis) as well as all shares of Common Stock issuable
upon the exercise of (x) any  convertible  debt,  (y)
warrants  outstanding  at such  time and (z)  options
outstanding at such time.

(B) No  adjustment of the  Conversion  Price
shall be made unless such adjustment would require an
increase  or  decrease  of  at  least  $.01  in  such
Conversion Price; provided that any adjustments which
by reason of this  Subparagraph  (B) are not required
to be made shall be carried forward and shall be made
at the time of and together with the next  subsequent
adjustment   which,   together  with  adjustments  so
carried   forward,   shall  require  an  increase  or
decrease  of at least  $.01 in the  Conversion  Price
then in effect hereunder.

(C)  In  case  of  (1)  the  sale  or  other
issuance by the Corporation (including as a component
of a unit) of any rights or warrants to subscribe for
or  purchase,  or any  options for the  purchase  of,
Common Stock or any  securities  convertible  into or
exchangeable   for  Common  Stock  (such   securities
convertible,  exercisable or exchangeable into Common
Stock being herein called "Convertible  Securities"),
or (2) the issuance by the  Corporation,  without the
receipt  by  the  Corporation  of  any  consideration
therefor,  of any rights or warrants to subscribe for
or  purchase,  or any  options for the  purchase  of,
Common Stock or  Convertible  Securities,  whether or
not such rights, warrants or options, or the right to
convert or exchange such Convertible Securities,  are
immediately  exercisable,  and the  consideration per
share for which  Common  Stock is  issuable  upon the
exercise of such rights,  warrants or options or upon
the  conversion  or  exchange  of  such   Convertible
Securities  (determined  by dividing  (x) the minimum
aggregate   consideration,   as  set   forth  in  the
instrument  relating  thereto  without  regard to any
antidilution or similar provisions  contained therein
for a subsequent  adjustment of such amount,  payable
to the Corporation  upon the exercise of such rights,
warrants or options, plus the consideration  received
by the Corporation for the issuance or sale of such

-11-

rights,  warrants  or options,  plus,  in the case of
such Convertible  Securities,  the minimum  aggregate
amount,  as  set  forth  in the  instrument  relating
thereto without regard to any antidilution or similar
provisions   contained   therein  for  a   subsequent
adjustment    of   such   amount,    of    additional
consideration,  if any,  other than such  Convertible
Securities,  payable upon the  conversion or exchange
thereof,  by (y) the  total  maximum  number,  as set
forth  in the  instrument  relating  thereto  without
regard  to any  antidilution  or  similar  provisions
contained therein for a subsequent adjustment of such
amount,  of shares of Common Stock  issuable upon the
exercise of such rights,  warrants or options or upon
the  conversion  or  exchange  of  such   Convertible
Securities issuable upon the exercise of such rights,
warrants   or   options)  is  less  than  either  the
Conversion  Price or the  Market  Price of the Common
Stock as of the date of the  issuance or sale of such
rights,  warrants or options, then such total maximum
number of shares of Common  Stock  issuable  upon the
exercise of such rights,  warrants or options or upon
the  conversion  or  exchange  of  such   Convertible
Securities (as of the date of the issuance or sale of
such rights,  warrants or options) shall be deemed to
be "Common Stock" for purposes of Subsection  4(c)(i)
and  shall be  deemed to have been sold for an amount
equal to such consideration per share and shall cause
an  adjustment   to  be  made  in   accordance   with
Subsection 4(c)(i).

(D) In case of the  sale by the  Corporation
of any  Convertible  Securities,  whether  or not the
right  of  conversion   or  exchange   thereunder  is
immediately exercisable,  and the price per share for
which Common Stock is issuable upon the conversion or
exchange of such Convertible  Securities  (determined
by  dividing  (x) the total  amount of  consideration
received  by the  Corporation  for  the  sale of such
Convertible  Securities,  plus the minimum  aggregate
amount,  as  set  forth  in the  instrument  relating
thereto without regard to any antidilution or similar
provisions   contained   therein  for  a   subsequent
adjustment    of   such   amount,    of    additional
consideration,  if any,  other than such  Convertible
Securities,  payable upon the  conversion or exchange
thereof,  by (y) the  total  maximum  number,  as set
forth  in the  instrument  relating  thereto  without
regard  to any  antidilution  or  similar  provisions
contained therein for a subsequent adjustment of such
amount,  of shares of Common Stock  issuable upon the
conversion   or   exchange   of   such    Convertible
Securities) is less than either the Conversion  Price
or the  Market  Price of the  Common  Stock as of the
date of the sale of such Convertible Securities, then
such total  maximum  number of shares of Common Stock
issuable  upon the  conversion  or  exchange  of such
Convertible Securities (as of the date of the sale of
such  Convertible  Securities)  shall be deemed to be
"Common Stock" for purposes of Subsection 4(c)(i) and
shall be deemed to have been sold for

-12-

an amount equal to such  consideration  per share and
shall cause an  adjustment  to be made in  accordance
with Subsection 4(c)(i).

(E) In case the Corporation shall modify the
rights of conversion,  exchange or exercise of any of
the  securities  referred  to in (C) and (D) above or
any other securities of the Corporation  convertible,
exchangeable  or  exercisable  for  shares  of Common
Stock,  for any reason other than an event that would
require  adjustment to prevent dilution,  so that the
consideration  per share received by the  Corporation
after  such  modification  is less  than  either  the
Conversion  Price or the Market  Price as of the date
prior to such modification,  then such securities, to
the extent not  theretofore  exercised,  converted or
exchanged,   shall  be  deemed  to  have  expired  or
terminated  immediately  prior  to the  date  of such
modification and the Corporation  shall be deemed for
purposes of calculating any  adjustments  pursuant to
this   Subsection   4(c)  to  have  issued  such  new
securities  upon  such  new  terms  on  the  date  of
modification.  Such adjustment shall become effective
as of the date upon  which  such  modification  shall
take effect. On the expiration or cancellation of any
such right,  warrant or option or the  termination or
cancellation of any such right to convert or exchange
any such Convertible Securities, the Conversion Price
then  in  effect   hereunder   shall   forthwith   be
readjusted  to such  Conversion  Price as would  have
obtained  (a)  had  the  adjustments  made  upon  the
issuance or sale of such rights, warrants, options or
Convertible  Securities  been  made upon the basis of
the  issuance  of only the number of shares of Common
Stock theretofore  actually  delivered (and the total
consideration received therefor) upon the exercise of
such   rights,   warrants  or  options  or  upon  the
conversion or exchange of such Convertible Securities
and (b) had adjustments been made on the basis of the
Conversion Price as adjusted under clause (a) of this
sentence  for  all  transactions  (which  would  have
affected such adjusted  Conversion  Price) made after
the  issuance  or  sale  of  such  rights,  warrants,
options or Convertible Securities.

(F) In case of the  sale  of any  shares  of
Common Stock, any Convertible Securities,  any rights
or  warrants to  subscribe  for or  purchase,  or any
options  for  the  purchase   of,   Common  Stock  or
Convertible Securities, the consideration received by
the  Corporation  therefor  shall be deemed to be the
gross  sales   price   therefor   without   deducting
therefrom   any  expense  paid  or  incurred  by  the
Corporation   or  any   underwriting   discounts   or
commissions  or  concessions  paid or  allowed by the
Corporation  in  connection  therewith.  In the event
that any  securities  shall be issued  in  connection
with  any  other   securities  of  the   Corporation,
together comprising one integral transaction in which
no

-13-

specific   consideration   is  allocated   among  the
securities,  then  each of such  securities  shall be
deemed to have been issued for such  consideration as
the Board of Directors of the Corporation  determines
in  good  faith;   provided,   however  that  if  the
Registered  Holders  of in  excess of 50% of the then
outstanding  Series B Preferred  Stock  disagree with
such determination,  the Corporation shall retain, at
its own expense,  an independent  investment  banking
firm for the purpose of obtaining an appraisal.

(vi)  Notwithstanding  any other provision hereof, no adjustment to the
Conversion Price will be made:

(A) upon the  exercise of any of the options
previously granted and outstanding on the date hereof
under the Corporation's  existing stock option plans;
or

(B) upon the issuance or exercise of options
which may  hereafter  be granted with the approval of
the Board of Directors or an authorized  committee of
the  Board of  Directors,  or  exercised,  under  any
employee benefit plan of the Corporation to officers,
directors, consultants or employees; or

(C)  upon  the   issuance   or  exercise  or
conversion of (1) options or warrants to purchase, in
the aggregate,  up to 25% of the  securities  sold in
the  Offering   issued  to  any  placement  agent  or
financial  advisor  in  connection  with the  private
placement of the Offering Notes or Series B Preferred
Stock offered in lieu of Offering  Notes and, in each
case, warrants to purchase Common Stock (such options
or  warrants,  the  "Offering  Warrants"),   (2)  any
Offering  Notes,  including any Offering Notes issued
pursuant to the  exercise of the  Offering  Warrants,
(3) any  Series  B  Preferred  Stock,  including  any
Series B  Preferred  Stock  issued  in the  Offering,
pursuant to the exercise of any Offering  Warrants or
upon conversion of any Offering Notes, (4) any equity
securities or warrants of the Corporation (including,
without  limitation,  the Series A  Preferred  Stock,
warrants and equity securities  underlying  warrants)
issued in exchange  for 9%  Convertible  Subordinated
Notes due 2004 (the "9% Notes") of the Corporation or
accrued   interest   thereon  or   pursuant   to  the
conversion or exercise  provisions  thereof,  (5) any
warrants  issued in  connection  with the Offering or
upon any  Reset  Event (as  defined  herein or in the
Certificate of Designation for the Series A Preferred
Stock),  (6) any  warrants  issued  to Forum  Capital
Markets, LLC ("Forum") in exchange for or in addition
to, or any  amendment to, any warrants held by Forum,
in each case,  pursuant to a letter  agreement  dated
January 5,

-14-

1998,  between  the  Corporation  and Forum,  (7) any
Series A Preferred  Stock  issued as dividends on the
Series A  Preferred  Stock,  or (8) any Common  Stock
issued or cash paid upon the mandatory  conversion or
redemption of any Series A Preferred  Stock or Series
B Preferred  Stock in  accordance  with  Section 5 of
this  Certificate  of Designation or Section 5 of the
Certificate of Designation for the Series A Preferred
Stock, or

(D)  upon  the  issuance  or sale of  Common
Stock  or  Convertible  Securities  pursuant  to  the
exercise  of  any  rights,  options  or  warrants  to
receive,  subscribe  for or purchase,  or any options
for the  purchase  of,  Common  Stock or  Convertible
Securities,  whether or not such rights,  warrants or
options were outstanding on the Final Closing Date or
were  thereafter  issued  or sold,  provided  that an
adjustment was either made or not required to be made
in accordance  with  Paragraph  4(c)(i) in connection
with the issuance or sale of such  securities  or any
modification of the terms thereof; or

(E)  upon  the  issuance  or sale of  Common
Stock upon  conversion or exchange of any Convertible
Securities, provided that any adjustments required to
be made upon the issuance or sale of such Convertible
Securities or any  modification  of the terms thereof
were so made,  and  whether  or not such  Convertible
Securities were outstanding on the Final Closing Date
or were thereafter issued or sold; or

(F) upon the  issuance  of stock  which  may
hereafter  be  purchased or sold with the approval of
the Board of Directors, under the 1995 Employee Stock
Purchase  Plan  of  the   Corporation   to  officers,
directors,  consultants  or employees,  but only with
respect to such shares as are  purchased  and/or sold
in accordance  with the current plan and at prices no
lower than 85% of the  Closing  Bid Price (or, if the
prices  referenced  in the  definition of Closing Bid
Price  cannot be  determined,  85% of the Fair Market
Value) of the Common Stock as of the date of purchase
and/or sale thereof; or

(G)  upon  the  issuance  or sale of  Common
Stock   incident   to   transactions   or  series  of
transactions  which  consist  primarily of technology
licensing  agreements  and strategic  alliances  with
pharmaceutical companies (such as partnerships, joint
ventures  or  SWORDS   financing   of  research   and
development   programs   directed   at  one  or  more
specified disease targets).

Subparagraph 4(c)(v)(E) shall nevertheless apply to any modification of
the rights of conversion, exchange or exercise of any of the securities referred
to in this Paragraph

-15-

4(c)(vi),   except  that   Subparagraph   4(c)(v)(E)  shall  not  apply  to  any
modification of the rights of conversion, exchange or exercise of the securities
excepted by Subparagraph (C) of this paragraph 4(c)(vi) that are required by the
original terms of those respective instruments.

(vii) As used in this  Subsection  4(c),  the term "Common Stock" shall
mean and include the  Corporation's  Common Stock  authorized on the date of the
original  issue of the  Series B  Preferred  Stock and shall  also  include  any
capital stock of any class of the Corporation  thereafter authorized which shall
not be  limited  to a fixed sum or  percentage  in  respect of the rights of the
holders  thereof to participate in dividends and in the  distribution  of assets
upon the voluntary  liquidation,  dissolution or winding up of the  Corporation;
provided,  however,  that the shares  issuable  upon  conversion of the Series B
Preferred  Stock  shall  include  only  shares of such class  designated  in the
Certificate of  Incorporation  as Common Stock on the date of the original issue
of the Series B  Preferred  Stock or (i),  in the case of any  reclassification,
change,  consolidation,  merger, sale or conveyance of the character referred to
in Subsection 4(c)(ii) hereof, the stock, securities or property provided for in
such  section  or (ii),  in the case of any  reclassification  or  change in the
outstanding  shares of Common Stock  issuable  upon  conversion  of the Series B
Preferred  Stock as a result of a subdivision  or combination or consisting of a
change in par value,  or from par value to no par value, or from no par value to
par value, such shares of Common Stock as so reclassified or changed.

(viii) Any  determination as to whether an adjustment in the Conversion
Price in effect hereunder is required pursuant to Subsection 4(a) or 4(c), or as
to the amount of any such  adjustment,  if  required,  shall be binding upon the
holders  of the Series B  Preferred  Stock and the  Corporation  if made in good
faith by the Board of Directors of the Corporation.

(d) No Fractional  Shares. No fractional  shares or scrip  representing
fractional  shares of Common Stock shall be issued upon  conversion  of Series B
Preferred  Stock.  If more than one  certificate  evidencing  shares of Series B
Preferred  Stock shall be  surrendered  for  conversion  at one time by the same
holder,  the number of full shares  issuable  upon  conversion  thereof shall be
computed  on the basis of the  aggregate  number of shares of Series B Preferred
Stock so  surrendered.  Instead of any  fractional  share of Common  Stock which
would otherwise be issuable upon  conversion of such aggregate  number of shares
of Series B Preferred  Stock,  the  Corporation may elect in its sole discretion
independently  for each  holder,  whether  such number of shares of Common Stock
will be rounded to the nearest whole share (with .5 of a share  rounded  upward)
or whether such holder will be given cash, in lieu of any fractional  share,  in
an amount equal to the same  fraction of the Market Price of the Common Stock as
of the close of business on the day of conversion.

(e) [Reserved]

(f) Reservation of Shares;  Transfer Taxes,  Etc. The Corporation shall
at all times  reserve and keep  available,  out of its  authorized  and unissued
shares of Common Stock,  solely for the purpose of effecting  the  conversion of
the Series B Preferred Stock, such number

-16-

of shares of its Common Stock free of  preemptive  rights as shall be sufficient
to effect the conversion of all shares of Series B Preferred  Stock from time to
time outstanding (including, without limitation, shares of Common Stock issuable
upon  conversion of the Series B Preferred  Stock in the case of a Reset Event).
The Corporation shall use its best efforts from time to time, in accordance with
the laws of the State of Delaware to increase the authorized number of shares of
Common  Stock if at any time the number of shares of  authorized,  unissued  and
unreserved  Common Stock shall not be sufficient to permit the conversion of all
the then-outstanding shares of Series B Preferred Stock.

The Corporation  shall pay any and all issue or other taxes  (excluding
any income  taxes)  that may be payable in respect of any issue or  delivery  of
shares of Common  Stock on  conversion  of the  Series B  Preferred  Stock.  The
Corporation shall not, however,  be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of Common Stock (or
other  securities  or  assets)  in a name other than that in which the shares of
Series B Preferred  Stock so  converted  were  registered.  and no such issue or
delivery  shall be made  unless and until the person  requesting  such issue has
paid to the  Corporation  the  amount  of such  tax or has  established,  to the
satisfaction of the Corporation, that such tax has been paid.

(g) Prior Notice of Certain Events. In case:

(i) the  Corporation  shall  declare any  dividend  (or any other
distribution); or

(ii) the Corporation  shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or

(iii) of any  reclassification  of  Common  Stock  (other  than a
subdivision  or  combination  of the  outstanding  Common Stock,  or a
change in par value, or from par value to no par value, or from no par
value to par value); or

(iv)  of  any   consolidation  or  merger   (including,   without
limitation,  a Merger Transaction) to which the Corporation is a party
and for which approval of any stockholders of the Corporation shall be
required,  or of the sale or transfer of all or  substantially  all of
the assets of the  Corporation  or of any  compulsory  share  exchange
whereby the Common Stock is converted into other  securities,  cash or
other property; or

(v) of the voluntary or involuntary  dissolution,  liquidation or
winding  up of  the  Corporation  (including,  without  limitation,  a
Liquidation Event);

then the  Corporation  shall cause to be filed with the  transfer  agent for the
Series B  Preferred  Stock,  and  shall  cause to be  mailed  to the  Registered
Holders, at their last addresses as they shall

-17-

appear upon the stock transfer books of the Corporation,  at least 20 days prior
to the applicable  record date hereinafter  specified,  a notice stating (x) the
date on which a record (if any) is to be taken for the purpose of such dividend.
distribution  or  granting  of rights or  warrants  or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such  dividend,  distribution,  rights or warrants are to be determined and a
description  of the cash,  securities  or other  property to be received by such
holders upon such  dividend,  distribution  or granting of rights or warrants or
(y) the  date on  which  such  reclassification,  consolidation,  merger,  sale,
transfer,  share  exchange,  dissolution,  liquidation  or  winding  up or other
Liquidation  Event is expected to become  effective,  the date as of which it is
expected  that  holders of Common  Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property  deliverable  upon
such exchange, dissolution, liquidation or winding up or other Liquidation Event
and the consideration, including securities or other property, to be received by
such holders upon such exchange; provided, however, that no failure to mail such
notice or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice.

(h) Other Changes in Conversion Rate. The Corporation from time to time
may  increase  the  Conversion  Rate by any amount for any period of time if the
period is at least 20 days and if the increase is irrevocable during the period.
Whenever the Conversion Rate is so increased,  the Corporation shall mail to the
Registered Holders a notice of the increase at least 15 days before the date the
increased  Conversion  Rate  takes  effect,  and such  notice  shall  state  the
increased Conversion Rate and the period it will be in effect.

The  Corporation  may make such  increases in the  Conversion  Rate, in
addition to those  required or allowed by this Section 4, as shall be determined
by it, as evidenced by a resolution of the Board of  Directors,  to be advisable
in  order to avoid or  diminish  any  income  tax to  holders  of  Common  Stock
resulting  from any dividend or  distribution  of stock or issuance of rights or
warrants to purchase or  subscribe  for stock or from any event  treated as such
for income tax purposes.

Notwithstanding  the foregoing,  the Corporation shall not increase the
Conversion Rate, as provided in this subsection 4(h), unless the Corporation, at
such time,  makes a pro rata increase to the conversion  rate of any outstanding
shares  of  Series  A  Preferred  Stock  pursuant  to  Subsection  4(h)  of  the
Certificate  of  Designation  for the Series A Preferred  Stock.  Moreover,  the
Corporation  shall not  increase the  conversion  rate of the Series A Preferred
Stock pursuant to subsection  4(h) of the  Certificate  of  Designation  for the
Series A Preferred Stock, unless the Corporation, at such time, makes a pro rata
increase in the Conversion Rate

Notwithstanding  anything to the contrary herein,  in no case shall the
Conversion Price be adjusted to an amount less than $.001 per share, the current
par value of the  Common  Stock  into  which  the  Series B  Preferred  Stock is
convertible.

-18-

(i) Ambiguities/Errors. The Board of Directors of the Corporation shall
have the power to resolve any  ambiguity or correct any error in the  provisions
relating to the  convertibility of the Series B Preferred Stock, and its actions
in so doing shall be final and conclusive.

5.  Mandatory  Conversion.  At any time on or after the Reset Date, the
Corporation  at its  option,  may  cause  the  Series  B  Preferred  Stock to be
converted  in  whole  or in  part,  on a pro rata  basis,  into  fully  paid and
nonassessable  shares of Common Stock at the then effective  Conversion  Rate if
the Closing Bid Price (or, if the price  referenced in the definition of Closing
Bid Price cannot be determined, the Fair Market Value) of the Common Stock shall
have  exceeded  250% of the then  applicable  Conversion  Price  for at least 20
trading days in any 30 consecutive trading day period ending three days prior to
the date of notice of  conversion.  Any  shares of Series B  Preferred  Stock so
converted shall be treated as having been  surrendered by the holder thereof for
conversion  pursuant  to  Section  4 on the  date of such  mandatory  conversion
(unless previously converted at the option of the holder).

If the Corporation elects to cause the mandatory conversion of Series B
Preferred Stock pursuant to this Section 5, then the  Corporation  shall, at the
same  time,  convert  or  redeem  (whether  by  conversion  or  redemption,   to
"Take-Out") Series A Preferred Stock pursuant to Section 5 of the Certificate of
Designation  for the Series A  Preferred  Stock.  Moreover,  if the  Corporation
elects to Take-Out any shares of Series A Preferred  Stock pursuant to Section 5
of the  Certificate of Designation  for the Series A Preferred  Stock,  then the
Corporation shall, at the same time, Take-Out shares of Series B Preferred Stock
pursuant to this Section 5. If the  Corporation  chooses to Take-Out  fewer than
all of the shares of Series A Preferred Stock and the Series B Preferred  Stock,
then the Corporation must Take-Out an equal percentage of the outstanding shares
of both the Series A Preferred Stock and the Series B Preferred Stock.

No greater than 60 nor fewer than 20 days prior to the date of any such
mandatory  conversion,  notice by first class mail,  postage  prepaid,  shall be
given to the holders of record of the Series B Preferred  Stock to be converted,
addressed to such holders at their last addresses as shown on the stock transfer
books of the  Corporation.  Each such  notice  shall  specify the date fixed for
conversion,  the place or places for  surrender  of shares of Series B Preferred
Stock, and the then effective Conversion Rate pursuant to Section 4.

Any notice  which is mailed as herein  provided  shall be  conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail,  whether or not the holder of the Series B Preferred  Stock  receives such
notice;  and failure properly to give such notice by mail, or any defect in such
notice,  to the  holders  of the  shares to be  converted  shall not  affect the
validity of the  proceedings  for the conversion of any other shares of Series B
Preferred  Stock.  On or after the date fixed for  conversion  as stated in such
notice,  each  holder  of shares  called to be  converted  shall  surrender  the
certificate evidencing such shares to the Corporation at the place designated in
such notice for conversion. Notwithstanding that the certificates evidencing any
shares properly called for conversion shall not have been surrendered,

-19-

the shares shall no longer be deemed  outstanding and all rights whatsoever with
respect to the shares so called for conversion  (except the right of the holders
to convert such shares upon  surrender  of their  certificates  therefor)  shall
terminate.

Notwithstanding  the above,  the  Corporation  shall not be required to
deliver Common Stock to any Registered  Holder upon any Take-Out,  to the extent
that such issuance would violate Section 12.

6. Voting Rights.

(a) General. Except as otherwise provided herein, in the Certificate of
Incorporation  or the By-laws of the  Corporation  or as required by  applicable
law, the holders of shares of Series B Preferred Stock, the holders of shares of
Common Stock and the holders of any other class or series of shares  entitled to
vote with the Common  Stock  shall  vote  together  as one class on all  matters
submitted to a vote of stockholders of the  Corporation.  In any such vote, each
share of Series B Preferred  Stock shall entitle the holder  thereof to cast the
number of votes equal to the number of votes which could be cast in such vote by
a holder of the Common  Stock into which such share of Series B Preferred  Stock
is  convertible  on the record date for such vote, or if no record date has been
established,  on the date such vote is taken.  Any shares of Series B  Preferred
Stock held by the Corporation or any entity  controlled by the Corporation shall
not have voting  rights  hereunder and shall not be counted in  determining  the
presence of a quorum.

(b) Class Voting  Rights.  In addition to any vote specified in Section
6(a), so long as at least 50% of the shares of Series B Preferred Stock shall be
outstanding,  the Corporation shall not, without the affirmative vote or consent
of the  holders of at least 50% of all  outstanding  Series B  Preferred  Stock,
voting  separately as a class,  (i) amend,  alter or repeal any provision of the
Certificate of Incorporation or the Bylaws of the Corporation so as adversely to
affect  the  relative  rights,  preferences,   qualifications,   limitations  or
restrictions  of the Series B Preferred  Stock or (ii) approve the alteration or
change to the rights, preferences or privileges of the Series B Preferred Stock,
(iii)  authorize  or issue,  or increase  the  authorized  amount of, any equity
security  ranking prior to the Series B Preferred Stock (except shares of Series
A Preferred Stock issued in exchange for 9% Notes or accrued interest thereon or
as  dividends  on or  otherwise  pursuant  to the  terms of the  Certificate  of
Designation for, the Series A Preferred Stock) (A) upon a Liquidation Event, (B)
with  respect  to the  payment of any  dividends  or  distributions  or (C) with
respect to voting  rights  (except for class voting  rights  required by law) or
(iv)  authorize  or issue,  or  increase  the  authorized  amount  of,  Series B
Preferred Stock, other than Series B Preferred Stock issuable upon conversion of
Offering Notes or accrued interest thereon.

7. Outstanding Shares. For purposes of this Certificate of Designation,
a share of Series B Preferred Stock,  when issued,  shall be deemed  outstanding
except (i) from the date,  or the deemed  date,  of  surrender  of  certificates
evidencing shares of Series B Preferred

-20-

Stock,  all shares of Series B Preferred  Stock  converted into Common Stock and
(ii) from the date of registration of transfer, all shares of Series B Preferred
Stock held of record by the Corporation or any subsidiary of the Corporation.

8.  Status of  Acquired  Shares.  Shares of  Series B  Preferred  Stock
received  upon  conversion  pursuant  to  Section 4 or  Section  5 or  otherwise
acquired by the  Corporation  will be restored to the status of  authorized  but
unissued shares of Preferred  Stock,  without  designation as to class,  and may
thereafter be issued, but not as shares of Series B Preferred Stock.

9. Preemptive  Rights.  The Series B Preferred Stock is not entitled to
any  preemptive  or  subscription  rights in  respect of any  securities  of the
Corporation.

10.  Severability  of  Provisions.  Whenever  possible,  each provision
hereof  shall be  interpreted  in a manner as to be  effective  and valid  under
applicable  law,  but if any  provision  hereof is held to be  prohibited  by or
invalid under  applicable law, such provision  shall be ineffective  only to the
extent of such  prohibition or  invalidity,  without  invalidating  or otherwise
adversely  affecting the remaining  provisions  hereof.  If a court of competent
jurisdiction  should  determine  that a  provision  hereof  would  be  valid  or
enforceable  if a period of time were  extended  or  shortened  or a  particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.

11. No Amendment or  Impairment.  The  Corporation  shall not amend its
Certificate of Incorporation or participate in any  reorganization,  transfer of
assets, consolidation,  merger, dissolution,  issue or sale of securities or any
other  voluntary  action,  for the  purpose of  avoiding or seeking to avoid the
observance  or  performance  of any of the  terms to be  observed  or  performed
hereunder  by the  Corporation,  but will at all times in good  faith  assist in
carrying out all such action as may be reasonably  necessary or  appropriate  in
order to protect  the rights of the  holders  of the  Series B  Preferred  Stock
against impairment.

12. Restrictions on Change of Control.  Notwithstanding anything to the
contrary contained in this Certificate of Designation, without the prior written
consent of the  Corporation,  so long as any 9% Notes remain  outstanding  under
that certain  Indenture dated as of March 26, 1997  ("Indenture"),  no holder of
Series B Preferred Stock shall have voting rights granted hereunder, be entitled
to receive voting  securities of the Corporation  pursuant hereto or be entitled
to exercise any of the  conversion  rights set forth herein (each, a "Restricted
Event"),   to  the  extent  that  any  such  Restricted   Event  could,  in  the
Corporation's  reasonable  judgment,  either alone or in conjunction  with other
issuances or holdings of capital stock,  warrants or  convertible  securities of
the  Corporation,  result in a Change of Control  (as  defined in the  Indenture
relating to the 9% Notes).

[Signature page follows]

-21-

IN WITNESS WHEREOF, ____________, __________ of the Corporation, acting
for and on behalf of the Corporation, has hereunto subscribed his name this ____
day of ________, 199_.

HYBRIDON, INC.

By:____________________________
Name:
Title:

-22-

ANNEX D
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the Year Ended December 31, 1996

COMMISSION FILE NO. 0-27352

HYBRIDON, INC.
---------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware                                   3072298
- -------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts                   02139
- ------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code: (617) 528-7000

Securities registered pursuant to Section 12(b) of the Act:

NONE
----

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X                       No
-----                        -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

On March 14, 1997, the aggregate market value of voting Common Stock held
by nonaffiliates of the registrant was $118,762,093, based on the last reported
sale price of the registrant's Common Stock on the Nasdaq National Market on
March 14, 1997. There were 25,173,502 shares of Common Stock outstanding as of
March 14, 1997.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------

Part of Form 10-K
DOCUMENT                         INTO WHICH INCORPORATED
--------                         -----------------------

Portions of the Registrant's Proxy Statement          Items 10, 11, 12 and 13
with respect to the Annual Meeting of Stockholders    of Part III
to be held on May 19, 1997

PART I

ITEM 1. BUSINESS.
--------

GENERAL

Hybridon, Inc. ("Hybridon" or the "Company"), established in 1989, is a
leader in the discovery and development of novel genetic medicines based
primarily on antisense technology. Antisense technology involves the use of
synthetic segments of DNA (oligonucleotides) constructed through rational drug
design to interact at the genetic level with target messenger RNA, which codes
for the production of proteins. In contrast to traditional drugs, which are
designed to interact with protein molecules associated with diseases, antisense
drugs work at the genetic level to interrupt the process by which
disease-causing proteins are produced. Drugs based on antisense technology may
have broader applicability, greater efficacy and fewer side effects than
conventional drugs because antisense compounds are designed to intervene early
in the disease process at the genetic level and in a highly specific fashion.

Hybridon has established a leadership position in the antisense field by
developing an integrated antisense technology platform based on a combination of
patented and proprietary medicinal chemistries, synthetic DNA manufacturing
technology and analytical processes. The Company's strategy is to leverage this
technology platform by applying its oligonucleotides against a range of genetic
targets associated with major diseases, by manufacturing oligonucleotides for
its own internal use and on a custom contract basis for sale to third parties
and by extending its medicinal chemistries to additional targets through
collaborations with large pharmaceutical company partners.

Hybridon's first gene expressive modulation ("GEM") drug candidate, GEM 91
for the treatment of HIV-1 infection and AIDS, is in a confirmatory Phase II
clinical trial in advanced AIDS patients. This trial is designed to confirm the
preliminary findings from the Company's Ib/II clinical trials of GEM 91 in the
U.S. in which a significant decrease was observed in the quantities of cell-
associated HIV-1 in circulating blood cells of patients with characteristics of
advanced HIV disease. Hybridon is also conducting clinical trials of GEM 132, an
advanced chemistry antisense compound for the treatment of CMV. The first trial
involves the treatment of CMV retinitis in AIDS patients by intravitreal
injection in the eye; the second trial involves the treatment of systemic CMV by
intravenous administration. Hybridon believes that its clinical trials of GEM 91
were the first human clinical trials involving intravenous or other systemic
administration of an antisense oligonucleotide for the treatment of a viral
disease and that its clinical trials of GEM 132 were the first human clinical
trials involving administration of an advanced chemistry oligonucleotide into
humans.

The Company plans to commence clinical trials of three additional product
candidates in the second half of 1997: GEM 231, an antisense compound being
developed to inhibit the production of protein kinase A, which is associated
with many cancers; GEM 92, an antisense compound being developed for the
treatment of HIV-1 infection and AIDS by oral administration; and GEM 220, an
antisense compound being developed to target vascular endothelial growth factor
for the treatment of various cancers. All three of these compounds are based on
Hybridon's advanced antisense chemistries and, the Company believes, have the
potential for oral administration.

In 1996, Hybridon formed its Hybridon Specialty Products Division to
manufacture highly purified oligonucleotide compounds both for the Company's
internal use and on a custom contract basis for sale to third parties, including
the Company's collaborative partners. The Company is manufacturing
oligonucleotides in compliance with GMP at its 36,000 square foot leased
manufacturing facility, which the Company believes is the first commercial-scale
synthetic DNA production facility with a fully integrated manufacturing
technology platform, including large-scale synthesis, purification

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and proprietary analytical support. The Division first began production of
oligonucleotide compounds for sale to third parties in June 1996 and by the end
of 1996 had achieved sales revenues of approximately $1.1 million. The Division
also has received orders to provide analytical services and plans to expand its
product offerings to include proprietary intermediates used in the manufacture
of oligonucleotides. In order to strengthen the marketing of the Division's
products, the Company has entered into a sales and supply agreement with the
Applied Biosystems Division of the Perkin-Elmer Corporation ("Perkin-Elmer")
under which Perkin-Elmer refers potential customers to the Company.

Because of the broad applicability of Hybridon's antisense technology
platform and its patent estate, the Company's strategy is both to pursue
research and development programs on its own and to form a variety of
collaborations with pharmaceutical and biotechnology companies and academic and
research institutions. These collaborations provide Hybridon with access to
resources and expertise not otherwise available and enable the Company to
conserve its resources while accelerating research and development. To date,
Hybridon has entered into corporate collaborations with G.D. Searle & Co.
("Searle"), a subsidiary of Monsanto Company, in the field of
inflammation/immunomodulation, F. Hoffmann-La Roche Ltd. ("Roche") relating to
human papilloma virus and hepatitis C virus, and Medtronic, Inc. ("Medtronic")
involving the development of a drug delivery device for use in delivering
Hybridon's antisense compounds for the treatment of Alzheimer's disease. The
Company has developed lead compounds for each of the two disease targets in the
Roche collaboration and has received associated milestone payments from Roche.

The Company's accomplishments to date have been based on its integrated
antisense technology platform, which includes:

- Advanced Medicinal Chemistries. Hybridon's scientists have designed and
produced over 20 proprietary families of synthetic antisense
oligonucleotide chemistries. The Company believes that antisense
compounds based on these chemistries will demonstrate a range of
favorable pharmaceutical attributes and provide flexibility in
addressing many biological targets. In particular, the Company believes
that its advanced chemistries provide the potential for enhanced
metabolic stability, which may result in less frequent dosing and
therefore lower costs of therapy. In addition, the Company believes that
its advanced chemistries provide the potential for oral administration.
In this regard, in a preclinical test in which an advanced antisense
oligonucleotide developed by the Company was administered orally to nude
mice in which human colon and breast cancer cells had been implanted, a
significant antisense-specific anti-tumor effect was exhibited.

- Manufacturing Technology. The Company has developed a manufacturing
technology platform which integrates key elements of the manufacturing
process. In 1996, the Company completed development of two separate
commercial scale oligonucleotide synthesizers, one in an internal
program and one in a collaboration with Pharmacia Biotech, Inc.
("Pharmacia"). The synthesizer developed by Hybridon is specifically
designed to produce advanced chemistry antisense oligonucleotides. In
addition, the Company has implemented proprietary purification
processes, which use water in place of chemical solvents, simplifying
environmental compliance and permitting purification of kilogram batches
of oligonucleotides. The advances made by the Company in oligonucleotide
manufacturing technology have enabled the Company to reduce its direct
oligonucleotide unit production costs by approximately 50% annually
since 1991. Because antisense compounds targeted at different diseases
can be manufactured with the same nucleotide building blocks and using
the same manufacturing processes and equipment with minimal adjustments,
the knowledge and experience that the Company obtains in the manufacture
of each compound is substantially applicable to the manufacture of other
oligonucleotide compounds for the treatment of other diseases and
results in significant manufacturing efficiencies.

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- Proprietary Analytical Tools and Processes. Hybridon has developed
proprietary analytical tools and processes that enable the Company to
analyze the chemical purity, base sequencing and composition of its
oligonucleotides with greater speed and accuracy than existing
analytical processes. In particular, the Company has developed
proprietary laser induced fluorescence and physical sequencing mass
spectrometry which enables the Company to directly sequence advanced
chemistry oligonucleotides which is not possible using more traditional
enzymatic and chemical methods. The Company uses the information that it
obtains with its analytical tools and processes to improve production
quality control, to comply with regulatory requirements and to monitor
the pharmacokinetic behavior of its oligonucleotide compounds in
preclinical studies and clinical trials.

Hybridon seeks to establish a comprehensive proprietary position through a
"layered" patent strategy covering the Company's families of oligonucleotide
chemistries, the antisense sequences of the Company's oligonucleotide compounds
and the chemical compositions of these oligonucleotide compounds. The Company
believes that this approach may provide it with at least three independent
levels of protection. Hybridon also seeks to protect its proprietary analytical
and manufacturing processes. Hybridon owns or exclusively licenses 23 issued
U.S. patents, six issued European patents, 31 allowed U.S. patent applications,
eight allowed European patent applications and 168 other U.S. patent
applications. One of the issued U.S. patents and one of the issued European
patents broadly claim antisense oligonucleotides targeted at HIV, four of the
issued U.S. patents and 63 of the U.S. patent applications relate to antisense
oligonucleotides targeted at genes which are implicated in diseases such as
cancer and viral and bacterial infections, seven of the issued U.S. patents and
38 of the U.S. patent applications relate to the Company's medicinal
chemistries, including one issued U.S. patent that broadly claims methods of
orally-administering advanced chemistry oligonucleotides, and six of the issued
U.S. patents and 47 of the U.S. patent applications relate to oligonucleotide
production.

TECHNOLOGY OVERVIEW

Introduction

Proteins play a central role in virtually every aspect of human
metabolism. Almost all human diseases are the result of inappropriate protein
production or performance. Traditional drugs are designed to interact with
protein molecules that support or create diseases. Antisense drugs work at the
genetic level to interrupt the process by which disease-causing proteins are
produced.

The information necessary to produce a specific protein is encoded in a
specific gene. The information required to produce all human proteins is
contained in the human genome and its collection of more than 100,000 genes.
Each gene is made up of DNA, which is a duplex of entwined strands -- a "double
helix." In each duplex, the building blocks of DNA, called nucleotides, are
bound or "paired" with complementary nucleotides on the other strand. The
precise sequence of a nucleotide chain that is the blueprint for the information
that is used during protein production is called the "sense" sequence. The
sequence of a nucleotide chain that is precisely complementary to a given sense
sequence is called its "antisense" sequence.

Protein synthesis or expression typically involves a two-phase process.
First, the information contained in the gene is transcribed from the sense
strand of DNA into one or more molecules of messenger RNA. Second, the
information encoded in the messenger RNA is translated into the sequence of
amino acids that comprise the protein. The information contained in a single
gene is often repeatedly transcribed into multiple copies of messenger RNA,
which in turn are repeatedly translated, giving rise to multiple copies of the
same protein.

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Conventional Drugs

Most drugs are chemicals designed to induce or inhibit the function of a
target molecule, typically a protein, with as few unwanted side effects as
possible. However, conventional drugs are not available for the treatment of
many diseases because of their relatively low level of selectivity. The
selectivity of conventional drugs is usually determined by only a few, generally
two or three, points of interaction at the binding site of the target molecule.
Frequently, sites on other non-target molecules resemble the target binding site
sufficiently to permit the conventional drug to bind to some degree. This lack
of selectivity may result in decreased efficacy, unwanted side effects or a need
to administer the drug in less than optimal dosages due to toxicity concerns. In
addition, the development of conventional drugs is generally time consuming and
expensive, as thousands of compounds must be synthesized to find one with the
right efficacy and side effect profile.

Gene Expression Modulation

In contrast to conventional drugs, which usually interact with
disease-associated proteins after they have been produced, gene expression
modulation technology is intended to regulate the production of
disease-associated proteins, thus targeting an earlier biochemical process.
Advances in genomic science have identified many targets for gene expression
modulation products. Once a gene that codes for a disease-associated protein is
identified, an oligonucleotide based on the complementary sequence for the
selected site can be synthesized and its pharmaceutical properties optimized by
chemical modification. These chemically-modified oligonucleotides may be
composed of DNA, RNA or a combination of the two.

Chemically-modified oligonucleotides can be designed to attack a disease
at the genetic level by binding to messenger RNA or DNA to prevent production of
disease-associated proteins. Binding to messenger RNA generally is used in the
"antisense" and "ribozyme" approaches to gene expression modulation, while
binding to the DNA generally is used in the "triplex" approach to gene
expression modulation.

In the antisense approach to gene expression modulation,
chemically-modified oligonucleotides, which consist of the antisense sequence to
a selected region on a target messenger RNA, are used to inhibit the synthesis
of a particular protein. Because the sequence of nucleic acid bases of a
chemically-modified antisense oligonucleotide is complementary to its target
sequence on a messenger RNA, the antisense oligonucleotide forms a large number
of bonds at the target site, typically in excess of 35, practically assuring
that the oligonucleotide will hybridize (bind) tightly to the selected type of
messenger RNA. Since a single messenger RNA may be translated repeatedly into a
protein, a single chemically-modified antisense oligonucleotide may inhibit the
synthesis of many copies of a protein. Moreover, in vitro tests have shown that
certain chemically-modified antisense oligonucleotides form complexes with their
target messenger RNAs. These complexes activate RNase H, a cellular enzyme, in a
manner that destroys the messenger RNA to which the oligonucleotide is bound,
without destroying the oligonucleotide itself, thus freeing the oligonucleotide
to bind with another identical messenger RNA.

Ribozymes are RNA molecules that have the ability to cleave other RNA
molecules. Ribozymes contain a catalytic core along with an oligonucleotide
sequence complementary to a sequence on the target messenger RNA. As with
enzymes, ribozymes function catalytically when cleaving other RNA molecules and
thus are not themselves permanently affected by the process. As with antisense
oligonucleotides, ribozymes bind selectively with target RNAs. Therefore, a
single ribozyme molecule will cleave a specific target messenger RNA molecule
with which the ribozyme becomes bound. That same ribozyme will then be free to
bind with another identical messenger RNA molecule and repeat the cleaving
function. Because of their catalytic activity, ribozymes may have advantages
over antisense oligonucleotides in situations in which cellular RNase H is not
abundant or

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cannot be activated. Ribozymes have had limited utility as potential drugs
because of their relatively large size, which increases the expense of
synthesizing these molecules; the difficulty in increasing their stability
through chemical modification; and the limited nature of the catalytic activity
of synthetic ribozymes, particularly at magnesium levels present in human cells.

The triplex approach involves the interaction of oligonucleotides directly
with the appropriate region of the double-stranded DNA comprising the target
gene, thus resulting in a triplex structure and physically interfering with the
transcription of DNA into messenger RNA. The triplex approach typically does not
involve the destruction of the region of DNA to which the oligonucleotides are
bound, in contrast with the effects of antisense oligonucleotides and ribozymes
on messenger RNA. Constraining factors to the triplex approach to date have been
the difficulty of obtaining access for oligonucleotides to the DNA, the relative
weakness of the bonding of the oligonucleotides with the DNA and concerns over
compounds that interact directly with the DNA genetic information.

HYBRIDON TECHNOLOGY

Antisense

Hybridon has developed an integrated antisense technology platform based
on proprietary medicinal chemistries, analytical chemistry and manufacturing
technology. The development of Hybridon's antisense technology has been directed
by Dr. Sudhir Agrawal, the Company's Chief Scientific Officer, along with Drs.
John Goodchild and Jin-Yan Tang, two of the Company's principal scientists, and
builds on the pioneering work in the antisense field begun in the 1970s by Dr.
Paul C. Zamecnik, a founder and director of the Company and Chairman of its
Scientific Advisory Board, at the Massachusetts General Hospital ("MGH") and
continued by Dr. Zamecnik at the Worcester Foundation for Biomedical Research,
Inc. (the "Worcester Foundation").

Medicinal Chemistries. Hybridon's scientists have designed and synthesized
over 20 proprietary families of synthetic antisense oligonucleotide chemistries.
The Company believes that antisense compounds based on these chemistries may
demonstrate a range of favorable pharmaceutical attributes, including: reduced
side effects, increased duration of action, increased potency and susceptibility
to lower dosing, less frequent dosing, controlled release formulation and
alternative routes of administration, including oral administration. Hybridon
designed its first generation phosphorothioate oligonucleotides to increase
their resistance to enzymatic degradation and their biological activity and to
act catalytically by triggering RNase H. GEM 91 is such a phosphorothioate-
modified oligonucleotide. Hybridon has used the insights gained by it in the
development and ongoing human clinical trials of GEM 91 in the design of its
more advanced oligonucleotide chemistries.

In addition to developing advanced oligonucleotide chemistries, Hybridon
is developing new formulations of its antisense oligonucleotides to optimize
their pharmaceutical properties. Data from in vivo studies in a rat model of
Hybridon's antisense oligonucleotide formulated with the chemical cyclodextrin
suggest that such compounds would exhibit increased cellular uptake, lower
immunostimulatory effects, a generally enhanced safety profile and improved
stability. In in vitro tests, a formulation of Hybridon's antisense
oligonucleotide with protamine also demonstrated reduced immunostimulatory
effects.

Hybridon has also developed substantial expertise in the selection of
molecular targets for its antisense compounds. The Company's studies of DNA and
messenger RNA from a large number of viruses, other infectious organisms and
cancer cells have yielded an improved understanding by Company scientists of RNA
structure and the importance of particular RNA sequences to the processing of
messenger RNA and the translation of proteins. This knowledge enhances the
Company's ability to select attractive target sites and thereby increases the
efficiency of Hybridon's

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drug development programs. The Company has developed in vitro tests which can
select preferred oligonucleotide binding sequences on messenger RNA. The Company
also employs conventional computer-based rational drug design to select
attractive binding sequences.

Manufacturing Technology. The Company's expertise in the structure, design
and analysis of chemically-modified oligonucleotides has served as the
foundation of its manufacturing technology and know-how. The Company has
developed proprietary technology to increase the purity of oligonucleotide
products, enhance the efficiency of the production process and increase the
scale of production. In 1996, the Company completed development of two separate
commercial scale oligonucleotide synthesizers, one in an internal program and
one in a collaboration with Pharmacia. The synthesizer developed by Hybridon is
specifically designed to produce advanced chemistry antisense oligonucleotides.
In addition, the Company has implemented proprietary purification processes,
which use water in place of chemical solvents, simplifying environmental
compliance and permitting purification of kilogram batches of oligonucleotides.
The Company has also developed proprietary chemical synthesis processes and
novel reagents used in the synthesis process, which the Company believes may
further decrease the cost of production of its modified oligonucleotides.

Proprietary Analytical Tools and Processes. The Company has established
proprietary analytical tools and processes that enable it to analyze
oligonucleotide compounds with greater speed and accuracy when compared to
traditional methods. Hybridon has developed a novel method of determining
antisense purity that is sensitive to a single DNA base difference; this method
is significantly more accurate than traditional chromatography methods. The
Company is also able to sequence and identify short strands of DNA at the
subparts-per-billion level, allowing Hybridon's scientists to trace the compound
through the metabolic pathway and assess the compound's bioavailability. The
Company uses the information that it obtains with its proprietary analytical
tools and processes to improve production quality control, to comply with
regulatory requirements and to monitor the pharmacokinetic behavior of its
oligonucleotide compounds in preclinical studies and clinical trials.

Ribozyme

Hybridon believes that the ribozyme approach of gene expression modulation
is complementary to the Company's antisense technology because the Company's
oligonucleotide drug development, production and analytic and advanced medicinal
chemistry technology are all directly applicable to this approach.

Hybridon's ribozyme research group is working on the development of
ribozymes which may exhibit favorable pharmaceutical attributes, such as
improved catalytic activity and greater resistance to degradation by cellular
enzymes, the development of oligonucleotides with ribonuclease-like activity
that do not contain enzymatic RNA and the development of shorter length
ribozymes which are easier and less expensive to synthesize. The Company has
developed a method of using ribozymes in the presence of antisense
oligonucleotides that bind to a site on the target messenger RNA immediately
adjacent to the site of ribozyme binding. These antisense oligonucleotides act
as facilitators for the binding of ribozymes and, in in vitro tests, have
allowed the use of shorter length ribozymes. Also in in vitro tests, the Company
has shown that the presence of antisense oligonucleotide facilitators increases
the catalytic activity of ribozymes, thereby potentially increasing the potency
of these compounds, and promotes ribozyme activity at concentrations of
magnesium naturally occurring in human cells. Synthetic ribozymes generally
cleave poorly or not at all in such low levels of magnesium. Another ribozyme
approach under research by the Company involves the combination of
oligonucleotides that do not activate RNase H with ribozymes that act in a
catalytic manner, thereby offering the prospect of lower dosing of the
oligonucleotide. The Company is engaged in additional studies to improve the
pharmaceutical properties of ribozymes against various disease targets.

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HYBRIDON DRUG DEVELOPMENT AND DISCOVERY PROGRAMS

Hybridon is focusing its development efforts on products for the treatment
of diseases for which the gene encoding the target protein is well
characterized; that afflict a substantial number of people; for which there are
significant unmet clinical needs, particularly diseases for which there is no
current drug therapy or for which available therapies have unacceptable side
effects; and for which expedited regulatory review processes reasonably may be
expected. Based on these criteria, Hybridon is directing its drug development
efforts at the treatment of HIV-1 infection and AIDS, other viral and infectious
diseases, cancers and certain metabolic disorders.

The following table summarizes Hybridon's principal product development
and discovery programs. All of these programs involve the discovery and
development of chemically-modified oligonucleotides using the antisense approach
to gene expression modulation. This table is qualified in its entirety by
reference to the more detailed descriptions elsewhere in this Annual Report on
Form 10-K.

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- - -------------------------------------------------------------------------------------------
Primary Therapeutic
TARGET                                 Indication(s)                    STATUS(1)
- - -----------------------------   ---------------------------   -----------------------------

HIV-1 AND AIDS
HIV-1........................   HIV-1 Infection and AIDS      GEM 91 - Phase II Clinical
Trials

HIV-1 Infection and AIDS      GEM 92 - Preclinical
(Intravenous and Oral
Formulations)
VIRAL AND INFECTIOUS
DISEASES
Cytomegalovirus..............   CMV Retinitis                 GEM 132 for Intravitreal
Injection - Phase I/II Clinical
Trials
CMV (Systemic)                GEM 132 for Systemic
Injection - Phase II Clinical
Trials
Human Papilloma Virus........   Genital Warts; Cancer         Preclinical (2)
Hepatitis C Virus............   Hepatitis; Liver Cancer       Lead Compounds (2)
Hepatitis B Virus............   Hepatitis; Liver Cancer       Research Compounds

CANCERS
Protein Kinase A.............   Cancer                        GEM 231 - Preclinical
(Intravenous and Oral
Formulations)
Vascular Endothelial Growth
Factor.......................   Cancer Angiogenesis           GEM 220 - Preclinical

Multiple Drug Resistance.....   Cancer Chemotherapy           Preclinical
DNA Methyltransferase........   Cancer                        Lead Compounds (3)

METABOLIC DISORDERS
Vascular Endothelial Growth
Factor.......................   Retinopathies                 Preclinical
Psoriasis                     Preclinical
Amyloid Precursor Protein....   Alzheimer's Disease           Lead Compounds
ApoE-4.......................   Alzheimer's Disease           Lead Compounds
- - -----------------------------   ---------------------------   -----------------------------

(1)  Preclinical: Compounds are undergoing additional testing and alternative
chemistries are being evaluated in biological assays and/or appropriate
animal models in order to assess efficacy, toxicology and pharmacokinetics
and to select particular chemistries with optimal pharmaceutical
attributes. If these procedures are completed satisfactorily and other
scientific and financial criteria are met, the Company may initiate
investigational new drug ("IND")- enabling Good Laboratory Practices
("GLP") studies and begin preparation of an IND application.

Lead Compounds: One or more antisense compounds have demonstrated
biological activity for a particular gene target in a specific and relevant
biological assay.

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Research Compounds: Appropriate target gene(s) and sequence(s) are being
determined; antisense compounds are being synthesized and screened for
biological activity.

(2)  Being developed as part of collaboration with Roche. See "Item 1. Business
-- Corporate Collaborations -- F. Hoffmann-La Roche Ltd."

(3)  Technology relating to target has been licensed to and is being developed
by Methylgene Inc., a Canadian company co-founded by the Company and in
which the Company owns a minority interest ("Methylgene"). See "Item 1.
Business -- Financial Collaborations -- Methylgene Inc."

HIV-1 and AIDS

AIDS is caused by infection with HIV and leads to severe, life-threatening
impairment of the immune system. HIV causes immunosuppression by attacking and
destroying T-cells, which coordinate much of the network of normal immune
responses. HIV infection usually leads to AIDS, although progression to
symptomatic disease may take many years. The process of HIV replication involves
the integration of a DNA copy of the viral RNA into the human genome, the
transcription of the DNA copy into messenger RNA ("reverse transcription") and
the synthesis of viral proteins and copies of viral RNA for packaging into new
virus particles that may infect other cells.

As of June 30, 1996, approximately 548,100 cases of AIDS had been reported
to the U.S. Centers for Disease Control and Prevention, and the current
population of surviving AIDS patients in the U.S. was estimated to be
approximately 200,000. As of June 30, 1996, AIDS was the leading cause of death
in the U.S. for men between the ages of 25 and 44 and the third leading cause of
death in the U.S. for women between the ages of 25 and 44. The U.S. Public
Health Service estimates that more than 1,000,000 other people in the U.S. are
infected with HIV. As of June 30, 1996, the World Health Organization (the
"WHO") reported that approximately 1,394,000 AIDS cases had been reported
worldwide, but it estimated that the actual total number of cases was over
7,700,000. The WHO also estimated that, as of June 30, 1996, approximately
21,800,000 individuals were infected with HIV/AIDS worldwide.

Therapies that have received U.S. Food and Drug Administration ("FDA")
marketing approval for the treatment of HIV infection and AIDS include two
classes of products: reverse transcriptase inhibitors and inhibitors of HIV-1
protease, known as protease inhibitors. Both types of drugs are inhibitors of
viral enzymes and have shown efficacy in reducing the concentration of viral RNA
(HIV) in the blood and in prolonging the asymptomatic periods in HIV-positive
individuals, especially when administered in combination. However, not all
patients have benefitted from these drugs, when used in combination or
otherwise, and problems remain with respect to patient compliance regimens and
certain toxic side effects. In addition, it is not known to what extent HIV will
develop resistance over time to these drugs.

GEM 91. The Company is enrolling patients for a Phase II clinical trial of
GEM 91 in the U.S. This trial will involve the administration of GEM 91 in an
open label trial in which GEM 91 will be administered for a two-week period to
up to 24 HIV-positive patients with characteristics of advanced HIV disease.
This trial is designed to confirm the preliminary findings from the Company's
Phase Ib/II clinical trials of GEM 91 in the U.S. in which a decrease was
observed in the quantities of cell-associated HIV-1 in circulating blood cells
of patients with characteristics of advanced HIV disease.

In 1993 and 1994, the Company conducted Phase Ia clinical trials of GEM 91
in the U.S. and in France in conjunction with the Agence Nationale de Recherches
sur le SIDA (the "ANRS"). The Company believes that these trials were the first
human clinical trials involving intravenous or other systemic administration of
an antisense oligonucleotide for the treatment of a viral disease. In these
trials, the Company administered ascending single doses of up to 3.5 mg/kg of
GEM 91 to 72 HIV-

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positive patients, administered by two-hour intravenous infusions. The Company
also conducted additional Phase Ia clinical trials of GEM 91 in Europe involving
27 normal volunteers to study the pharmacokinetic interaction of a combined
treatment of GEM 91 and AZT and to investigate the absolute bioavailability of
subcutaneously and intramuscularly administered GEM 91. GEM 91 was well
tolerated by all patients in the Phase Ia clinical trials without dose-limiting
toxicity or side effects.

In 1995, the Company initiated Phase Ib/II clinical trials of GEM 91 in
the U.S. and in France in conjunction with the ANRS. These trials are designed
to assess the safety and pharmacokinetics of repeated doses of GEM 91 and to
provide preliminary data on the drug's antiviral action in reducing viral load.
In the U.S. trials, daily doses of up to 4.4 mg/kg/day of GEM 91 have been
administered by continuous intravenous infusion for periods of between eight and
14 days. In the French trials, GEM 91 was administered by intermittent two hour
intravenous infusions for periods of up to 27 days at daily doses of up to 3.0
mg/kg/day. Through February 28, 1997, these trials have involved 176
HIV-positive patients. GEM 91 has been well tolerated by all patients in the
Phase Ib/II clinical trials without dose-limiting toxicity or side effects. In
addition, unblinded analysis of the on-going Phase Ib/II trials showed a
significant difference between treated and untreated patients in cellular
viremia (e.g. the quantities of infectious virus in circulating blood cells)
with a more pronounced difference in patients with characteristics of advanced
HIV. The Company is continuing these Phase Ib/II clinical trials in the U.S.

GEM 91 is a phosphorothioate antisense oligonucleotide comprised of 25
nucleotides. In certain specially-designed cell culture tests, GEM 91
demonstrated inhibition of HIV-1 replication at multiple stages in the virus
replication cycle: (i) by binding with surface proteins and inhibiting the
absorption of HIV into cells, (ii) by interfering with the reverse transcription
of viral RNA into DNA, and (iii) by binding with the gag-messenger RNA of HIV-1,
which is common to different viral strains (referred to as a "conserved region")
and which codes for a protein essential to viral replication. The multiple
mechanisms of action exhibited by GEM 91 in these in vitro tests may enhance the
likelihood that GEM 91 may delay the emergence of viral resistance to its
activity.

GEM 91 has demonstrated significant inhibition of the replication of HIV-1
in various cell culture tests of AZT-resistant and other primary human isolates.
In a cell culture model that was monitored for 187 days, GEM 91 inhibited HIV-1
replication without any significant resistance being observed. In a parallel
model that was monitored for 174 days, AZT inhibition of HIV-1 replication was
accompanied by the development of significant AZT resistance in the virus
population. In similar tests of protease inhibitors, significant resistance also
developed in the virus population. In tissue culture assays, GEM 91 suppressed
HIV-1 induced cytopathic effects on CD4 cells, thereby maintaining CD4 cell
population in a dose-dependent fashion. There can be no assurance that
preclinical tests will be predictive of the effect of GEM 91 in humans. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Certain Factors That May Affect Future Results -- Early Stage
of Development; Technological Uncertainty."

GEM 92. Using the insights gained in the development and ongoing clinical
trials of GEM 91 and employing chemistry advances developed by the Company, the
Company is developing GEM 92 for the treatment of HIV-1 infection and AIDS. GEM
92 is based on one of the Company's more advanced oligonucleotide chemistries.
Because GEM 92 also targets the gag messenger RNA, the Company believes that the
various attributes of GEM 91, including the multiple mechanisms of action, may
be equally applicable to GEM 92. GEM 92 has demonstrated significant inhibition
of the replication of HIV-1 in various human cell culture systems. In addition,
based on in vitro tests, the Company believes that GEM 92 may demonstrate
increased stability in comparison with GEM 91 and, as a result, longer duration
of action, thereby potentially permitting lower and less frequent dosing.
Because preclinical tests have demonstrated that other molecules with similar
chemical properties have the potential for oral administration, the Company
plans to systematically evaluate GEM 92 for potential oral use.

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Other Viral and Infectious Diseases

Cytomegalovirus. CMV is widespread in the human population as a persistent
subclinical infection. Approximately 70,000 to 150,000 cases occur each year in
the U.S., of which approximately one-half involve congenitally infected infants.
Infection by CMV is manifested clinically in certain individuals, particularly
in newborns, transplant recipients, cancer patients and AIDS patients. In
approximately 40% of all AIDS patients, clinical CMV may develop as a
progressive destruction of the retina (retinitis), resulting in blindness. In
transplant recipients, CMV may develop as a variety of diseases, including
pneumonitis.

The Company is conducting two clinical trials of GEM 132, its advanced
chemistry compound for the treatment of CMV: a Phase I/II clinical trial of GEM
132 for the treatment of CMV retinitis in AIDS patients by intravitreal
injection in the eye (the "IVT Formulation") and a Phase II clinical trial of
another formulation of GEM 132 for the treatment of systemic CMV by intravenous
administration (the "Systemic Formulation"). The Company's Phase I/II clinical
trials of the IVT Formulation are being conducted in the U.S. and France and
will involve the injection of the IVT Formulation into the vitreous humor of the
affected eye in up to 29 HIV-positive patients with CMV retinitis. These trials
are designed to assess the safety of GEM 132 and to provide preliminary data as
to the ability of GEM 132 to inhibit the progression of CMV retinitis in
individuals with AIDS.

The Company's Phase II clinical trials of the Systemic Formulation are
currently being conducted in France. The Company recently submitted an IND
covering the Systemic Formulation with the FDA and, subject to such IND becoming
effective, expects trials to begin in the U.S. in the second quarter of 1997.
These clinical trials will involve the intravenous administration of the
Systemic Formulation to up to 30 HIV-positive patients with CMV infections and
are designed to study the safety and pharmacokinetics of the Systemic
Formulation and the usefulness of several currently available tests as surrogate
markers to evaluate the efficacy of anti-CMV therapies.

In October 1996, the Company completed a Phase I safety and
pharmacokinetic trial of the Systemic Formulation in healthy, adult male
volunteers in the United Kingdom. In this trial, subjects received doses of the
Systemic Formulation ranging from 0.125 to 0.5 mg/kg in a single two hour
intravenous infusion. Results of this study provided data on safety, drug
distribution and metabolism. GEM 132 was well-tolerated by the subjects without
dose-limiting toxicity or side effects during administration and for the
subsequent 14-day follow-up period.

GEM 132 has demonstrated significant inhibition of the replication of
human cytomegalovirus in tissue culture assays. GEM 132 has demonstrated
activity in cell culture against both clinical isolates and viruses which have
become resistant to current therapies, such as ganciclovir. In addition, in cell
culture studies, GEM 132 has demonstrated significantly more potent anti-viral
activity than the two existing therapies against which it has been tested,
ganciclovir and foscarnet.

Human Papilloma Viruses. Human papilloma viruses are associated with a
variety of warts, including benign genital warts which, if untreated, can lead
to cervical cancer. Human papilloma viruses are found in more than 24,000,000
Americans, with an estimated 500,000 to 1,000,000 new cases each year. Genital
warts currently are among the most prevalent sexually transmitted diseases in
the U.S. Pursuant to its collaboration with Roche, Hybridon has identified
through joint research with Roche specific sequences on the messenger RNA of the
papilloma virus as targets for chemically- modified antisense oligonucleotides
and has synthesized chemically-modified antisense oligonucleotides that inhibit
human papilloma virus gene expression in tissue culture assays. These compounds
also have been shown in an animal model to be active in preventing virus damage
to tissues. Hybridon has achieved the first contractually specified development
milestone, designation of a lead compound, in the human papilloma virus program
under its collaboration with Roche.

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Hepatitis C Virus. There are approximately 3,500,000 people in the U.S.
carrying the hepatitis C virus, and approximately 150,000 individuals in the
U.S. become infected with hepatitis C each year. Approximately 80% of those who
contract the virus each year develop chronic hepatitis C infections and
approximately 30,000 cases each year ultimately result in cirrhosis of the
liver. Chronic infection due to hepatitis C is a significant disease in Japan
and other Pacific Rim countries that has been linked to the development of
primary liver cancer. Pursuant to its collaboration with Roche, Hybridon has
identified through joint research with Roche specific sequences on the messenger
RNA as targets for chemically modified antisense oligonucleotides and has
synthesized chemically-modified antisense oligonucleotides that inhibit
hepatitis C viral gene expression in in vitro and tissue culture assays.
Hybridon has achieved the first contractually specified development milestone,
designation of a lead compound, in the hepatitis C program under its
collaboration with Roche.

Hepatitis B Virus. Hepatitis B is a major health problem throughout the
world, with endemic infection in some less developed countries. Approximately
1,200,000 individuals in the U.S. carry the hepatitis B virus. There are an
estimated 200,000 to 300,000 new hepatitis B infections in the U.S. each year.
Hepatitis B infections can lead to liver cirrhosis and cancer of the liver.
Pursuant to its collaboration with Roche, Hybridon identified through joint
research with Roche specific sequences on the messenger RNA as targets for
chemically-modified antisense oligonucleotides and synthesized
chemically-modified antisense oligonucleotides that inhibit the expression of
hepatitis B virus in cell cultures. Although Roche has since determined not to
pursue this program, the Company is continuing its development efforts. All
rights relating to the Roche-sponsored research with respect to hepatitis B have
reverted to the Company.

Cancer

Approximately 1,380,000 new cancer cases are reported in the U.S.
annually. Cancers of all types result in approximately 560,000 deaths in the
U.S. each year, making cancer the second leading cause of death in the U.S. In
addition to surgery and radiotherapy, there are nearly 50 FDA-approved drug
therapies for the treatment of a variety of cancers, although many of these
therapies suffer from severe adverse side effects.

Protein Kinase A. Protein Kinase A ("PKA") is a protein that has been
shown to be expressed in human cancer cell lines and in primary tumors after
cells have been transformed with various oncogenes or after stimulation of cell
growth with cell growth stimulating factors. Based on cell culture studies, the
Company believes that overexpression of PKA may be associated with colon,
breast, ovarian and lung cancer. Hybridon has identified specific sequences on
the PKA gene as targets for chemically-modified antisense oligonucleotides and
has synthesized an advanced chemically-modified antisense compound, GEM 231,
that has demonstrated inhibition of the expression of PKA and tumor growth in
animal model studies. In these studies, repeated daily doses of Hybridon's
oligonucleotide compound administered either intraperitoneally or orally
resulted in reduction of PKA, with suppression of tumor growth for seven days.
The Company plans to commence clinical trials of GEM 231 in the second half of
1997.

Vascular Endothelial Growth Factor -- Cancer Angiogenesis. Vascular
Endothelial Growth Factor ("VEGF") is a growth factor that stimulates
angiogenesis, the process of new blood vessel formation. Angiogenesis plays a
major role in wound healing and organ regeneration and also is involved in
certain pathological processes, such as tumor growth and metastasis. VEGF has
been shown to be overexpressed in developing tumors and is believed to be a key
factor in providing new blood supply to feed developing tumors. Hybridon has
identified specific sequences on the VEGF messenger RNA as targets for
chemically-modified antisense oligonucleotides and has synthesized an advanced
chemically-modified antisense oligonucleotide, GEM 220, that has inhibited the
expression of the VEGF gene in in vitro and tissue culture assays. In an animal
model for solid tumor growth, this compound

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demonstrated tumor growth suppression. The Company plans to commence clinical
trials of GEM 220 in the second half of 1997.

Multiple Drug Resistance. Approximately 500,000 (or one-half) of the new
cancer cases reported each year are not curable by any conventional treatment.
In approximately one-half of these incurable cases, Multiple Drug Resistance
("MDR-1") gene expression is thought to play a predominant role in the cancers'
resistance to chemotherapy. Hybridon has identified specific sequences on the
messenger RNA as targets for chemically-modified antisense oligonucleotides and
has synthesized chemically- modified antisense oligonucleotides that inhibit the
expression of the MDR-1 gene in drug-resistant human cancer cells in tissue
culture assays and increase their sensitivity to anti-cancer drugs in such
assays. These compounds also have decreased MDR-1 expression in human tumors in
a mouse model and have shown activity in a murine leukemia model. In addition,
in in vitro and in vivo tests, these compounds sensitized formerly resistant
cancer cells to chemotherapeutic agents.

DNA Methyltransferase. DNA methyltransferase is a regulatory protein that
has been implicated in the processes of cell growth and differentiation and has
been shown to be overexpressed in some tumors, such as small cell lung cancer,
colon cancer and breast cancer. Hybridon has identified specific sequences on
the messenger RNA as targets for chemically-modified antisense oligonucleotides
and has synthesized chemically-modified antisense oligonucleotides that alter
DNA methylation of cultured human cancer cells and inhibit the ability of such
cells to grow in cell culture and their ability to form tumors in mice. The
Company has licensed the technology relating to the development of this compound
to Methylgene, which is currently developing this technology. See "Item 1.
Business -- Financial Collaborations -- Methylgene Inc."

Metabolic Disorders

Vascular Endothelial Growth Factor -- Retinopathies. Overexpression of
VEGF has been implicated in four major causes of blindness: late stage,
age-related macular degeneration, which currently afflicts approximately 500,000
people in the U.S.; proliferative diabetic retinopathy, the major cause of
blindness in diabetics which currently affects approximately 250,000 people in
the U.S.; central retinal vein occlusion, which currently afflicts approximately
200,000 people in the U.S.; and retinopathy of prematurity, which affects
approximately 10,000 premature newborns annually in the U.S. Hybridon has
identified specific sequences on the VEGF messenger RNA as targets for
chemically-modified antisense oligonucleotides and is synthesizing
chemically-modified antisense oligonucleotides designed to inhibit the
expression of the VEGF gene in retinal cells. These oligonucleotides have been
shown in an animal model of retinopathy to inhibit vascular proliferation and
prevent aberrant angiogenesis in the retinas of mice in a model for retinopathy
of prematurity. Hybridon's antisense oligonucleotides have also been shown to
inhibit neovascularization in a primate animal model of neovascularization.

Vascular Endothelial Growth Factor--Psoriasis. VEGF, in association with
its role in angiogenesis, has recently been implicated in psoriasis, which
currently afflicts more than 6,000,000 people in the U.S. with between 150,000
and 260,000 new cases in the U.S. each year. Hybridon has identified specific
sequences on the VEGF messenger RNA as targets for chemically-modified antisense
oligonucleotides and has synthesized chemically-modified antisense
oligonucleotides that have inhibited the expression of the VEGF gene in in vitro
and tissue culture assays. The Company is currently investigating optimal forms
of topical delivery to the basal layers of the epidermis, where VEGF has been
found to be overexpressed in psoriasis.

Amyloid Precursor Protein. Alzheimer's disease is a neurodegenerative
disease which is the most common cause of dementia in the elderly. It is
estimated to affect approximately 4,000,000 individuals in the U.S. The presence
of amyloid precursor protein ("APP") in the brain at abnormal sites and in
abnormal amounts has been reported to be associated with Alzheimer's disease.
Hybridon has identified specific sequences on the messenger RNA as targets for
chemically-modified antisense

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oligonucleotides and has synthesized chemically-modified antisense
oligonucleotides that inhibit APP production in tissue culture assays. In
addition, the Company is continuing to conduct studies of APP regulation in
rats.

ApoE-4. Apolipoprotein E4 ("ApoE-4") is a plasma protein involved in
cholesterol transport and is associated with Alzheimer's disease. The two gene
products from the APP and ApoE-4 locus appear to interact and provide a
strategic site for therapeutic intervention in Alzheimer's disease. Hybridon and
has identified specific sequences on the messenger RNA as targets for
chemically- modified antisense oligonucleotides and is continuing to conduct
preclinical studies of ApoE-4. The Company is a party to a collaboration with
Medtronic involving the testing of a drug delivery device which could be used to
deliver Hybridon's antisense oligonucleotides targeting Alzheimer's disease and
other neurodegenerative diseases. See "Item 1. Business -- Corporate
Collaborations -- Medtronic, Inc."

CORPORATE COLLABORATIONS

An important part of Hybridon's business strategy is to enter into
research and development collaborations, licensing agreements or other strategic
alliances with third parties, primarily biotechnology and pharmaceutical
corporations, for the development and commercialization of certain products. As
of the date hereof, the Company had entered into corporate collaborations with
Searle, Roche and Medtronic, all as summarized below. The Company intends to
retain manufacturing rights for many of the products it may license pursuant to
these collaborations.

G.D. Searle & Co.

In January 1996, the Company and Searle entered into a collaboration
relating to research and development of therapeutic antisense compounds directed
at up to eight molecular targets in the field of inflammation/immunomodulation
(the "Searle Field").

Pursuant to the collaboration, the parties are conducting research and
development relating to a compound directed at a molecular target in the Searle
Field designated by Searle. In this project, Searle is funding certain research
and development efforts by Hybridon, and each of Searle and Hybridon have
committed certain of its own personnel to the collaboration. The initial phase
of research and development activities relating to the initial target will be
conducted through the earlier of (i) the achievement of certain product
candidate milestones and (ii) 36 months after commencement of the collaboration,
subject to early termination by Searle (although in any event Searle is required
to pay 18 months of research and development funding). The parties may extend
the initial collaboration by mutual agreement, including agreement as to
additional research funding by Searle.

In addition, under the collaboration Searle has the right, at its option,
to designate up to six additional molecular targets in the Searle Field (the
"Additional Targets") for collaborative research and development with Hybridon
on terms substantially consistent with the terms of the collaboration applicable
to the initial molecular target. This right is exercisable by Searle with
respect to each of the Additional Targets upon the payment by Searle of certain
research payments (beyond the project specific payments relating to the
particular Additional Target) and the purchase of additional Common Stock from
the Company by Searle (at the then fair market value). The aggregate amount to
be paid by Searle for such research payments and equity investment in order to
designate each of the Additional Targets is $10,000,000 per Additional Target.
In the event that Searle designates all of the Additional Targets, the aggregate
amount to be paid by Searle for research payments will be $24,000,000 and the
aggregate amount to be paid by Searle in equity investment will be $36,000,000.
If Searle has not designated all of the Additional Targets by the time it
advances the product candidate for the initial molecular target to certain
stages of preclinical development, Searle will be required to purchase an
additional $10,000,000 of Common Stock (at the then fair market value) on
specified dates in order to maintain its right to designate any of the
Additional Targets that it has not yet designated.

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The payment for any such Common Stock will be creditable against the equity
investment portion of the payments to be made by Searle with respect to the
designation of any of the Additional Targets that Searle has not yet designated.

Searle also has the right, at its option, to designate a molecular target
in the Searle Field to develop a therapeutic agent for cancer that acts through
immunomodulation (the "Searle Cancer Target") for collaborative research and
development with Hybridon on terms substantially consistent with the terms of
the collaboration applicable to the initial molecular target. At the time of
such designation, Searle will be required to make certain research payments to
Hybridon and purchase additional Common Stock from the Company (at the then fair
market value). The aggregate amount to be paid by Searle for such research
payments and equity investment will range from $12,000,000 (comprised of
$5,000,000 in research payments and $7,000,000 in equity investment) if the
Searle Cancer Target is designated in 1997 to $26,000,000 (comprised of
$21,000,000 in research payments and $5,000,000 in equity investment) if the
Searle Cancer Target is designated in 2000.

Searle has exclusive rights to commercialize any products resulting from
the collaboration. If Searle determines, in its sole discretion, to
commercialize a product, Searle will fund and perform preclinical tests and
clinical trials of the product candidate and will be responsible for regulatory
approvals for and marketing of the product. In certain instances and for
specified periods of time, Hybridon has agreed to perform research and
development work in the Searle Field exclusively with Searle. In addition, as to
each product candidate, Hybridon will be entitled to milestone payments from
Searle totalling up to an aggregate of $10,000,000 upon the achievement of
certain development benchmarks. Hybridon also will be entitled to royalties from
net sales of products resulting from the collaboration. Subject to satisfying
certain conditions relating to its manufacturing capacities and capabilities,
Hybridon will retain manufacturing rights, and Searle will be required to
purchase its requirements of products from Hybridon on an exclusive basis at
specified transfer prices. Upon a change in control of the Company, Searle would
have the right to terminate Hybridon's manufacturing rights, although the
royalty payable in respect of net sales would be increased in such event.

Under the collaboration, in the event that Searle designates (and makes
the required payments and equity investments for) all of the Additional Targets
or in certain other instances relating to Hybridon's failure to satisfy certain
requirements relating to its manufacturing capacities and capabilities, Searle
will have the right, exercisable in its sole discretion, to require Hybridon to
form a joint venture with Searle for the development of products in the Searle
Field (other than products relating to molecular targets that have already been
designated by Searle) to which each party will contribute $50,000,000 in cash,
although Hybridon's cash contribution would be reduced by the value of the
technology and other rights contributed by Hybridon to the joint venture.
Hybridon and Searle would each own 50% of the joint venture, although Searle's
ownership interest in the joint venture would increase based upon a formula to
up to a maximum of 75% if the joint venture is established in certain instances
relating to Hybridon's failure to satisfy certain requirements relating to its
manufacturing capacities and capabilities.

Under the collaboration, Searle also purchased 1,000,000 shares of Common
Stock in the Company's initial public offering.

F. Hoffmann-La Roche Ltd.

In December 1992, the Company and Roche entered into a collaboration
involving the application of Hybridon's antisense oligonucleotide chemistry to
the development of compounds for the treatment of hepatitis B, hepatitis C and
human papilloma virus. See "Item 1. Business -- Hybridon Drug Development and
Discovery Programs." Under this collaboration, Roche funded research and
development efforts relating to the collaboration and committed personnel of its
own to the collaboration. In 1995, Roche notified the Company that it had
selected an antisense

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oligonucleotide directed at hepatitis C as a lead compound for further
development and made a milestone payment to Hybridon in connection with such
designation. In the third quarter of 1996, Roche notified the Company that it
had selected an antisense oligonucleotide directed at human papilloma virus as a
lead compound for further development, and in the fourth quarter of 1996, made a
milestone payment to the Company in connection with such designation. At such
time, Roche also notified the Company that Roche had elected not to continue the
hepatitis B program under the research and development collaboration. As a
result, in light of the selection by Roche of lead compounds directed at
hepatitis C and human papilloma virus for further development and its
determination to discontinue the hepatitis B program, Roche notified the Company
that Roche was exercising its option to terminate the research phase of the
collaboration as of March 31, 1997. The Company and Roche are engaged in ongoing
discussions as to the manner in which they will collaborate in connection with
the further development of the two antisense oligonucleotides that have been
selected by Roche as lead compounds. All rights relating to the hepatitis B
program have reverted to the Company.

The Company has licensed to Roche any products resulting from the
collaboration on a royalty-bearing, worldwide exclusive basis. Subject to
compliance with certain production cost requirements, Roche is required to
purchase from Hybridon, and Hybridon is required to supply to Roche, Roche's
requirements of products at specified transfer prices.

As part of this collaboration, Roche purchased 551,724 shares of the
Company's Series E Convertible Preferred Stock and 200,000 shares of the
Company's Series F Convertible Preferred Stock, which shares were automatically
converted into an aggregate of 818,390 shares of Common Stock upon the Company's
initial public offering. In addition, the Company issued Roche a five-year
(subject to earlier expiration in certain circumstances) warrant to purchase
551,724 shares of Common Stock, which has a current exercise price of $17.97 per
share.

Medtronic, Inc.

In May 1994, the Company and Medtronic entered into a collaboration
involving the testing of a drug delivery device for use in delivering Hybridon's
antisense oligonucleotides for the treatment of Alzheimer's disease. See "Item
1. Business -- Hybridon Drug Development and Discovery Programs -- Metabolic
Disorders -- Amyloid Precursor Protein and Beta-amyloid Protein." Hybridon will
be responsible for the development of, and hold all rights to, any drug
developed pursuant to this collaboration, and Medtronic will be responsible for
the development of, and hold all rights to, any delivery system developed
pursuant to this collaboration. The parties may extend this collaboration by
mutual agreement to other neurodegenerative disease targets. The research and
development to be conducted is determined and supervised by a committee
comprised of an equal number of designees of the Company and Medtronic.

As part of the collaboration, Medtronic purchased 400,000 shares of the
Company's Series F Convertible Preferred Stock and 125,000 preferred stock units
of the Company (each unit consisting of one share of Series G Convertible
Preferred Stock and one warrant to purchase one-half of one share of the
Company's Common Stock). Upon the closing of the Company's initial public
offering, the shares of Series F Convertible Preferred Stock and Series G
Convertible Preferred Stock purchased by Medtronic automatically converted into
an aggregate of 658,333 shares of the Company's Common Stock. In addition, the
Company issued to Medtronic a warrant expiring on May 10, 1997 to purchase
53,333 shares of the Company's Common Stock at an exercise price equal to $7.50
per share (subject to increase under certain circumstances).

FINANCIAL COLLABORATIONS

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In order to maintain financial flexibility, Hybridon considers innovative
arrangements to finance certain applications of its GEM technology, particularly
applications that it would not develop in the near term without external
funding. The Company has entered into one such arrangement and has executed a
letter of intent with respect to a second. These arrangements are summarized
below.

Methylgene Inc.

The Company and certain Canadian institutional investors have formed a
Quebec company, Methylgene, to develop and market (i) antisense compounds to
inhibit DNA methyltransferase for the treatment of cancers, (ii) other methods
of inhibiting DNA methyltransferase for the treatment of any indications and
(iii) antisense compounds to inhibit a second molecular target other than DNA
methyltransferase for the treatment of cancers, to be agreed upon by Hybridon
and Methylgene (such three product areas being referred to herein as the
"Methylgene Fields").

Hybridon acquired a 49% minority interest in Methylgene for approximately
CDN$1,000,000, and the Canadian investors acquired a majority interest in
Methylgene for a total of approximately CDN$7,500,000. It is anticipated that
Methylgene will issue stock and stock options to certain key employees of and
consultants to Methylgene, including certain directors and officers of the
Company.

The Canadian investors have the right to exchange all (but not less than
all) of their shares of stock in Methylgene for shares of Common Stock of
Hybridon on the basis of 7.5 Methylgene shares (for which they paid
approximately US $11.25) for one share of Hybridon Common Stock (subject to
adjustment for stock splits, stock dividends and the like). This option is
exercisable only during a 90- day period commencing on the earlier of the date
five years after the closing of the Canadian investors' investment in Methylgene
or the date on which Methylgene ceases operations, and terminates sooner if
Methylgene satisfies certain conditions.

Hybridon has granted to Methylgene exclusive worldwide licenses and
sublicenses in respect of certain technology relating to the Methylgene Fields.
In addition, Hybridon and Methylgene have entered into a supply agreement
pursuant to which Methylgene is obligated to purchase from Hybridon all required
formulated bulk oligonucleotides at specified transfer prices.

It is anticipated that Methylgene will qualify to receive certain Canadian
tax benefits with respect to the research and development activities which it
carries on in Canada.

Symbiotech, Inc.

Hybridon and Symbiotech, Inc., a development stage biotechnology company
("Symbiotech"), have entered into a letter of intent to form a new company for
the development of quantitative in vitro diagnostic, detection and biological
amplification products using certain of the Company's antisense oligonucleotides
and Symbiotech's phage technology. The letter of intent provides for each of
Hybridon and Symbiotech to grant the new company exclusive worldwide
royalty-free licenses of certain of their respective technologies for the
development of these products. The letter of intent also has been signed by
Medical Science Partners, L.P. ("MSP") and Pillar S.A., which have indicated an
intention initially to invest a total of $250,000 in the new company. It is
anticipated that each of Hybridon and Symbiotech initially will own
approximately one-third of the equity in the new company, with the balance held
by MSP, Pillar S.A. and certain key employees or consultants, including certain
officers and directors of the Company. The majority of the capital stock of
Symbiotech is owned by MSP.

Because a definitive agreement relating to this transaction has not yet
been executed by the parties, it is possible that the final terms of this
arrangement may differ from those summarized above, possibly materially, or that
this transaction will not be consummated.

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MANUFACTURING TECHNOLOGY AND THE HYBRIDON SPECIALTY PRODUCTS DIVISION

The Company has developed a manufacturing technology platform which
integrates key elements of the manufacturing process to increase the purity of
oligonucleotide products, enhance the efficiency of the production process and
increase the scale of production. The Company has developed two separate
commercial scale oligonucleotide synthesizers. One of these machines was
developed in an internal program and the other in a collaboration with
Pharmacia. Both machines are designed with a capacity of up to 100 millimoles
(approximately 300 grams per batch), although the Company believes that these
machines may be able to exceed such capacity. Pharmacia has retained the right
to sell the machine developed under the collaboration to third parties, subject
to an obligation to pay Hybridon royalties on such third party sales. The
Company believes that its machine is the first commercial scale synthesizer
designed for more advanced chemistries. In addition, the Company has implemented
proprietary purification processes, which use water in place of chemical
solvents, simplifying environmental compliance and permitting purification of
kilogram batches of oligonucleotides. The Company has also developed proprietary
chemical synthesis processes and novel reagents used in the synthesis process,
which the Company believes will further decrease the cost of production of
advanced oligonucleotides.

In 1996, Hybridon formed the Hybridon Specialty Products Division to
capitalize on this technology and know-how and manufacture highly purified
oligonucleotide compounds both for Hybridon's internal use and for sale to third
parties, including the Company's collaborative partners, on a custom contract
basis. The Company is manufacturing oligonucleotides at its 36,000 square foot
leased manufacturing facility, which the Company believes is the first
commercial-scale synthetic DNA production facility with a fully integrated
manufacturing technology platform, including large-scale synthesis, purification
and proprietary analytical support. The Company first began production of
oligonucleotide compounds for sale to third parties in June 1996 and by the end
of 1996 had achieved sales revenues of approximately $1.1 million. The Company
also has received orders to provide analytical services and plans to expand its
product offerings to include proprietary intermediates used in the manufacture
of oligonucleotides.

In order to strengthen the marketing of the Division's products, in 1996
the Company entered into a four-year sales and supply agreement with the Applied
Biosystems Division of Perkin-Elmer. Under the agreement, Perkin-Elmer agreed to
refer potential customers for the custom contract manufacture of
oligonucleotides to Hybridon, and Hybridon agreed to purchase amidites from
Perkin- Elmer for the manufacture of oligonucleotides sold to such customers and
to pay Perkin-Elmer a percentage of the sales price paid by such customers. In
addition, Perkin-Elmer licensed to Hybridon its oligonucleotide synthesis
patents and agreed to discuss a future collaboration with respect to the
development, marketing and distribution of Hybridon's proprietary intermediates.

The production of antisense compounds is similar to the chemical synthesis
used in the production of conventional pharmaceuticals, and in contrast with
typical biopharmaceuticals, does not involve any fermentation processes or
living cells. Moreover, unlike many conventional drugs, antisense compounds
targeted at different diseases can be manufactured with the same nucleotide
building blocks and using the same manufacturing processes and equipment with
minimal adjustments. As a result, the knowledge and experience that the Company
obtains in the manufacture of one compound is substantially applicable to the
manufacture of other oligonucleotide compounds for the treatment of other
diseases and results in other manufacturing efficiencies.

The Company will need to further increase its manufacturing capacity
through the purchase or construction of additional large-scale oligonucleotide
synthesizers in order to satisfy its anticipated future requirements for GEM 91
and the Company's other product candidates and in order to manufacture
oligonucleotides on a custom contract basis for sale to third parties. In
addition, in order to successfully commercialize its product candidates or
achieve satisfactory margins on sales, the

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Company may be required to reduce further the cost of production of its
oligonucleotide compounds. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - - Certain Factors That May
Affect Future Results -- Limited Manufacturing Capability."

The Company believes that it is currently manufacturing oligonucleotides
in substantial compliance with FDA requirements for manufacturing in compliance
with GMP, although its facility and procedures have not been formally inspected
by the FDA and the procedures and documentation followed may have to be enhanced
in the future as the Company expands its oligonucleotide production activities.
Failure to establish to the FDA's satisfaction compliance with GMP can result in
the FDA denying authorization to initiate or continue clinical trials, to
receive approval of a product or to begin or to continue commercial marketing.

In addition, the Company's manufacturing processes are subject to federal,
state and local laws and regulations governing the use, manufacture, storage,
handling and disposal of certain materials and waste products.

MARKETING STRATEGY

Hybridon plans to market the pharmaceutical products it is developing
either directly or through co-marketing, licensing, distribution or other
arrangements with pharmaceutical and biotechnology companies. Hybridon's current
strategy with respect to these products in development is to build a
hospital-targeted direct sales group for products for HIV-1 infection and AIDS
and other market areas that can be accessed with a small to medium size sales
force. Implementation of this strategy will depend on many factors, including
the market potential of any such products the Company develops as well as on the
Company's financial resources. The Company does not expect to establish a direct
sales capability with respect to such products until such time as one or more of
such products approach marketing approval. To market those products that will
serve a large, geographically diverse patient population, the Company expects to
enter into licensing, distribution or partnering agreements with pharmaceutical
and biotechnology companies that have large, established sales organizations. To
the extent the Company enters into marketing arrangements with third parties,
any revenues received by the Company will be dependent on the efforts of such
third parties, and there can be no assurance that such efforts will be
successful. While the Company has developed general marketing strategies, it has
not begun the implementation of any of these strategies with respect to any of
these potential products.

ACADEMIC AND RESEARCH COLLABORATIONS

Hybridon has entered into over 50 collaborative research agreements
relating to specific disease targets and other research activities in order to
augment its internal research capabilities and to obtain access to the
specialized knowledge or expertise of its collaborative partners. With respect
to certain of the Company's drug development programs, the Company relies
primarily upon outside collaborators. Accordingly, termination of the Company's
collaborative research agreements with any of these collaborators could result
in the termination of the related research program.

In general, the Company's collaborative research agreements require the
payment by Hybridon of various amounts in support of the research to be
conducted. The Company usually provides the collaborator with selected
oligonucleotides, which the collaborator then tests in his or her assay systems.
If the collaborator creates any invention during the course of his or her
efforts, solely or jointly with the Company, Hybridon generally has an option to
negotiate an exclusive, worldwide, royalty-bearing license of the collaborator's
rights in the invention for the purpose of commercializing any product
incorporating such invention. Inventions developed solely by Hybridon's
scientists as part of the collaboration generally are owned exclusively by
Hybridon. Most of these collaborative agreements are non-exclusive and can be
cancelled on relatively short notice.

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PATENTS, TRADE SECRETS AND LICENSES

Proprietary protection for the Company's product candidates, processes and
know-how is important to Hybridon's business. Thus, the Company plans to
prosecute and enforce aggressively its patents and proprietary technology. The
Company's policy is to file patent applications to protect technology,
inventions and improvements that are considered important to the development of
its business. Hybridon seeks to establish a comprehensive proprietary position
through a "layered" patent strategy covering the Company's families of
oligonucleotide chemistries, the antisense sequences of the Company's
oligonucleotide compounds and the overall chemical compositions of these
oligonucleotide compounds. The Company believes that this approach may provide
it with at least three independent levels of protection. Hybridon also seeks to
protect its proprietary analytical and manufacturing processes. The patents and
patent applications owned or exclusively licensed by the Company also are
directed to many aspects of the Company's proprietary oligonucleotide production
and analysis technology and ribozyme technology. The Company also relies upon
trade secrets, know-how, continuing technological innovation and licensing
opportunities to develop and maintain its competitive position.

As of February 28, 1997, Hybridon owned or exclusively licensed 23 issued
U.S. patents, six issued European patents, 31 allowed U.S. patent applications,
eight allowed European applications and 168 other U.S. patent applications. Of
these, the Company owned (as opposed to licensed) nine issued U.S. patents, 22
allowed U.S. patent applications and 159 other U.S. patent applications along
with corresponding patent applications in many cases in other major industrial
countries. The patents and applications owned by the Company cover various
chemically advanced oligonucleotides, proprietary target sequences, specific
preferred oligonucleotide products, methods for making and purifying
oligonucleotides, analytical methods and methods for oligonucleotide-based
therapeutic treatment of various diseases. The U.S. patents owned or exclusively
licensed by Hybridon expire at various dates ranging from 2006 to 2014.

Under the terms of a license agreement with the Worcester Foundation (the
"Foundation License"), Hybridon is the worldwide, exclusive licensee under
twelve issued U.S. patents, four issued European patents, six allowed U.S.
patent applications, two allowed European patent applications and six other U.S.
patent applications owned by the Worcester Foundation relating to
oligonucleotides and their production and use, as well as certain
ribozyme-related technology. Many of these patents and patent applications have
corresponding applications on file in other major industrial countries.

One of the issued U.S. patents (the "HIV Patent") and one of the issued
European patents licensed from the Worcester Foundation broadly claim antisense
oligonucleotides as new compositions of matter for inhibiting the replication of
HIV. The other issued U.S. patents include claims covering composition and uses
of oligonucleotides based on the Company's advanced chemistries, methods of
oligonucleotide synthesis that are potentially applicable to large-scale
commercial production, compositions of certain modified oligonucleotides that
are useful for diagnostic tests or assays and methods of purifying full-length
oligonucleotides after synthesis. The earliest expiration of the patents
licensed to the Company by the Worcester Foundation is 2006, when the HIV Patent
expires.

The Company also is the exclusive licensee under various other U.S. and
foreign patents and patent applications, including one U.S. patent, one allowed
U.S. patent application and one U.S. patent applications jointly owned by the
Worcester Foundation and the Mount Sinai Medical Center of New York claiming the
use of antisense oligonucleotides for the inhibition of influenza viruses and
two U.S. patent applications owned by McGill University relating to
oligonucleotides and DNA methyltransferase. The Company and MGH jointly own
three patent applications and one allowed U.S. patent application directed to
compositions and use of antisense applied to Alzheimer's disease. The Company
holds an exclusive license to MGH's interests under such patent applications.

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The Company is a non-exclusive licensee of certain patents held by the NIH
relating to oligonucleotide phosphorothioates and a non-exclusive licensee of an
NIH patent covering the phosphorothiolation of oligonucleotides. The field of
each of these licenses extends to a wide variety of genetic targets. If certain
of the claims of the NIH patents non-exclusively licensed to Hybridon are valid,
GEM 91 and certain of the Company's other products in development would infringe
these patents in the absence of the license.

The U.S. PTO has informed Hybridon that certain otherwise allowable patent
applications exclusively licensed by the Company from Worcester Foundation have
been submitted to the Board of Patent Appeals and Interferences to determine
whether an interference should be declared with issued U.S. patents held by the
NIH relating to oligonucleotide phosphorothioates. Banner & Witcoff, the
Company's U.S. patent counsel, is of the opinion that the Worcester Foundation
patent application has a prima-facie case for priority against the NIH for an
invention that includes phosphorothioate-modified oligonucleotides. However,
there can be no assurance an interference can be declared, or if declared, as to
the outcome thereof. In addition, Hybridon has filed an opposition to the NIH
oligonucleotide phosphorothioate patent in Europe. There can be no assurance as
to the outcome of the opposition. An adverse outcome in either the interference
or the European opposition would not affect the non-exclusive license from the
NIH to Hybridon of the NIH phosphorothioate patents.

Under the licenses to which it is a party, the Company is obligated to pay
royalties on net sales by the Company of products or processes covered by a
valid claim of a patent or patent application licensed to it. The Company also
is required in some cases to pay a specified percentage of any sublicense income
that the Company may receive. These licenses impose various commercialization,
sublicensing, insurance and other obligations on the Company. Failure of the
Company to comply with these requirements could result in termination of the
license. The Foundation License also grants the Company a right of first refusal
to certain technology developed by the Worcester Foundation.

The patent positions of pharmaceutical and biotechnology firms, including
Hybridon, are generally uncertain and involve complex legal and factual
questions. Consequently, even though Hybridon and its licensors are currently
prosecuting their respective patent applications with the U.S. Patent and
Trademark Office and certain foreign patent authorities, the Company does not
know whether any of its applications or those of third parties under which the
Company has or may obtain a license will result in the issuance of any patents
or, if any patents are issued, whether they will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in
the U.S. are maintained in secrecy until patents issue, and since publication of
discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months, Hybridon cannot be certain that it, or any
licensor of patents to it, as the case may be, was the first creator of
inventions claimed by pending patent applications or that Hybridon or any
licensor, as the case may be, was the first to file patent applications for such
inventions. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Certain Factors That May Affect Future
Results -- Patents and Proprietary Rights."

Competitors of the Company and other third parties hold issued patents and
pending patent applications relating to antisense and other gene expression
modulation technologies, and it is uncertain whether these patents and patent
applications will require the Company to alter its products or processes, pay
licensing fees or cease certain activities. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results -- Patents and Proprietary." In particular, the
Company is aware of a European patent granted to a third party relating to
certain types of stabilized synthetic oligonucleotides for use as therapeutic
agents for selectively blocking the translation of a messenger RNA into a
targeted protein by binding with a portion of the messenger RNA to which the
stabilized synthetic oligonucleotide is substantially

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complementary. This European patent was revoked in entirety in an opposition
proceeding before the European Patent Office in September 1995. The holder of
this patent has appealed such decision.

The Company is also aware of various issued U.S. patents and patent
applications owned by third parties that claim various uses of ribozymes,
including their use to modulate gene expression, particular ribozymes of
specific molecular sequences and methods of ribozyme production. Foreign
counterparts of certain of these patents and patent applications have been filed
in other major industrialized countries. There can be no assurance that the
Company will be successful in designing or producing ribozymes that fall outside
the valid scope of these patents and patent applications or that any license
that may be required for the Company to exploit ribozyme products, if any, will
be available on acceptable terms or at all. None of the Company's antisense
oligonucleotides infringe any of these patents. In addition, Banner & Witcoff is
of the opinion that the Company's finderons, oligonucleotides with
ribonuclease-like activity that do not contain enzymatic RNA, do not infringe
the claims of these patents and patent applications.

Hybridon's practice is to require its employees, consultants, members of
its Scientific and Clinical Advisory Boards, outside scientific collaborators
and sponsored researchers and other advisors to execute confidentiality
agreements upon the commencement of employment or consulting relationships with
the Company. These agreements provide that all confidential information
developed or made known to the individual during the course of the individual's
relationship with Hybridon is to be kept confidential and not disclosed to third
parties, subject to a right to publish certain information in the scientific
literature in certain circumstances and subject to other specific exceptions. In
the case of employees, the agreements provide that all inventions conceived by
the individual shall be the exclusive property of the Company. There can be no
assurance, however, that these agreements will provide meaningful protection for
the Company's trade secrets or adequate remedies in the event of unauthorized
use or disclosure of such information.

Hybridon engages in collaborations and sponsored research agreements and
enters into preclinical and clinical testing agreements with academic and
research institutions and U.S. government agencies, such as the NIH, to take
advantage of their technical expertise and staff and to gain access to clinical
evaluation models, patients, and related technology. Consistent with
pharmaceutical industry and academic standards, and the rules and regulations
under the Federal Technology Transfer Act of 1986, these agreements may provide
that developments and results will be freely published, that information or
materials supplied by Hybridon will not be treated as confidential and that
Hybridon may be required to negotiate a license to any such developments and
results in order to commercialize products incorporating them. There can be no
assurance that the Company will be able successfully to obtain any such license
at a reasonable cost or that such developments and results will not be made
available to competitors of the Company on an exclusive or nonexclusive basis.
See "Item 1. Business -- Academic and Research Collaborations."

GOVERNMENT REGULATION

The production and marketing of the Company's products and its research
and development activities are subject to regulation for safety, effectiveness
and quality by numerous governmental authorities in the U.S. and other
countries. The Company believes that it is in material compliance with all
federal, state and foreign legal and regulatory requirements under which it
operates. However, there can be no assurance that such legal or regulatory
requirements will not be amended or that new legal or regulatory requirements
will not be adopted, any one of which could have a material adverse effect on
the Company's business or results of operations.

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FDA Approval

In the U.S., pharmaceutical products intended for therapeutic or
diagnostic use in humans are subject to rigorous FDA regulation. The process of
completing clinical trials and obtaining FDA approvals for a new drug is likely
to take a number of years and requires the expenditure of substantial resources.
There can be no assurance that any product will receive such approval on a
timely basis, if at all. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Factors That May Affect
Future Results -- No Assurance of Regulatory Approval; Government Regulation."

The steps required before a new oligonucleotide-based pharmaceutical
product for use in humans may be marketed in the U.S. include (i) preclinical
tests, (ii) submission to the FDA of an IND application, which must become
effective before human clinical trials commence, (iii) adequate and
well-controlled human clinical trials to establish the safety and effectiveness
of the product, (iv) submission of a New Drug Application ("NDA") to the FDA,
and (v) FDA approval of the NDA prior to any commercial sale or shipment of the
product.

Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies, to assess the potential safety and
effectiveness of the product. Compounds must be manufactured according to GMP
and preclinical safety tests must be conducted by laboratories that comply with
FDA regulations regarding GLP. See "Item 1. Business -- Manufacturing." The
results of the preclinical tests are submitted to the FDA as part of an IND and
are reviewed by the FDA prior to the commencement of human clinical trials.
Unless the FDA objects to, or makes comments or raises questions concerning, an
IND, the IND will become effective 30 days following its receipt by the FDA.
There can be no assurance that submission of an IND will result in FDA
authorization to commence clinical trials.

Clinical trials involve the administration of the investigational new drug
to healthy volunteers and to patients, under the supervision of a qualified
principal investigator. Clinical trials are conducted in accordance with Good
Clinical Practices under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the effectiveness criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical study must be conducted under the auspices of an
independent Institutional Review Board (an "IRB"). The IRB will consider, among
other things, ethical factors, the safety of human subjects and the possible
liability of the institution.

Clinical trials are typically conducted in three sequential phases,
although the phases may overlap. In Phase I, the investigational new drug
usually is administered to healthy human subjects and is tested for safety
(adverse effects), dosage, tolerance, metabolism, distribution, excretion and
pharmacodynamics (clinical pharmacology). Phase II involves studies in a limited
patient population to (i) determine the effectiveness of the investigational new
drug for specific indications, (ii) determine dosage tolerance and optimal
dosage, and (iii) identify possible adverse effects and safety risks. When an
investigational new drug is found to be effective and to have an acceptable
safety profile in Phase II evaluation, Phase III trials are undertaken to
further evaluate clinical effectiveness and to further test for safety within an
expanded patient population at geographically dispersed clinical study sites.
There can be no assurance that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products subject to such testing. Furthermore, the
Company, an IRB or the FDA may suspend clinical trials at any time if it is felt
that the participants are being exposed to an unacceptable health risk.

The results of the pharmaceutical development, preclinical studies and
clinical studies are submitted to the FDA in the form of an NDA for approval of
the marketing and commercial shipment of the product. The FDA may require
additional testing or information before approving the NDA. In

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any event, the FDA may deny an NDA if applicable regulatory criteria are not
satisfied. Moreover, if regulatory approval of a product is granted, such
approval may require postmarketing testing and surveillance to monitor the
safety of the product or may entail limitations on the indicated uses for which
it may be marketed. Finally, product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing.

In addition to product approval, the Company may be required to obtain a
satisfactory inspection by the FDA covering the Company's manufacturing
facilities before a product manufactured by the Company can be marketed in the
U.S. The FDA will review the Company's manufacturing procedures and inspect its
facilities and equipment for compliance with GMP and other applicable rules and
regulations. Any material change by the Company in its manufacturing process,
equipment or location would necessitate additional FDA review and approval.

Foreign Regulatory Approval

Whether or not FDA approval has been obtained, approval of a
pharmaceutical product by comparable governmental regulatory authorities in
foreign countries must be obtained prior to the commencement of clinical trials
and subsequent marketing of such product in such countries. The approval
procedure varies from country to country, and the time required may be longer or
shorter than that required for FDA approval.

Under European Community ("EC") law, either of two approval procedures may
apply to the Company's products: a centralized procedure, administered by the
EMEA (the European Medicines Evaluation Agency); or a decentralized procedure,
which requires approval by the medicines agency in each EC Member State where
the Company's products will be marketed. The centralized procedure is mandatory
for certain biotechnology products and available at the applicant's option for
certain other products. Whichever procedure is used, the safety, efficacy and
quality of the Company's products must be demonstrated according to demanding
criteria under EC law and extensive nonclinical tests and clinical trials are
likely to be required. In addition to premarket approval requirements, national
laws in EC Member States will govern clinical trials of the Company's products,
adherence to good manufacturing practice, advertising and promotion and other
matters. In certain EC Member States, pricing or reimbursement approval may be a
legal or practical precondition to marketing.

At present, pharmaceutical products generally may not be exported from the
U.S. for other than research purposes until the FDA has approved the product for
marketing in the U.S. However, a company may apply to the FDA for permission to
export finished products or partially processed products to a limited number of
countries prior to obtaining FDA approval for marketing in the U.S.
The Company has FDA permission for the export of GEM 91 to France.

Other Regulation

In addition to regulations enforced by the FDA, the Company also is
subject to regulation under the Occupational Safety and Health Act and other
present and potential future federal, state or local regulations. Furthermore,
because the Company's research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds, the
Company's operations are subject to U.S. Department of Transportation and
Environmental Protection Agency requirements and other federal, state and
foreign laws and regulations regarding hazardous waste disposal, air emissions
and wastewater discharge, including without limitation the Environmental
Protection Act, the Toxic Substances Control Act and the Resource Conservation
and Recovery Act. Although the Company believes that its procedures for handling
and disposing of such materials comply with the standards prescribed by
applicable regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an

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accident, the Company could be held liable for any damages that result and any
such liability could have a material adverse effect on the Company.

COMPETITION

The Company's products under development are expected to address several
different markets defined by the potential indications for which such products
are developed and ultimately approved by regulatory authorities. For several of
these indications, the Company's proposed products will be competing with
products and therapies either currently existing or expected to be developed,
including antisense oligonucleotides developed by third parties. Competition
among these products will be based, among other things, on product efficacy,
safety, reliability, availability, price and patent position. An important
factor will be the timing of market introduction of the Company's or competitive
products. Accordingly, the relative speed with which Hybridon can develop
products, complete the clinical trials and approval processes and supply
commercial quantities of the products to the market is expected to be an
important competitive factor. The Company's competitive position will also
depend upon its ability to attract and retain qualified personnel, to obtain
patent protection or otherwise develop proprietary products or processes, and to
secure sufficient capital resources for the often substantial period between
technological conception and commercial sales.

There are a number of companies, both privately and publicly held, that
are conducting research and development activities on technologies and products
aimed at therapeutic modulation of gene expression. The Company believes that
the industry-wide interest in these technologies and products will continue and
will accelerate as the techniques which permit their application to drug
development become more widely understood. There can be no assurance that the
Company's competitors will not succeed in developing products based on
oligonucleotides or other novel technologies that are more effective than any
which are being developed by the Company or which would render the Company's
technology and products obsolete and noncompetitive prior to recovery by the
Company of the research, development and commercialization expenses incurred
with respect to those products. Furthermore, because of the fundamental
differences between gene expression modulation and other technologies, there may
be indications for which such other technologies are superior to gene expression
modulation. The development by others of new treatment methods not based on gene
expression modulation technology for those indications for which the Company is
developing compounds could render the Company's compounds noncompetitive or
obsolete.

Competitors of the Company engaged in all areas of drug discovery in the
U.S. and other countries are numerous and include, among others, major
pharmaceutical and chemical companies, biotechnology firms, universities and
other research institutions. Many of these competitors have substantially
greater financial, technical and human resources than the Company. In addition,
many of these competitors have significantly greater experience than the Company
in undertaking preclinical studies and human clinical trials of new
pharmaceutical products and obtaining FDA and other regulatory approvals of
products for use in health care. Accordingly, the Company's competitors may
succeed in obtaining FDA or other regulatory approvals for products more rapidly
than the Company. Furthermore, if the Company is permitted to commence
commercial sales of products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has
limited or no experience. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Factors That May Affect
Future Results -- Competition."

EMPLOYEES

As of February 28, 1997, Hybridon employed 206 individuals full-time, of
whom 99 held advanced degrees. 165 of these employees are engaged in research
and development activities and 31 are employed in finance, corporate development
and legal and general administrative activities. In addition, 90 of these
employees are employees of the Hybridon Specialty Products Division, of whom

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35 are employed in analytical research and quality control. Many of the
Company's management and professional employees have had prior experience with
pharmaceutical, biotechnology or medical products companies. None of the
Company's employees is covered by collective bargaining agreements, and
management considers relations with its employees to be good.

SCIENTIFIC ADVISORY BOARD

The Company's Scientific Advisory Board consists of individuals with
recognized expertise in gene expression modulation technology, antisense
oligonucleotides, oligonucleotide biochemistry, human genetics, medicine and
related fields who advise the Company about current and long-term scientific
planning, research and development. The Scientific Advisory Board holds
approximately three or four formal meetings annually. All members of the
Scientific Advisory Board are employed by employers other than the Company,
primarily academic institutions, and may have commitments to or consulting or
advisory agreements with other entities that may limit their availability to the
Company. These companies may also be competitors of Hybridon. Several members of
the Scientific Advisory Board have, from time to time, devoted significant time
and energy to the affairs of the Company. However, except for Drs. Zamecnik and
Wyngaarden, who are parties to consulting agreements with the Company, no
members are regularly expected to devote more than a small portion of their time
to Hybridon.

The following persons are members of the Scientific Advisory Board:

Paul C. Zamecnik, M.D. (Chairman) is a founder of Hybridon and serves as a
director of the Company. Dr. Zamecnik has served as a Principal Scientist of the
Worcester Foundation and as the Collis P. Huntington Professor of Oncologic
Medicine Emeritus at the Harvard Medical School since 1979.

Daniel M. Brown, Sc.D., F.R.S. has been a Fellow of King's College,
University of Cambridge, since 1953, and currently serves as Vice-Provost of
King's College and as an Attached Scientific Worker in the Medical Research
Council Laboratory of Molecular Biology at the University of Cambridge. Dr.
Brown is also an Emeritus Reader in Organic Chemistry at the University of
Cambridge and became a Fellow of the Royal Society in 1982.

Edgar Haber, M.D. has served as the Elkan R. Blout Professor of Health
Science and Director of the Division of Biological Sciences at the Harvard
School of Public Health and as a Clinical Professor of Medicine at Harvard
Medical School since 1991. From 1990 to 1991, Dr. Haber served as President of
the Bristol-Myers Squibb Pharmaceutical Research Institute, and from 1988 to
1990, he was President of the Squibb Institute for Medical Research.

Har Gobind Khorana, Ph.D. has served as a Sloan Professor in the
Departments of Biology and Chemistry at the Massachusetts Institute of
Technology since 1970. Dr. Khorana has been awarded numerous prestigious honors,
including the Nobel Prize in Medicine or Physiology in 1968 and the National
Medal of Science in 1987.

Roger E. Monier, Ph.D. has served as Director of Molecular Oncology at the
Institute Gustave Roussy in Paris since 1985. From 1980 to 1985, Dr. Monier
served as the Director of Life Sciences at the Centre Nationale de Recherches
Scientifiques in Paris. Dr. Monier was elected to the French Academy of Science
in 1992.

Peter Palese, Ph.D. has served as a Professor in the Department of
Microbiology at Mount Sinai School of Medicine in New York since 1978 and has
served as Chairman of the Department of Microbiology since 1987.

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Thoru Pederson, Ph.D. is a Principal Scientist of Cell Biology at the
Worcester Foundation and has served as its President and Director since 1985.
From February 1990 to November 1993, Dr. Pederson served as a director of the
Company.

Jerry A. Weisbach, Ph.D. a director of the Company, is an independent
consultant to biotechnology and pharmaceutical companies. Dr. Weisbach served as
Director of Technology Transfer and as an Adjunct Professor at The Rockefeller
University from 1988 to 1994. Dr. Weisbach served as Corporate Vice President of
Warner-Lambert Company, an international pharmaceutical company, from 1981 to
1987 and President of the Parke-Davis Pharmaceutical Research Division of
Warner-Lambert Company from 1979 to 1987.

James B. Wyngaarden, M.D. a director of the Company, served as the Foreign
Secretary of the National Academy of Sciences and the Institute of Medicine of
the National Academy of Sciences from 1990 to 1994. Dr. Wyngaarden also served
as the Director of the NIH from 1982 to 1989 and as a council member of the
Human Genome Organization from 1990 to 1993 and as its Director from 1990 to
1991.

Members of the Company's Scientific Advisory Board are paid $2,500 per
calendar quarter for their services in such capacity and are reimbursed for
their expenses incurred in connection with attendance at its meetings. Members
of the Scientific Advisory Board also have received options to purchase Common
Stock of the Company under the Company's stock option plans.

CLINICAL ADVISORY BOARD

The Company's Clinical Advisory Board was formally established in November
1993 to advise the Company with respect to clinical trials of the Company's
product candidates. The Clinical Advisory Board holds approximately three or
four formal meetings annually. The Clinical Advisory Board consists of
individuals with recognized expertise in the conduct of clinical trials and the
regulatory approval process. All members of the Clinical Advisory Board are
employed by employers other than the Company, primarily academic institutions,
and may have commitments to or consulting or advisory agreements with other
entities that may limit their availability to the Company. These companies may
also be competitors of Hybridon. Several members of the Clinical Advisory Board
have, from time to time, devoted significant time and energy to the affairs of
the Company. However, except for Drs. Wyngaarden and Weisbach, who are directors
of and consultants to the Company, and Dr. Groopman, who is a consultant to the
Company, no members are regularly expected to devote more than a small portion
of their time to Hybridon.

The following persons are members of the Clinical Advisory Board:

Dr. Wyngaarden's (Chairman) background and experience are described above
under "Item 1. Business -- Scientific Advisory Board."

Robert M. Chanock, M.D. has served as an infectious disease epidemiologist
and laboratory virologist at the NIH since 1957. Prior to that Dr. Chanock held
academic appointments at the University of Cincinnati College of Medicine and
the Johns Hopkins University School of Hygiene and Public Health. Dr. Chanock
has been awarded numerous prestigious honors, including the ICN International
Prize in Virology in 1990, the Bristol-Myers Squibb Award for Distinguished
Achievement in Infectious Diseases Research in 1993 and the Albert B. Sabin
Foundation award.

Vincent T. DeVita, Jr., M.D. has served as Director of the Yale Cancer
Center since 1993. Dr. DeVita served as an attending physician and member of the
Program of Molecular Pharmacology and Therapeutics from 1988 to 1993, and as
Physician-in-Chief from 1988 to 1991, at Memorial Sloan Kettering Cancer Center.
From 1980 to 1988, Dr. DeVita served as Director of the National Cancer
Institute, NIH. In 1995, he was honored with the City of Medicine Award.

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Jerome Groopman, M.D. has served as Chief of the Division of
Hematology/Oncology at the New England Deaconess Hospital since 1985. He has
also served as a Professor of Medicine at Harvard Medical School since 1993. Dr.
Groopman is a member of the AIDS Advisory Committee, the Biologics Committee of
the FDA, the AIDS Clinical Trials Group of the NIH and the AIDS Basic Science
Research Study Section A, NIAID.

Paul Meier, Ph.D. has served as Professor and Chairman of the Department of
Statistics and Division of Biological Sciences at Columbia University since
1985. Dr. Meier has served as an advisor to the FDA on the statistical analysis
of clinical trials since 1991.

Dr. Weisbach's background and experience are described under "Item 1.
Business -- Scientific Advisory Board."

Members of the Company's Clinical Advisory Board are paid $2,500 per
calendar quarter for their services in such capacity and are reimbursed for
their expenses incurred in connection with attendance at its meetings.

ITEM 2. PROPERTIES.
----------

The Company's executive, administrative and research and development
facilities, comprising approximately 90,000 square fee, currently are located in
Cambridge, Massachusetts. These facilities are held under a lease which expires
in 2007, but may be extended at Hybridon's option for three additional five-year
terms. The lease provides for an annual rent of approximately $38.00 per square
foot for the first five years and approximately $42.00 per square foot for the
second five years.

The Company leases its 36,000 square foot manufacturing facility in
Milford, Massachusetts under a lease which expires in 2004. The term of the
lease may be extended at Hybridon's option for two additional five-year terms.
In addition to its manufacturing operations, the Company conducts process and
analytical chemistry operations at this facility.

The Company also leases approximately 1,800 square feet of space in Paris,
France under a lease expiring on May 1, 2003 for administrative offices for its
European operations.

For a description of various arrangements relating to the Cambridge
facility and the Paris facility, see "Certain Transactions -- Transactions with
Pillar S.A. and Certain Affiliates" in the Company's 1997 Proxy Statement (as
defined in "Item 10. Directors and Executive Officers of the Registrant").

ITEM 3. LEGAL PROCEEDINGS.
-----------------

The Company is not a party to any litigation that it believes could have a
material adverse effect on the Company or its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
--------------------------------------------------

No matters were submitted to a vote of securityholders of the Company,
through solicitation of proxies or otherwise, during the last quarter of the
year ended December 31, 1996.

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EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES OF THE COMPANY
- - -----------------------------------------------------------

The executive officers and significant employees of the Company and their
ages as of March 15, 1997 are as follows:

NAME                 AGE   POSITION
----                 ---   --------
Executive Officers
E. Andrews Grinstead, III.........   51   Chairman of the Board of Directors, 
President and Chief Executive Officer
Sudhir Agrawal, D. Phil...........   43   Senior Vice President of Discovery, 
Chief Scientific Officer and Director
Anthony J. Payne..................   50   Senior Vice President of Finance and
Administration, International 
Operations, Chief Financial Officer, 
Treasurer and Secretary
Significant Employees
Robert G. Andersen  . . . . . . . . .46   Vice.President of Systems Engineering 
and Management Information Systems
Aharon Cohen, Ph.D.  . . . . . . . . 52   Vice President of Analytical Research 
and Chief Analytical Scientist
Jose E. Gonzalez, Ph.D.  . . . . . . 50   Vice President of Manufacturing
John Goodchild, Ph.D.  . . . . . . . 52   Vice President of Applied Chemistry 
and Ribozyme Research
J. Michael Grindel, Ph.D.  . . . . . 50   Vice President of Pre-Clinical 
Development
Philippe Guinot, M.D., Ph.D.  . . . .47   Vice President of Drug Development and
General Manager, Hybridon Europe
Charles R. Hogen, Jr.  . . . . . . . 49   Vice President of Corporate 
Communications and Public Affairs
Douglas J. Jensen  . . . . . . . . . 44   Vice President of Corporate 
Administration and Development
Monroe I. Klein, Ph.D.  . . . . . . .54   Vice.President of Regulatory Affairs
R. Russell Martin, M.D.  . . . . . . 61   Vice President of Drug Development
Jin-Yan Tang, Ph.D.  . . . . . . . . 52   Vice President of Process Development
Darlene A. Van Stone  . . . . . . . .34   Patent.Counsel
Mark C. Wiggins  . . . . . . . . . . 41   Vice President of Business 
Development and Marketing 

Mr. Grinstead joined the Company in June 1991 and was appointed Chairman of
the Board and Chief Executive Officer in August 1991 and President in January
1993. He has served on the Board of Directors since June 1991. Prior to joining
the Company, Mr. Grinstead served as Managing Director and Group Head of the
life sciences group at PaineWebber, Incorporated, an investment banking firm,
from 1987 to October 1990; Managing Director and Group Head of the life sciences
group at Drexel Burnham Lambert, Inc., an investment banking firm, from 1986 to
1987; and Vice President at Kidder, Peabody & Co. Incorporated, an investment
banking firm, from 1984 to 1986, where he developed the life sciences corporate
finance specialty group. Mr. Grinstead served in a variety of operational and
executive positions with Eli Lilly and Company ("Eli Lilly"), an international
pharmaceutical company, from 1976 to 1984, most recently as General Manager of
Venezuelan Pharmaceutical, Animal Health and Agricultural Chemical Operations
and as Administrator, Strategic Planning and Acquisitions. Since 1991, Mr.
Grinstead has served as a director of EcoScience Corporation, a development
stage company engaged in the development of biopesticides, and as a director of
Pharmos Corporation, a development stage company engaged in the development of
drug

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delivery systems. Mr. Grinstead also serves as a director of Meridian Medical
Technologies, Inc., a pharmaceutical and medical device company. Mr. Grinstead
was appointed to The President's Council of the National Academy of Sciences and
the Institute of Medicine in January 1992. Since 1994, Mr. Grinstead has served
as a member of the Board of Trustees of the Albert B. Sabin Vaccine Foundation,
a charitable foundation dedicated to disease prevention. Mr. Grinstead received
an A.B. from Harvard College in 1967, a J.D. from the University of Virginia
School of Law in 1974 and an M.B.A. from the Harvard Graduate School of Business
Administration in 1976.

Dr. Agrawal joined the Company in February 1990 and served as Principal Research
Scientist from February 1990 to January 1993 and as Vice President of Discovery
from December 1991 to January 1993 prior to being appointed Chief Scientific
Officer in January 1993 and Senior Vice President of Discovery in March 1994. He
has served on the Board of Directors since March 1993. Prior to joining the
Company, Dr. Agrawal served as a Foundation Scholar at the Worcester Foundation
from 1987 through 1991 and currently maintains Visiting Scholar status. Dr.
Agrawal served as a Research Associate at the Medical Research Council
Laboratory of Molecular Biology in Cambridge, England, from 1985 to 1986,
studying synthetic oligonucleotides. Dr. Agrawal received a B.Sc. in chemistry,
botany and zoology in 1973, an M.Sc. in organic chemistry in 1975 and a D. Phil.
in chemistry in 1980 from Allahabad University in India.

Mr. Payne joined the Company in June 1991 and was appointed Chief Financial
Officer in August 1991, Treasurer in September 1991, Secretary in April 1992 and
Senior Vice President of Finance and Administration, International Operations in
January 1993. Prior to joining the Company, Mr. Payne served as Audit Director
at The First National Bank of Boston, an international commercial bank, from
1990 to 1991, where he directed that bank's audit coverage in global banking and
treasury. He served in a variety of financial and accounting positions with
Manufacturers Hanover Trust Corporation, an international commercial bank, from
1980 to 1990, most recently as Vice President and Audit Director. From 1974 to
1979, Mr. Payne was associated with Price Waterhouse, an international public
accounting firm. Mr. Payne received a B.Sc. in mathematics and physics from the
University of London in 1970 and an M.Sc. in computer science from the
University of Essex in 1973. Mr. Payne is both a chartered accountant and a
certified public accountant.

Mr. Andersen joined the Company and was appointed Vice President of Systems
Engineering and Management Information Systems in November 1996. Prior to
joining the Company, Mr. Andersen served in a variety of positions at Digital
Equipment Corporation, a computer company, from 1986 to 1996, most recently as
Group Manager of the Applied Objects Group. From 1978 to 1986, Mr. Andersen
served in a variety of positions at United Technologies Corporation, an aviation
technology company, most recently as Director of Quality. Mr. Andersen received
his B.E.E. in Electrical Engineering from The City College of New York in 1972
and a M.S. from Northeastern University in 1978.

Dr. Cohen joined the Company in March 1992 and served as Director of
Analytical Research from 1992 to June 1993 prior to being appointed Vice
President of Analytical Research in June 1993. Prior to joining the Company, Dr.
Cohen served as Senior Staff Scientist in the Barnett Institute at Northeastern
University from 1987 to 1992 and as a Postdoctoral Research Associate at
Northeastern University from 1985 to 1987. Dr. Cohen received a B.S. in
chemistry in 1970, an M.S. in analytical chemistry in 1980 and a Ph.D. in
analytical chemistry in 1985 from Hebrew University.

Dr. Gonzalez joined the Company and was appointed Vice President of
Manufacturing in August 1995. Prior to joining the Company, Dr. Gonzalez served
as Vice President of Manufacturing Operations at Enzon Corporation, a
biotechnology company, from 1993 to 1995. From 1977 to 1993, Dr. Gonzalez served
in a variety of positions at The Upjohn Company, a pharmaceutical company, most
recently as Associate Director of Bioprocess Development. Dr. Gonzalez received
a B.S. in

31

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chemistry from the University of Miami in 1969 and a Ph.D. in biochemistry from
Purdue University in 1974.

Dr. Goodchild joined the Company in March 1992 and served as Vice President
of Ribozyme Research from March 1992 to July 1993 prior to being appointed Vice
President of Applied Chemistry and Ribozyme Research in July 1993. He also has
served as an Adjunct Associate Professor at the University of Massachusetts
Medical Center Department of Pharmacology since September 1992. Prior to joining
the Company, Dr. Goodchild was a faculty member and Staff Scientist from 1987 to
1992 and a Visiting Scientist from 1984 to 1987 at the Worcester Foundation and
a Visiting Scientist at the National Research Council of Canada from 1982 to
1984. From 1971 to 1982, he was a Senior Research Scientist and Group Leader at
Searle. Dr. Goodchild is a Fellow of the Royal Society of Chemistry and became a
chartered chemist in 1979. Dr. Goodchild received a B.Sc. in chemistry in 1965
and a Ph.D. in organic chemistry in 1968 from Liverpool University.

Dr. Grindel joined the Company and was appointed Vice President of
Preclinical Development in September 1994. Prior to joining the Company, Dr.
Grindel served in a variety of positions at R.W. Johnson Pharmaceutical Research
Institute, a division of Johnson & Johnson, from 1988 to 1994, most recently as
Vice President of Strategic Planning, Project Planning and Management. Dr.
Grindel received a B.S. in chemistry from St. Benedict's College in 1969 and a
Ph.D. in medicinal chemistry from the University of Kansas in 1973.

Dr. Guinot joined the Company and was appointed Vice President of European
Drug Development and General Manager of Hybridon Europe in September 1995. Prior
to joining the Company, Dr. Guinot served as a consultant to the Laboratoire
Francais du Fractionnemant et des Biotechnologies (the "LFB") from 1994 to 1995,
where he was responsible for conducting audits of all of the LFB's research and
development programs. From 1981 to 1994, Dr. Guinot served in a variety of
positions at the Beaufour-Ipsen Group, a group of affiliated pharmaceutical
companies, most recently as General Manager of the Institute Henri Beaufour
where he was responsible for the planning, strategy, budget and coordination of
the Beaufour-Ipsen Group's product development efforts. In addition, Dr. Guinot
has served as an Adjunct Professor of Medicine at the University of California,
Davis since 1992, an Adjunct Professor of Physiology at New York Medical College
since 1991 and Consultant Physician in Internal Medicine at Broussais Hospital
in Paris. Dr. Guinot received an M.D. from the University of Paris in 1975 and a
Ph.D. in biophysics from Clermont Ferrand in 1994.

Mr. Hogen joined the Company and was appointed Vice President of Corporate
Communications and Public Affairs in February 1996. Prior to joining the
Company, Mr. Hogen served in a variety of positions at Merck & Co., a
pharmaceutical company, from 1988 to 1995, most recently as Executive Director
of Public Affairs. From 1978 to 1988, Mr. Hogen served in a variety of positions
at United Technologies Corporation, most recently as Director of Contributions
and Community Affairs. Mr. Hogen received a B.A. from Yale University in 1970.

Mr. Jensen joined the Company and served as Vice President of
Administration and Corporate Communications from March 1994 to May 1996 prior to
being appointed Vice President of Corporate Administration and Development in
May 1996. Prior to joining the Company, Mr. Jensen served as Managing Partner of
Parkway Capital Corporation, a securities firm which he co-founded, from 1990 to
1994. From 1984 to 1990, Mr. Jensen served as Senior Vice President of
Oppenheimer & Co., Inc., where he was responsible for marketing the firm's
proprietary trading strategies, and, from 1983 to 1984, as a registered
representative of Merrill Lynch. Mr. Jensen received a B.A. from Wheaton College
in 1976.

Dr. Klein joined the Company and was appointed Vice President of Regulatory
Affairs in November 1996. Prior to joining the Company, Dr. Klein served as the
Vice President of Worldwide Regulatory Affairs at Cephalon, Inc., a
pharmaceutical company, from 1994 to 1996. From 1990 to

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33

1993, Dr. Klein served as the Vice President of Regulatory Affairs at
Carter-Wallace, Inc., a pharmaceutical company, and from 1983 to 1990 he held a
variety of regulatory positions at SmithKline & French Laboratories. Dr. Klein
received his B.Sc. in Pharmacy from Philadelphia College of Pharmacy and Science
in 1965 and a Ph.D. in Pharmacology from the Albert Einstein College of Medicine
in 1972.

Dr. Martin joined the Company and served as Vice President of Clinical
Research from April 1994 to February 1997 prior to being appointed Vice
President of Drug Development in February 1997. Prior to joining the Company,
Dr. Martin served in a variety of positions at Bristol Myers Squibb from 1983 to
1994, most recently as Vice President of Clinical Research (Infectious
Diseases). During such period, he served as an Adjunct Associate Professor of
Medicine and Associate Clinical Professor at Yale University School of Medicine
from 1987 to 1994, Clinical Professor at University of Connecticut School of
Medicine from 1986 to 1993 and Adjunct Professor of Medicine at Baylor College
of Medicine from 1983 to 1994. Prior to joining Bristol Myers Squibb, Dr. Martin
served as Professor of Medicine, Microbiology and Immunology at Baylor College
from 1975 to 1983. Dr. Martin received an A.B. in American studies from Yale
University in 1956 and an M.D. from the Medical College of Georgia in 1960.

Dr. Tang joined the Company in 1991 and served as Senior Research Scientist
from 1991 to 1993, Director of Oligonucleotide Chemistry from 1993 to 1994 and
Executive Director of Process Chemistry from 1994 to April 1995 prior to being
appointed Vice President of Process Development in April 1995. Prior to joining
the Company, Dr. Tang served as a Visiting Fellow at the Worcester Foundation
from 1988 to 1991. He also served as a Visiting Professor at the University of
Colorado in 1988. Dr. Tang received a B.S. in biochemistry from Shanghai
University of Sciences and Technology in 1965 and a Ph.D. from the Shanghai
Institute of biochemistry in 1978.

Ms. VanStone joined the Company in May 1995 as its patent counsel. Prior to
joining the Company, Ms. VanStone served as patent counsel at ImmuLogic
Pharmaceutical Corporation from 1992 to 1995 and as an associate attorney at the
law firm of Weingarten, Schurgin, Gabnebin & Hayes from 1989 to 1992. Ms.
VanStone received an A.B. in biochemistry from Mount Holyoke College in 1984 and
a J.D. from Suffolk University Law School in 1989.

Mr. Wiggins joined the Company and was appointed Vice President of Business
Development and Marketing in November 1996. Prior to joining the Company, Mr.
Wiggins served in a variety of positions at Schering-Plough Corporation, a
pharmaceutical company, from 1986 to 1996, most recently as the Director of
Business Development. From 1980 to 1986, Mr. Wiggins held various marketing
positions at Ortho Pharmaceuticals, Inc., a pharmaceutical company, and Pfizer,
Inc., a pharmaceutical company. Mr. Wiggins received his B.S. in Finance from
Syracuse University in 1978 and a M.B.A. from the University of Arizona in 1980.

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34

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
---------------------------------------------------------------------

Since January 24, 1996, the Company's Common Stock has traded on the
Nasdaq National Market under the symbol "HYBN." Prior to January 24, 1996, there
was no established public trading market for the Company's Common Stock.

The following table sets forth for the periods indicated the high and low
sales prices per share of the Common Stock during each of the quarters set forth
below as reported on the Nasdaq National Market since January 24, 1996.

HIGH         LOW 
----         ---
1996
- - ----

First Quarter (from January 24, 1996)............       $14.25       $ 8.75
Second Quarter...................................       11.875        5.125
Third Quarter....................................       11.875        6.625
Fourth Quarter...................................        8.625         5.25

1997
- - ----
First Quarter (through March 26, 1997)...........        8.625        5.625

The reported closing bid price of the Common Stock on the Nasdaq National
Market on March 26, 1997 was $6.375 per share. The number of stockholders of
record on March 14, 1997 was 352.

The Company has never declared or paid cash dividends on its capital
stock, and the Company does not expect to pay any cash dividends on its Common
Stock in the foreseeable future. The indenture under which the Company has
agreed to issue $50.0 million of 9% Convertible Subordinated Notes due 2004     
(the "Notes") on April 2, 1997 limits the Company's ability to pay dividends or
make other distributions on its Common Stock. In addition, the Company is
currently prohibited from paying cash dividends under a credit facility with a
commercial bank (the "Bank Credit Facility").

RECENT SALES OF UNREGISTERED SECURITIES
- - ---------------------------------------

During the quarterly period ended December 31, 1996, the Company sold the
following securities that were not registered under the Securities Act of 1933,
as amended (the "Securities Act"):

1. On October 25, 1996, the Company issued, for an aggregate purchase
price of $1,637,352, a total of 204,669 shares of Common Stock to nine
individuals and one entity upon exercise by such individuals and entity of
warrants to purchase shares of Common Stock.

The shares of Common Stock issued in the above transactions were offered
and sold in reliance upon the exemption from registration under Regulation S
promulgated under the Securities Act, relative to sales by an issuer made
outside of the United States.

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35
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------

The selected financial data presented below for each of the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 have been derived from the
Company's Consolidated Financial Statements that have been audited by Arthur
Andersen LLP, independent public accountants. These financial data should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations, the Consolidated Financial Statements and
the Notes thereto and the other financial information appearing elsewhere in
this Annual Report on Form 10-K.

Year Ended December 31,
------------------------------------------------
1992       1993       1994       1995       1996
----       ----       ----       ----       ---- 
(In thousands, except per share data)

STATEMENT OF OPERATIONS DATA:
Revenues
Research and Development.......... $     --   $    917   $  1,032   $  1,186   $  1,419
Product revenue...................       --         --         --         --      1,080
Royalty and other income..........       --         --         --         --         62
Interest income...................       12        267        135        219      1,447
========   ========   ========   ========   ======== 
12      1,184      1,167      1,405      4,008
Operating Expenses
Research and development..........    8,762     16,168     20,024     29,685     39,390
General and administrative........    5,163      4,372      6,678      6,094     11,347
Interest..........................      782        380         69        173        124
--------   --------   --------   --------   -------- 

Total operating expenses.....   14,707     20,920     26,771     35,952     50,861
--------   --------   --------   --------   -------- 

Net Loss.............................. $(14,695)  $(19,736)  $(25,604)  $(34,547)  $(46,853)
========   ========   ========   ========   ======== 

Pro forma net loss per common share(1)                                  $  (2.13)  $  (1.93)
========   ========

Pro forma weighted average common shares
outstanding(1)..................                                    16,195     24,261
========   ========

As of December 31,
------------------------------------------------
1992       1993       1994       1995       1996
----       ----       ----       ----       ---- 
(In thousands)

BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments(2)...................... $    945   $  8,767   $  3,396   $  5,284   $ 16,419
Working capital (deficit).............     (301)     8,357     (1,713)       210      8,888
Total assets..........................    5,187     15,243     11,989     19,618     41,537
Long-term debt, net of current portion      293         79      1,522      1,145      9,032
Convertible promissory notes payable..    9,430         --         --         --         --
Deficit accumulated in the development  (22,454)   (42,190)   (67,794)  (102,341)  (149,194)
Total stockholders' equity (deficit)..   (7,069)    12,178      4,774     12,447     22,855

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

(1)  Computed on the basis described in Note 2(b) of Notes to Consolidated
Financial Statements attached as APPENDIX A hereto.

(2)  Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.

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36

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------

The Company is engaged in the discovery and development of genetic
medicines based primarily on antisense technology. The Company commenced
operations in February 1990 and since that time has been engaged primarily in
research and development efforts, development of its manufacturing capabilities
and organizational efforts, including recruitment of scientific and management
personnel, and raising capital. To date, the Company has not received revenue
from the sale of biopharmaceutical products developed by it. In order to
commercialize its own products, the Company will need to address a number of
technological challenges and comply with comprehensive regulatory requirements.
Accordingly, it is not possible to predict the amount of funds that will be
required or the length of time that will pass before the Company receives
revenues from sales of any of these products. All revenues received by the
Company to date have been derived from collaborative agreements, interest on
invested funds and revenues from the custom contract manufacturing of synthetic
DNA and reagent products by the Company's Hybridon Specialty Products Division.

The Company has incurred losses since its inception and expects to incur
significant operating losses in the future. The Company expects that its
research and development expenses will increase significantly during 1997 and
future years as it moves its principal research and development programs to more
advanced preclinical studies, clinical trials and later phase clinical trials.
In addition, the Company expects that its facilities costs will increase in 1997
and future years over 1996 levels as a result of the relocation of the Company's
executive offices and its primary research and development laboratories to
Cambridge, Massachusetts in February 1997. The Company also expects that its
personnel and patent costs will increase significantly in the future. Costs
associated with the Company's patent applications are expected to increase as
the Company continues to file and prosecute such applications. Patent costs also
would increase significantly if the Company became involved in litigation or
administrative proceedings involving its patents or those of third parties. The
Company has incurred cumulative losses from inception through December 31, 1996
of approximately $149.2 million.

This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward- looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors include, without limitation, those set forth below
under the caption "Certain Factors That May Affect Future Results."

RESULTS OF OPERATIONS

The Company had total revenues of $4.0 million in 1996, $1.4 million in
1995 and $1.2 million in 1994. During the years ended December 31, 1996, 1995
and 1994, the Company received revenues from research and development
collaborations of $1.4 million, $1.2 million and $1.0 million, respectively.
Research and development collaboration revenue includes revenues earned under a
collaborative agreement with Roche, which included milestone payments for the
designation of lead compounds in the human papilloma virus and hepatitis C
programs in the years ended December 31, 1996 and 1995, respectively. For the
year ended December 31, 1996, collaborative revenues also included revenues
earned under a collaborative agreement with Searle. Revenues from the custom
contract manufacturing of synthetic DNA and reagent products by the Hybridon
Specialty Products Division were $1.1 million for the year ended December 31,
1996. Revenues from interest income for the years ended December 31, 1996, 1995
and 1994 were $1.4 million, $219,000 and $135,000, respectively. The increase in
interest income in the year ended December 31, 1996 was the result of

36

37

substantially higher cash balances available for investment as a result of the
Company's initial public offering completed on February 2, 1996.

During the years ended December 31, 1996, 1995 and 1994, the Company
expended $39.4 million, $29.7 million and $20.0 million, respectively, on
research and development activities. The increases in research and development
expenses in 1996, 1995 and 1994 reflect increasing expenses related primarily to
ongoing clinical trials of the Company's product candidates. Clinical trials for
GEM 91 were initiated in France in October 1993 and in the U.S. in May 1994.
During the year ended December 31, 1996, GEM 132 for the treatment of systemic
CMV and CMV retinitis entered into clinical trials. Research and development
staffing and related costs also increased significantly in 1996 and 1995 as the
number of employees engaged in research and development increased to 206 at
December 31, 1996 from 124 at December 31, 1995 and from 102 at December 31,
1994. In addition, due to increased activity in preclinical studies and the
initiation of clinical trials, expenditures for outside testing services,
laboratory supplies and consulting fees increased significantly in 1996 and
1995. Patent expenses also increased in 1996, as the Company continued to
develop a patent portfolio both domestically and internationally and prosecuted
its patent applications. The Company expects to invest significant resources in
1997 in connection with the ongoing trials of GEM 91 and GEM 132 and the
performance of preclinical studies and the preparation of IND applications with
respect to additional antisense compounds.

The Company incurred general and administrative expenses of $11.3 million,
$6.1 million and $6.7 million in the years ended December 31, 1996, 1995 and
1994, respectively. The increase in general and administrative expenses in 1996
from 1995 was primarily attributable to an increase in expenses for business
development activity, public relations and legal expenses incurred primarily as
a result of being a public company and salaries and related costs. The decrease
in general and administrative expenditures in 1995 from 1994 was primarily
attributable to decreases in staffing and related costs and in outside
consultants previously used to develop a presence in foreign markets, offset
partially by an increase in occupancy costs of certain new facilities.

Interest expense was $124,000 in 1996, $173,000 in 1995 and $69,000 in
1994. Interest expense in 1996, 1995 and 1994 was comprised primarily of
interest incurred on borrowings to finance the purchase of property and
equipment and leasehold improvements. The decrease in interest expense in 1996
reflects a decrease in the outstanding balance of borrowings to finance the
purchase of property and equipment. The increase in interest expense in 1995
over 1994 reflects an increase in the average long-term debt outstanding during
1995. The Company's future interest expense will increase significantly as a
result of the Notes.

As a result of the above factors, the Company incurred net losses of $46.9
million, $34.5 million and $25.6 million for the years ended December 31, 1996,
1995 and 1994, respectively.

LIQUIDITY AND CAPITAL RESOURCES

From inception through December 31, 1996, the Company has financed its
operations, including capital expenditures, through a public offering of common
stock, private placements of equity securities and the exercise of stock options
and warrants with gross proceeds totalling $175.4 million, as well as through
bank and other borrowings of $9.5 million and capital leases of $3.2 million.
The Company has utilized approximately $127.8 million to fund operating
activities and $30.5 million to finance capital expenditures, including
leasehold improvements at the Company's Cambridge, Massachusetts corporate
headquarters and at its manufacturing facility in Milford, Massachusetts and a
$5.5 million investment in the partnership which owns the Cambridge facility.

On March 26, 1997, the Company entered into a Purchase Agreement pursuant
to which it agreed to issue and sell $50.0 million of the Notes to certain
investors. The Notes bear interest at a rate of 9% per annum and have a
maturity date of April 1, 2004. Under the terms of the

37

38

Notes, the Company will be required to make semiannual interest payments on the
outstanding principal balance of the Notes on April 1 and October 1 of each
year during which the Notes are outstanding. The Notes will be convertible at
the option of the holder into the Company's Common Stock at any time prior to
maturity, unless previously redeemed or repurchased by the Company under
certain specified circumstances, at a conversion price of $7.0125 per share
(subject to adjustment). In connection with the execution of the agreement, the 
Company also granted a 60-day option (which expires on May 25, 1997) to 
purchase up to an additional $10.0 million principal amount of the Notes.

During the year ended December 31, 1996, the Company utilized
approximately $42.1 million to fund operating activities and approximately $8.9
million for capital expenditures. The primary use of cash for operating
activities was to fund the cash operating loss of $43.7 million. Capital
expenditures during the year ended December 31, 1996 included amounts expended
for the build-out and equipping of the Company's corporate headquarters and
primary research and development laboratories in Cambridge, Massachusetts and of
its leased manufacturing facility in Milford, Massachusetts. During the fourth
quarter of 1996, the build-out of the Company's leased manufacturing facility in
Milford, Massachusetts was completed. The Company plans to equip the facility in
phases as necessary to satisfy its production requirements. The Company plans to
expend approximately $2.3 million for its equipment requirements for this
facility in 1997. The Company also expects to incur an additional $2.0 million
to complete the Cambridge facility and approximately $1.0 million for other
capital expenditures in 1997.

In December 1996, the Company entered into a four-year $7.5 million credit
facility with a bank to finance the leasehold improvements of its Milford
manufacturing facility. The Bank Credit Facility is payable in equal monthly
payments of $62,500 plus interest with a balloon payment of $3.8 million due on
January 1, 2002. Interest is payable at the lesser of (i) such financial
institution's prime rate plus 1%, or (ii) such financial institution's LIBOR
rate plus 3.5%. The Bank Credit Facility contains certain financial covenants,
including minimum liquidity and net worth requirements, and prohibits the
payment of dividends. The Company has secured its obligations under the Bank
Credit Facility with a lien on all of its assets. If, at specified times, the
Company's minimum liquidity is less than $15.0 million, $10.0 million or $5.0
million, the Company is required to pledge cash collateral to the bank equal to
25%, 50% and 100%, respectively, of the then outstanding balance due under the
Bank Credit Facility pursuant to a cash pledge agreement.

In 1996, the Company financed the purchase of manufacturing equipment and
other equipment at the Milford manufacturing facility through a sale/leaseback
transaction of approximately $1.7 million under a $2.8 million lease line with a
leasing company in the fourth quarter of 1996. These borrowings are payable in
48 monthly payments ranging from $36,000 to $50,000.

In 1994 and 1995, the Company financed the purchase of certain property
and equipment through a $500,000 secured note payable to a financial
institution, a $750,000 note payable to one of its landlords and $1.5 million of
capital lease obligations. The $500,000 secured note was repaid in 1995,
$661,000 of the $750,000 note is outstanding at December 31, 1996 and bears
interest at a rate of 13% per annum and $457,000 of the capital lease
obligations is currently outstanding and bears interest at a rate of 4.29% per
annum.

The Company has entered into a lease for its corporate headquarters and
primary research and development laboratories in Cambridge, Massachusetts and
moved its operations to this facility in the first quarter of 1997. The
Company's facilities costs increased significantly upon occupying the Cambridge
facility. As part of the lease agreement, the Company has elected to treat $5.5
million of payments to the landlord (primarily related to tenant improvements)
as contributions to the capital of the Cambridge landlord in exchange for a
limited partnership interest in the Cambridge landlord. All other expenses
incurred to equip and build-out the facility in excess of $5.5 million are
included in

38

39

leasehold improvements and are not exchangeable for a partnership interest under
the lease. The Cambridge landlord is an affiliate of three directors of the
Company.

The Company had cash, cash equivalents and short-term investments of $16.4
million at December 31, 1996. Based on its current operating plan, the Company
believes that its existing capital resources, together with the committed
collaborative research and development payments from Searle, anticipated sales  
of the Hybridon Specialty Products Division and margins on such sales, which
are expected to increase significantly over historic levels, and the net
proceeds from the sale of the Notes and the interest earned thereon, will be
adequate to fund the Company's capital requirements through at least the first
quarter of 1998.

The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research, drug discovery and
development programs, the magnitude of these programs, progress with preclinical
and clinical trials, sales of DNA products and reagents manufactured on a custom
contract basis by the Hybridon Specialty Products Division and the margins on
such sales, the time and costs involved in obtaining regulatory approvals, the
costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the ability of the Company to establish
and maintain collaborative academic and commercial research, development and
marketing relationships, the ability of the Company to obtain third party
financing for leasehold improvements and other capital expenditures and the
costs of manufacturing scale-up and commercialization activities and
arrangements.

The Company intends to seek additional equity, debt and lease financing to
fund future operations. The Company also intends to seek additional
collaborative development and commercialization relationships with potential
corporate partners in order to fund certain of its programs. Except for research
and development funding from Searle under Hybridon's collaborative agreement
with Searle (which is subject to early termination in certain circumstances),
Hybridon has no committed external sources of capital, and, as discussed above,
expects no product revenues for several years from sales of the products that it
is developing (as opposed to sales of DNA products and reagents manufactured on
a custom contract basis by the Hybridon Specialty Products Division). If the
Company is unable to obtain necessary additional funds, it would be required to
scale back or eliminate certain of its research and development programs or
license to third parties certain technologies which the Company would otherwise
pursue on its own.

As of December 31, 1996, the Company had approximately $138.2 million and
$3.0 million of net operating loss and tax credit carryforwards, respectively,
which expire at various dates between 2005 and 2011. The Tax Reform Act of 1986
(the "Tax Act") contains certain provisions that may limit the Company's ability
to utilize net operating loss and tax credit carryforwards in any given year if
certain events occur, including cumulative changes in ownership interests in
excess of 50% over a three-year period. The Company has completed several
financings since the effective date of the Tax Act, which, as of December 31,
1996, have resulted in ownership changes in excess of 50%, as defined under the
Tax Act. The Company does not believe that such ownership changes will
significantly impact the Company's ability to utilize the net operating loss and
credit carryforward existing at December 31, 1996. There can be no assurance
that ownership changes in future periods will not significantly limit the
Company's use of net operating loss and tax credit carryforwards.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

The following important factors, among others, could cause actual results
to differ materially from those contained in forward-looking statements made in
this Annual Report on Form 10-K and presented elsewhere by management from time
to time.

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Early Stage of Development; Technological Uncertainty

Hybridon's potential pharmaceutical products are at various stages of
research, preclinical testing or clinical development. There are a number of
technological challenges that the Company must successfully address to complete
any of its development efforts. To date, most of the Company's resources have
been dedicated to applying oligonucleotide chemistry and cell biology to the
research and development of potential pharmaceutical products based upon
antisense technology. As in most drug discovery programs, the results of in
vitro, tissue culture and preclinical studies by the Company may be inconclusive
and may not be indicative of results that will be obtained in human clinical
trials. In addition, results attained in early human clinical trials by the
Company may not be indicative of results that will be obtained in later clinical
trials. Neither the Company, nor to its knowledge, any other company has
successfully completed human clinical trials of a product based on antisense
technology, and there can be no assurance that any of the Company's products
will be successfully developed.

The success of any of the Company's potential pharmaceutical products
depends in part on the molecular target on the genetic material chosen as the
site of action of the oligonucleotide. There can be no assurance that the
Company's choice will be appropriate for the treatment of the targeted disease
indication in humans or that mutations in the genetic material will not result
in a reduction in or loss of the efficacy or utility of a Company product.

Uncertainty Associated with Clinical Trials

Before obtaining regulatory approvals for the commercial sale of any of
its pharmaceutical products under development, the Company must undertake
extensive and costly preclinical studies and clinical trials to demonstrate that
such products are safe and efficacious. The results from preclinical studies and
early clinical trials are not necessarily predictive of results that will be
obtained in later stages of testing or development, and there can be no
assurance that the Company's clinical trials will demonstrate the safety and
efficacy of any pharmaceutical products or will result in pharmaceutical
products capable of being produced in commercial quantities at reasonable cost
or in a marketable form.

Although the Company is conducting clinical trials of certain
oligonucleotide compounds and is developing several oligonucleotide compounds on
which it plans to file IND applications with the FDA and equivalent filings
outside of the U.S., there can be no assurance that necessary preclinical
studies on these compounds will be completed satisfactorily or that the Company
otherwise will be able to make its intended filings. Further, there can be no
assurance that the Company will be permitted to undertake and complete human
clinical trials of any of the Company's potential products, either in the U.S.
or elsewhere, or, if permitted, that such products will not have undesirable
side effects or other characteristics that may prevent or limit their commercial
use.

The rate of completion of the Company's human clinical trials, if
permitted, will be dependent upon, among other factors, the rate of patient
enrollment. Patient enrollment is a function of many factors, including the size
of the patient population, the nature of the protocol, the availability of
alternative treatments, the proximity to clinical sites and the eligibility
criteria for the study. Delays in planned patient enrollment might result in
increased costs and delays, which could have a material adverse effect on the
Company. The Company or the FDA or other regulatory agencies may suspend
clinical trials at any time if the subjects or patients participating in such
trials are being exposed to unacceptable health risks.

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Future Capital Needs; Uncertainty of Additional Funding

The Company's future capital requirements will depend on many factors,
including continued scientific progress in its research, drug discovery and
development programs, the magnitude of these programs, progress with preclinical
and clinical trials, sales of DNA products and reagents to third parties
manufactured on a custom contract basis by the Hybridon Specialty Products
Division and the margins on such sales, the time and costs involved in obtaining
regulatory approvals, the costs involved in filing, prosecuting and enforcing
patent claims, competing technological and market developments, the ability of
the Company to establish and maintain collaborative academic and commercial
research, development and marketing relationships, the ability of the Company to
obtain third-party financing for leasehold improvements and other capital
expenditures and the costs of manufacturing scale-up and commercialization
activities and arrangements.

Based on its current operating plan, the Company believes that its
existing capital resources, together with the committed collaborative research
and development payments from Searle, anticipated sales of the Hybridon
Specialty Products Division and margins on such sales, which are expected to
increase significantly over historic levels, and the net proceeds from the sale
of the Notes and the interest earned thereon, will be adequate to fund the
Company's capital requirements through at least the first quarter of 1998. The
Company anticipates that it will be required to raise substantial additional
funds through external sources, including through collaborative relationships
and public or private financings, to support the Company's operations beyond
that time. No assurance can be given that additional financing will be
available, or, if available, that it will be available on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
then existing stockholders will result. Additionally, the terms of any such
additional financing may adversely affect the holdings or rights of then
existing stockholders. If adequate funds are not available, the Company may be
required to curtail significantly one or more of its research, drug discovery or
development programs, or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products which the Company would
otherwise pursue on its own. See "Item 1. Business -- Hybridon Drug Development
and Discovery Programs."

History of Operating Losses and Accumulated Deficit

Hybridon has incurred net losses since its inception. At December 31,
1996, the Company's accumulated deficit was approximately $149.2 million. Such
losses have resulted principally from costs incurred in the Company's research
and development programs and from general and administrative costs associated
with the Company's development. No revenues have been generated from sales of
pharmaceutical products developed by the Company and no revenues from the sale
of such products are anticipated for a number of years, if ever. The Company
expects to incur additional operating losses over the next several years and
expects cumulative losses to increase significantly as the Company's research
and development and clinical trial efforts expand. The Company expects that
losses will fluctuate from quarter to quarter and that such fluctuations may be
substantial. Although the Company's Hybridon Specialty Products Division has
begun to generate revenues from the sale of synthetic DNA products and reagents
manufactured by it on a custom contract basis, there can be no assurance that
demand for and margins on these products will not be lower than anticipated. The
Company's ability to achieve profitability is dependent in part on obtaining
regulatory approvals for its pharmaceutical products and entering into
agreements for drug discovery, development and commercialization. There can be
no assurance that the Company will obtain required regulatory approvals, enter
into any additional agreements for drug discovery, development and
commercialization or ever achieve sales or profitability.

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Patents and Proprietary Rights

The Company's success will depend in part on its ability to develop
patentable products and obtain and enforce patent protection for its products
both in the U.S. and in other countries. The Company has filed and intends to
file applications as appropriate for patents covering both its products and
processes. However, the patent positions of pharmaceutical and biotechnology
firms, including Hybridon, are generally uncertain and involve complex legal and
factual questions. No assurance can be given that patents will issue from any
pending or future patent applications owned by or licensed to Hybridon. Since
patent applications in the U.S. are maintained in secrecy until patents issue,
and since publication of discoveries in the scientific or patent literature tend
to lag behind actual discoveries by several months, the Company cannot be
certain that it was the first creator of inventions covered by pending patent
applications or that it was the first to file patent applications for such
inventions. Further, there can be no assurance that the claims allowed under any
issued patents will be sufficiently broad to protect the Company's technology.
In addition, no assurance can be given that any issued patents owned by or
licensed to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide competitive advantages to the
Company.

The commercial success of the Company will also depend in part on its
neither infringing patents issued to competitors or others nor breaching the
technology licenses upon which the Company's products might be based. The
Company's licenses of patents and patent applications impose various
commercialization, sublicensing, insurance and other obligations on the Company.
Failure of the Company to comply with these requirements could result in
termination of the license. The Company is aware of patents and patent
applications belonging to competitors, and it is uncertain whether these patents
and patent applications will require the Company to alter its products or
processes, pay licensing fees or cease certain activities. In particular,
competitors of the Company and other third parties hold issued patents and
pending patent applications relating to antisense and other gene expression
modulation technologies which may result in claims of infringement against the
Company or other patent litigation. There can be no assurance that the Company
will be able successfully to obtain a license to any technology that it may
require or that, if obtainable, such technology can be licensed at a reasonable
cost or on an exclusive basis. See "Item 1. Business -- Patents, Trade Secrets
and Licenses."

The pharmaceutical and biotechnology industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
Litigation, which could result in substantial cost to the Company, may be
necessary to enforce any patents issued or licensed to the Company and/or to
determine the scope and validity of others' proprietary rights. The Company also
may have to participate in interference proceedings declared by the U.S. Patent
and Trademark Office, which could result in substantial cost to the Company, to
determine the priority of inventions. Furthermore, the Company may have to
participate at substantial cost in International Trade Commission proceedings to
abate importation of products which would compete unfairly with products of the
Company.

Hybridon engages in collaborations, sponsored research agreements and
other agreements with academic researchers and institutions and government
agencies. Under the terms of such agreements, third parties may have rights in
certain inventions developed during the course of the performance of such
collaborations and agreements.

The Company relies on trade secrets and proprietary know-how which it
seeks to protect, in part, by confidentiality agreements with its collaborators,
employees and consultants. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach or
that the Company's trade secrets will not otherwise become known or be
independently developed by competitors. See "Item 1. Business -- Patents, Trade
Secrets and Licenses."

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Risks Associated with Hybridon Specialty Products Division

Through its Hybridon Specialty Products Division, the Company manufactures
oligonucleotide compounds on a custom contract basis for third parties. The
results of operations of the Hybridon Specialty Products Division will be
dependent upon the demand for and margins on these products, which may be lower
than anticipated by the Company. The results of operations of the Hybridon
Specialty Products Division also may be affected by the price and availability
of raw materials. It is possible that Hybridon's manufacturing capacity may not
be sufficient for production of oligonucleotides both for the Company's internal
needs and for sale to third parties. The Company's manufacturing facility must
comply with GMP and other FDA regulations. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results -- Limited Manufacturing Capability."

The Company will be competing against a number of third parties, as well
as the possibility of internal production by the Company's customers, in
connection with the operations of the Hybridon Specialty Products Division. Many
of these third parties are likely to have greater financial, technical and human
resources than the Company. Key competitive factors will include the price and
quality of the products as well as manufacturing capacity and ability to comply
with specifications and to fulfill orders on a timely basis. The Company may be
required to reduce the cost of its product offerings to meet competition. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Certain Factors That May Affect Future Results -- Competition."
Failure to manufacture oligonucleotide compounds in accordance with the
purchaser's specifications could expose the Company to breach of contract and/or
product liability claims from the purchaser or the purchaser's customers. The
Company has limited experience in sales, marketing and distribution and is
relying in part upon the efforts of a third party, Perkin-Elmer, in connection
with the marketing and sale of products by the Hybridon Specialty Products
Division. See "Item 7. Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Certain Factors That May Affect Future
Results -- Absence of Sales and Marketing Experience."

Need to Establish Collaborative Commercial Relationships; Dependence on Partners

Hybridon's business strategy includes entering into strategic alliances or
licensing arrangements with corporate partners, primarily pharmaceutical and
biotechnology companies, relating to the development and commercialization of
certain of its potential products. Although the Company is a party to corporate
collaborations with Searle, Roche and Medtronic, there can be no assurance that
these collaborations will be scientifically or commercially successful, that the
Company will be able to negotiate additional collaborations, that such
collaborations will be available to the Company on acceptable terms or that any
such relationships, if established, will be scientifically or commercially
successful. The Company expects that under certain of these arrangements, the
collaborative partner will have the responsibility for conducting human clinical
trials and the submission for regulatory approval of the product candidate with
the FDA and certain other regulatory agencies. Should the collaborative partner
fail to develop a marketable product, the Company's business may be materially
adversely affected. There can be no assurance that the Company's collaborative
partners will not be pursuing alternative technologies or developing alternative
compounds either on their own or in collaboration with others, including the
Company's competitors, as a means for developing treatments for the diseases
targeted by these collaborative programs. The Company's business also will be
affected by the performance of its corporate partners in marketing any
successfully developed products within the geographic areas in which such
partners are granted marketing rights. The Company's plan is to retain
manufacturing rights for many of the products it may license pursuant to
arrangements with corporate partners. However, there can be no assurance that
the Company will be able to retain such rights on acceptable terms, if at all,
or that the Company will have the ability to produce the quantities of product
required under the terms of such

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arrangements. See "Item 1. Business -- Hybridon Drug Development and Discovery
Programs" and "-- Corporate Collaborations."

No Assurance of Regulatory Approval; Government Regulation

The Company's preclinical studies and clinical trials, as well as the
manufacturing and marketing of the potential products being developed by it and
the products sold by the Hybridon Specialty Products Division, are subject to
extensive regulation by numerous federal, state and local governmental
authorities in the U.S. Similar regulatory requirements exist in other countries
where the Company intends to test and market its drug candidates. Preclinical
studies of the Company's product development candidates are subject to GLP
requirements and the manufacture of any products by the Company, including
products developed by the Company and products manufactured for third parties on
a custom contract basis by the Hybridon Specialty Products Division, will be
subject to GMP requirements prescribed by the FDA.

The regulatory process, which includes preclinical studies, clinical
trials and post-clinical testing of each compound to establish its safety and
effectiveness, takes many years and requires the expenditure of substantial
resources. Delays may also be encountered and substantial costs incurred in
foreign countries. There can be no assurance that, even after the passage of
such time and the expenditure of such resources, regulatory approval will be
obtained for any drugs developed by the Company. Data obtained from preclinical
and clinical activities are subject to varying interpretations which could
delay, limit or prevent regulatory approval by the FDA or other regulatory
agencies. The Company, an IRB, the FDA or other regulatory agencies may suspend
clinical trials at any time if the participants in such trials are being exposed
to unacceptable health risks. Moreover, if regulatory approval of a drug is
granted, such approval may entail limitations on the indicated uses for which it
may be marketed. Failure to comply with applicable regulatory requirements can,
among other things, result in fines, suspension of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecutions.
FDA policy may change and additional government regulations may be established
that could prevent or delay regulatory approval of the Company's potential
products. In addition, a marketed drug and its manufacturer are subject to
continual review, and subsequent discovery of previously unknown problems with a
product or manufacturer may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market and withdrawal
of the right to manufacture the product. All of the foregoing regulatory matters
also will be applicable to development, manufacturing and marketing undertaken
by any strategic partners or licensees of the Company. See "Item 1. Business --
Government Regulation."

Competition

There are many companies, both private and publicly traded, that are
conducting research and development activities on technologies and products
similar to or competitive with the Company's antisense technologies and proposed
products. For example, many other companies are actively seeking to develop
products, including antisense oligonucleotides, with disease targets similar to
those being pursued by the Company. Some of these competitive products are in
clinical trials. The Company believes that the industry-wide interest in
investigating the potential of gene expression modulation technologies will
continue and will accelerate as the techniques which permit the design and
development of drugs based on such technologies become more widely understood.
There can be no assurance that the Company's competitors will not succeed in
developing products based on oligonucleotides or other technologies, existing or
new, which are more effective than any that are being developed by the Company,
or which would render Hybridon's antisense technologies obsolete and
noncompetitive. Moreover, there currently are commercially available products
for the treatment of many of the disease targets being pursued by the Company.

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45

Competitors of the Company engaged in all areas of biotechnology and drug
discovery in the U.S. and other countries are numerous and include, among
others, pharmaceutical and chemical companies, biotechnology firms, universities
and other research institutions. Many of the Company's competitors have
substantially greater financial, technical and human resources than the Company.
In addition, many of these competitors have significantly greater experience
than the Company in undertaking preclinical studies and human clinical trials of
new pharmaceutical products and obtaining FDA and other regulatory approvals of
products for use in health care. Furthermore, if the Company is permitted to
commence commercial sales of products, it will also be competing with respect to
manufacturing efficiency and marketing capabilities, areas in which it has
limited or no experience. Accordingly, the Company's competitors may succeed in
obtaining FDA or other regulatory approvals for products or in commercializing
such products more rapidly than the Company. See "Item 1. Business --
Competition."

Limited Manufacturing Capability

While the Company believes that its existing production capacity will be
sufficient to enable it to satisfy its current research needs and to support the
Company's preclinical and clinical requirements for oligonucleotide compounds,
the Company will need to purchase additional equipment to expand its
manufacturing capacity in order to satisfy its future requirements, subject to
obtaining regulatory approvals, for commercial production of its product
candidates. In addition, Hybridon Specialty Products Division is using the
Company's existing production capacity to custom contract manufacture synthetic
DNA products for commercial sale. As a result, depending on the level of sales
by the Hybridon Specialty Products Division, and the success of the Company's
product development programs, Hybridon's manufacturing capacity may not be
sufficient for production for both its internal needs and sales to third
parties. In addition, in order to successfully commercialize its product
candidates or achieve satisfactory margins on sales, the Company may be required
to reduce further the cost of production of its oligonucleotide compounds, and
there can be no assurance that the Company will be able to do so.

The manufacture of the Company's products is subject to GMP requirements
prescribed by the FDA or other standards prescribed by the appropriate
regulatory agency in the country of use. To the Company's knowledge, therapeutic
products based on chemically-modified oligonucleotides have never been
manufactured on a commercial scale. There can be no assurance that the Company
will be able to manufacture products in a timely fashion and at acceptable
quality and price levels, that it or its suppliers can manufacture in compliance
with GMP or other regulatory requirements or that it or its suppliers will be
able to manufacture an adequate supply of product. The Company has in the past
relied in part and may in the future rely upon third party contractors in
connection with the manufacture of some compounds. Reliance on such third
parties entails a number of risks, including the possibility that such third
parties may fail to perform on an effective or timely basis or fail to abide by
regulatory or contractual restrictions applicable to the Company. See "Item 1.
Business -- Manufacturing Technology and the Hybridon Specialty Products
Division."

There are three sources of supply for the nucleotide building blocks used
by the Company in its current oligonucleotide manufacturing process. This
process is covered by issued patents either held by or licensed to these three
companies. Therefore, these companies are likely the sole suppliers to Hybridon
of these nucleotide building blocks. The inability of Hybridon to obtain these
nucleotide building blocks from one of these suppliers could have a material
adverse effect on Hybridon.

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Absence of Sales and Marketing Experience

The Company expects to market and sell certain of its products directly
and certain of its products through co-marketing or other licensing arrangements
with third parties. The Company has limited experience in sales, marketing or
distribution, and does not expect to establish a sales and marketing plan or
direct sales capability with respect to the products being developed by it until
such time as one or more of such products approaches marketing approval. In
addition, although the Company does have a limited direct sales capability with
respect to the sales of custom contract manufactured DNA products to third
parties by the Hybridon Specialty Products Division, the Company has entered
into a sales and marketing arrangement with Perkin-Elmer with respect to such
products and is reliant in part on the efforts of Perkin-Elmer to promote these
products. In order to market the products being developed by it directly, the
Company will be required to develop a substantial marketing staff and sales
force with technical expertise and with supporting distribution capability.
There can be no assurance that the Company will be able to build such a
marketing staff or sales force, that the cost of establishing such a marketing
staff or sales force will be justifiable in light of any product revenues or
that the Company's direct sales and marketing efforts will be successful. In
addition, if the Company succeeds in bringing one or more products to market, it
may compete with other companies that currently have extensive and well-funded
marketing and sales operations. There can be no assurance that the Company's
marketing and sales efforts would enable it to compete successfully against such
other companies. To the extent the Company enters into co- marketing or other
licensing arrangements, any revenues received by the Company will be dependent
in part on the efforts of third parties and there can be no assurance that such
efforts will be successful. See "Item 1. Business -- Marketing Strategy."

No Assurance of Market Acceptance

Pharmaceutical products, if any, resulting from the Company's research and
development programs are not expected to be commercially available for a number
of years. There can be no assurance that, if approved for marketing, such
products will achieve market acceptance. The degree of market acceptance will
depend upon a number of factors, including the receipt of regulatory approvals,
the establishment and demonstration in the medical community of the clinical
efficacy and safety of the Company's products and their potential advantages
over existing treatment methods and reimbursement policies of government and
third-party payors. There is no assurance that physicians, patients, payors or
the medical community in general will accept or utilize any products that may be
developed by the Company.

Product Liability Exposure and Insurance

The use of any of the Company's potential products in clinical trials and
the commercial sale of any products, including the products being developed by
it and the DNA products and reagents manufactured and sold on a custom contract
basis by the Hybridon Specialty Products Division, may expose the Company to
liability claims. These claims might be made directly by consumers, health care
providers or by pharmaceutical and biotechnology companies or others selling
such products. Hybridon has product liability insurance coverage, and such
coverage is subject to various deductibles. Such coverage is becoming   
increasingly expensive, and no assurance can be given that the Company will be
able to maintain or obtain such insurance at reasonable cost or in sufficient
amounts to protect the Company against losses due to liability claims that
could have a material adverse effect on the Company.

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Hazardous Materials

The Company's research and development and manufacturing activities
involves the controlled use of hazardous materials, chemicals, viruses and
various radioactive compounds. Although the Company believes that its safety
procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result and any such liability could have a material adverse
effect on the Company.

Uncertainty of Pharmaceutical Pricing and Adequate Reimbursement

The Company's ability to commercialize its pharmaceutical products
successfully will depend in part on the extent to which appropriate
reimbursement levels for the cost of such products and related treatment are
obtained from government authorities, private health insurers and other
organizations, such as health maintenance organizations ("HMOs"). Third-party
payors are increasingly challenging the prices charged for medical products and
services. Also the trend towards managed health care in the U.S. and the
concurrent growth of organizations such as HMOs, which could control or
significantly influence the purchase of health care services and products, as
well as legislative proposals to reduce government insurance programs, may all
result in lower prices for the Company's products. The cost containment measures
that health care providers are instituting could affect the Company's ability to
sell its products and may have a material adverse effect on the Company.

Uncertainty of Health Care Reform Measures

Federal, state and local officials and legislators (and certain foreign
government officials and legislators) have proposed or are reportedly
considering proposing a variety of reforms to the health care systems in the
U.S. and abroad. The Company cannot predict what health care reform legislation,
if any, will be enacted in the U.S. or elsewhere. Significant changes in the
health care system in the U.S. or elsewhere are likely to have a substantial
impact over time on the manner in which the Company conducts its business. Such
changes could have a material adverse effect on the Company. The existence of
pending health care reform proposals could have a material adverse effect on the
Company's ability to raise capital. Furthermore, the Company's ability to
commercialize its potential products may be adversely affected to the extent
that such proposals have a material adverse effect on the business, financial
condition and profitability of other companies that are prospective corporate
partners with respect to certain of the Company's proposed products.

Attraction and Retention of Key Employees and Scientific Collaborators

The Company is highly dependent on the principal members of its management
and scientific staff, including E. Andrews Grinstead, III, the Company's
Chairman of the Board, President and Chief Executive Officer, and Sudhir
Agrawal, the Company's Senior Vice President of Discovery and Chief Scientific
Officer, the loss of whose services could have a material adverse effect on the
Company. Furthermore, recruiting and retaining qualified scientific personnel to
perform research and development work in the future will also be critical to the
Company's success. There can be no assurance that the Company will be able to
attract and retain such personnel on acceptable terms given the competition for
experienced scientists among numerous pharmaceutical, biotechnology and health
care companies, universities and non-profit research institutions.

The Company's anticipated growth and expansion into areas and activities
requiring additional expertise, such as clinical testing, governmental
approvals, production and marketing, are expected to require the addition of new
management personnel and the development of additional expertise by

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existing management personnel. The failure to acquire such services or to
develop such expertise could have a material adverse effect on the Company.

The Company's success will depend in part on its continued ability to
develop and maintain relationships with independent researchers and leading
academic and research institutions. The competition for such relationships is
intense, and there can be no assurance that the Company will be able to develop
and maintain such relationships on acceptable terms. The Company has entered
into a number of such collaborative relationships relating to specific disease
targets and other research activities in order to augment its internal research
capabilities and to obtain access to the specialized knowledge or expertise of
its collaborative partners. The loss of any such collaborative relationship
could have an adverse effect on the Company's ability to conduct research and
development in the area targeted by such collaboration. See "Item 1. Business --
Hybridon Drug Development and Discovery Programs" and "-- Academic and Research
Collaborations."

Concentration of Ownership by Directors and Executive Officers

The Company's directors and executive officers and their affiliates
beneficially own approximately 18.89% of the Company's outstanding Common Stock
(including 4,217,857 shares issuable upon the exercise of outstanding warrants
and options held by the Company's directors and executive officers and their
affiliates which are exercisable within the 60-day period following February 28,
1997). As a result, these stockholders, if acting together, may have the ability
to influence the outcome of corporate actions requiring stockholder approval.
This concentration of ownership may have the effect of delaying or preventing a
change in control of the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------

All financial statements required to be filed hereunder are filed as
APPENDIX A hereto, are listed under Item 14(a), and are incorporated herein by
this reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
--------------------------------------------------------------- 
FINANCIAL DISCLOSURE.
--------------------

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------

The response to this item is contained in part under the caption
"Executive Officers and Significant Employees of the Company" in Part I of this
Annual Report on Form 10-K and in part in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 19, 1997 (the "1997 Proxy
Statement") under the caption "Proposal 1--Election of Directors," which section
is incorporated herein by this reference.

Officers are elected on an annual basis and serve at the discretion of the
Board of Directors.

ITEM 11. EXECUTIVE COMPENSATION.
----------------------

The response to this item is contained in the 1997 Proxy Statement under
the caption "Proposal 1--Election of Directors," which section is incorporated
herein by this reference.

48

49

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------

The response to this item is contained in the 1997 Proxy Statement under
the caption "Stock Ownership of Certain Beneficial Owners and Management," which
section is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------

The response to this item is contained in the 1997 Proxy Statement under
the caption "Certain Transactions," which section is incorporated herein by this
reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------

(a)  The following documents are filed as APPENDIX A hereto and are
included as part of this Annual Report on Form 10-K:

Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

(b)  The Company is not filing any financial statement schedules as part
of this Annual Report on Form 10-K because they are not applicable or
the required information is included in the financial statements or
notes thereto.

(c)  The list of Exhibits filed as a part of this Annual Report on Form
10-K are set forth on the Exhibit Index immediately preceding such
Exhibits, and is incorporated herein by this reference.

(d)  REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
last quarter of the Company's fiscal year ended December 31, 1996.

49

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HYBRIDON, INC.

By: /s/ E. ANDREWS GRINSTEAD, III
-------------------------------------
E. Andrews Grinstead, III
Chairman of the Board, President and
Chief Executive Officer

Date: March 24, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

SIGNATURE                      TITLE                        DATE
---------                      -----                        ----

/s/ E. Andrews Grinstead, II  Chairman of the Board, President    March 24, 1997
- - --------------------------    and Chief Executive Officer and 
E. Andrews Grinstead, III     Director (Principal Executive
Officer)

/s/ Anthony J. Payne          Senior Vice President of Finance    March 24, 1997
- - --------------------------    and Administration, International 
Anthony J. Payne             Operations, Treasurer, Secretary 
and Chief Financial Officer 
(Principal Financial and 
Accounting Officer)

/s/ Sudhir Agrawal            Director                            March 24, 1997
- - --------------------------
Sudhir Agrawal

Director                            March __, 1997
- - --------------------------
J. Robert Buchanan

/s/ Mohamed El-Khereiji       Director                            March 24, 1997
- - --------------------------
Mohamed El-Khereiji

50

51

/s/ Youssef El-Zein           Director                            March 24, 1997
- - --------------------------  
Youssef El-Zein

/s/ Nasser Menhall            Director                            March 24, 1997
- - --------------------------
Nasser Menhall

/s/ Jerry A. Weisbach         Director                            March 24, 1997
- - ---------------------------
Jerry A. Weisbach

/s/ James B. Wyngaarden       Director                            March 24, 1997
- - ---------------------------
James B. Wyngaarden

/s/ Paul C. Zamecnik        Director                              March 24, 1997
- - ---------------------------
Paul C. Zamecnik

51

52
APPENDIX A
----------

INDEX

PAGE

Report of Independent Public Accountants                                               F-2

Consolidated Balance Sheets as of December 31, 1995 and 1996 and
unaudited pro forma balance sheet as of December 31, 1996                           F-3

Consolidated Statements of Operations for each of the three years in the period
ended December 31, 1996, and for the period from
May 25, 1989 (inception) to December 31, 1996                                       F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the
period from May 25, 1989  (inception) to December 31, 1996                          F-5

Consolidated Statements of Cash Flows for each of the three years in the period
ended December 31, 1996, and for the period from
May 25, 1989 (inception) to December 31, 1996                                       F-6

Notes to Consolidated Financial Statements                                             F-7

F-1

53

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Hybridon, Inc.:

We have audited the accompanying consolidated balance sheets of Hybridon, Inc.
(a Delaware corporation in the development stage) and subsidiaries as of
December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996 and for the period from May 25,
1989 (inception) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hybridon, Inc. and subsidiaries
as of December 31, 1995 and 1996 and for the period from May 25, 1989 
(inception) to December 31, 1996, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 21, 1997 (except with respect to
the matter discussed in Note 1, as to
which the date is March 26, 1997)

F-2

54

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

ASSETS

PRO FORMA
DECEMBER 31,          DECEMBER 31,
1995            1996          1996
(Unaudited)
(See Note 1)

CURRENT ASSETS:
Cash and cash equivalents                                       $   5,284,262   $  12,633,742  $  59,633,742
Short-term investments                                                      -       3,785,146      3,785,146
Prepaid expenses and other current assets                             951,526       2,119,220      2,119,220
-------------   -------------  -------------

Total current assets                                          6,235,788      18,538,108     65,538,108
-------------   -------------  -------------

PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements                                              1,965,754       9,257,516      9,257,516
Laboratory equipment                                                5,153,550       5,884,861      5,884,861
Equipment under capital leases                                      1,507,535       2,904,688      2,904,688
Office equipment                                                    1,149,141       1,496,639      1,496,639
Furniture and fixtures                                                321,763         499,957        499,957
Construction-in-progress                                            3,236,330       2,193,400      2,193,400
-------------   -------------  -------------
13,334,073      22,237,062     22,237,062

Less--Accumulated depreciation and amortization                     4,202,543       6,596,294      6,596,294
-------------   -------------  -------------

9,131,530      15,640,768     15,640,768
-------------   -------------  -------------
OTHER ASSETS:
Restricted cash                                                     1,025,856         437,714        437,714
Notes receivable from officers                                        308,133         317,978        317,978
Deferred financing costs and other assets                           1,217,804       1,152,034      4,152,034
Investment in real estate partnership                               1,698,448       5,450,000      5,450,000
-------------   -------------  -------------
4,250,241       7,357,726     10,357,726
-------------   -------------  -------------

$  19,617,559   $  41,536,602  $  91,536,602
=============   =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt and capital lease             $     418,713   $   1,308,511  $   1,308,511
obligations
Accounts payable                                                    2,053,438       4,064,419      4,064,419
Accrued expenses                                                    3,454,625       4,190,766      4,190,766
Deferred revenue                                                       86,250          86,250         86,250
Amounts payable to related parties                                     12,500               -              -
-------------   -------------  -------------

Total current liabilities                                     6,025,526       9,649,946      9,649,946
-------------   -------------  -------------

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT PORTION                                                 1,145,480       9,031,852      9,031,852
-------------   -------------  -------------

9% CONVERTIBLE SUBORDINATED NOTES PAYABLE                                      -               -     50,000,000
-------------   -------------  -------------

COMMITMENTS (Notes 10, and 15)

STOCKHOLDERS' EQUITY:
Convertible preferred stock, $.01 par value-
Authorized--23,026,323 shares at December 31, 1995 and no
shares at December 31, 1996
Issued and outstanding-- 15,982,179 and no shares at
December 31, 1995 and 1996, respectively (converted into
16,856,649 shares of common stock in February 1996)               159,822               -              -
Preferred stock, $.01 par value-
Authorized--5,000,000 shares at December 31, 1996
Issued and outstanding--None                                              -               -              -
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding-- 1,843,666 and 25,146,577 at
December 31, 1995 and 1996, respectively                            1,844          25,147         25,147
Additional paid-in capital                                        114,626,062     173,227,358    173,227,358
Deficit accumulated during the development stage                 (102,341,175)   (149,193,775)  (149,193,775)
Deferred compensation                                                       -      (1,203,926)    (1,203,926)
-------------   -------------  -------------

Total stockholders' equity                                   12,446,553      22,854,804     22,854,804
-------------   -------------  -------------

$  19,617,559   $  41,536,602  $  91,536,602
=============   =============  =============

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

55

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

CUMULATIVE
FROM MAY 25, 
1989 (INCEPTION) 
YEARS ENDED DECEMBER 31,             TO DECEMBER 31, 
1994          1995          1996              1996

REVENUES:
Research and development                    $  1,032,083  $  1,186,124   $  1,419,389      $   4,554,263
Product revenue                                        -             -      1,080,175          1,080,175
Royalty income                                         -             -         62,321             62,321
Interest income                                  134,828       218,749      1,446,762          2,141,617
------------  ------------   ------------      -------------

1,166,911     1,404,873      4,008,647          7,838,376
------------  ------------   ------------      -------------

OPERATING EXPENSES:
Research and development                      20,024,310    29,684,707     39,390,525        118,631,900
General and administrative                     6,677,717     6,094,085     11,346,670         36,789,868
Interest                                          69,045       172,757        124,052          1,610,383
------------  ------------   ------------      -------------

26,771,072    35,951,549     50,861,247        157,032,151
------------  ------------   ------------      -------------

Net loss                              $(25,604,161) $(34,546,676)  $(46,852,600)     $(149,193,775)
============  ============   ============      =============

PRO FORMA NET LOSS PER COMMON SHARE (Note
2(b))                                                        $      (2.13)  $      (1.93)
============   ============

PRO FORMA WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Note 2(b))                                 16,195,100     24,260,702
============   ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

56

F-5

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

CONVERTIBLE                                            
PREFERRED STOCK           COMMON STOCK        ADDITIONAL 
NUMBER       $.01         NUMBER      $.001      PAID-IN  
OF SHARES   PAR VALUE     OF SHARES  PAR VALUE    CAPITAL  

INITIAL ISSUANCE OF COMMON STOCK                                           -   $       -       668,500   $    669  $          - 

Issuance of Series A convertible preferred stock, net of cash     875,000       8,750             -          -       848,250 
issuance costs of $18,000
Issuance of Series B convertible preferred stock, net of cash     648,147       6,481             -          -     1,731,616 
issuance costs of $11,900
Issuance of common stock                                                -           -       667,300        667             - 
Net loss                                                                -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1990                                         1,523,147      15,231     1,335,800      1,336     2,579,866 

Issuance of Series C convertible preferred stock, net of cash      520,000       5,200             -          -     2,571,603 
issuance costs of $23,197
Repurchase of common stock                                               -           -      (262,500)      (263)            - 
Deferred compensation related to restricted stock awards                 -           -             -          -     2,328,764 
Amortization of deferred compensation                                    -           -             -          -             - 
Compensation expense related to stock option grants                      -           -             -          -       669,433 
Net loss                                                                 -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1991                                         2,043,147      20,431     1,073,300      1,073     8,149,666 

Issuance of Series C convertible preferred stock, net of cash      920,000       9,200             -          -     4,570,509 
issuance costs of $20,291
Issuance of common stock related to restricted stock awards              -           -       500,266        501       122,243 
Issuance of common stock related to the exercise of stock                -           -       173,075        173         3,165 
options
Issuance of warrants                                                     -           -             -          -     2,776,130 
Deferred compensation related to stock options and restricted            -           -             -          -     2,249,428 
stock awards
Amortization of deferred compensation                                    -           -             -          -             - 
Net loss                                                                 -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1992                                         2,963,147      29,631     1,746,641      1,747    17,871,141 

Issuance of Series D convertible preferred stock in exchange
for convertible promissory notes payable, including accrued   1,891,757      18,918             -          -     9,581,633 
interest, net of cash issuance costs of $113,955
Issuance of Series E convertible preferred stock, net of cash   1,379,310      13,793             -          -     9,924,954 
issuance costs of $61,251
Issuance of Series F convertible preferred stock, net of cash   2,039,000      20,390             -          -    18,272,006 
issuance costs of $2,097,604
Issuance of common stock related to the exercise of stock               -           -        43,625         43        26,645 
options
Reduction in deferred compensation due to stock option                  -           -             -          -      (290,287)
termination prior to vesting
Amortization of deferred compensation                                   -           -             -          -             - 
Net loss                                                                -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1993                                         8,273,214      82,732     1,790,266      1,790    55,386,092 

Issuance of Series F convertible preferred stock, net of cash      584,500       5,845             -          -     5,759,478 
issuance costs of $79,677
Issuance of Series G convertible preferred stock, net of cash    1,591,512      15,915             -          -    11,709,340 
issuance costs of $1,006,841
Issuance of common stock related to the exercise of stock                -           -        24,000         24        13,376 
options
Cancellation of warrants                                                 -           -             -          -       (68,000)
Reduction in deferred compensation due to stock option                   -           -             -          -       (14,062)
termination prior to vesting
Amortization of deferred compensation                                    -           -             -          -             - 
Net loss                                                                 -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1994                                        10,449,226     104,492     1,814,266      1,814    72,786,224 

Issuance of Series G convertible preferred stock, net of cash    5,532,953      55,330             -          -    41,798,368 
issuance costs of $2,409,926
Issuance of common stock related to the exercise of stock                -           -        29,400         30        41,470 
options
Amortization of deferred compensation                                    -           -             -          -             - 
Net loss                                                                 -           -             -          -             - 
-----------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1995                                        15,982,179     159,822     1,843,666      1,844   114,626,062 

Issuance of common stock related to initial public offering,
net of issuance costs of  $ 5,268,756                                 -           -     5,750,000      5,750    52,225,494 
Conversion of convertible preferred stock to common stock     (15,982,179)   (159,822)   16,856,649     16,857       142,965 
Issuance of common stock related to the exercise of stock               -           -       288,700        289     1,089,387 
options
Issuance of common stock related to the exercise of warrants            -           -       407,562        407     3,176,334 
Deferred compensation related to grants of common stock                 -           -                              1,967,116 
options to non-employees
Amortization of deferred compensation relating to grants of
common stock options to non-employees                                 -           -             -          -             - 
Net loss                                                                -           -             -          -             - 
------------   ---------    ----------   --------  ------------ 

BALANCE, DECEMBER 31, 1996                                                 -   $       -    25,146,577   $ 25,147  $173,227,358
============   =========    ==========   ========  ============

DEFICIT                                 
ACCUMULATED                    TOTAL      
DURING THE     DEFERRED    STOCKHOLDERS' 
DEVELOPMENT    COMPENSATION   EQUITY      
STAGE                     (DEFICIT)    

INITIAL ISSUANCE OF COMMON STOCK                                        $           -  $         -  $        669    

Issuance of Series A convertible preferred stock, net of cash                    -            -       857,000    
issuance costs of $18,000                                                                                       
Issuance of Series B convertible preferred stock, net of cash                    -            -     1,738,097    
issuance costs of $11,900                                                                                       
Issuance of common stock                                                         -            -           667    
Net loss                                                                (1,110,381)           -    (1,110,381)   
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1990                                                 (1,110,381)           -     1,486,052    

Issuance of Series C convertible preferred stock, net of cash                     -            -     2,576,803    
issuance costs of $23,197                                                                                     
Repurchase of common stock                                                        -            -          (263)   
Deferred compensation related to restricted stock awards                          -   (2,328,764)            -    
Amortization of deferred compensation                                             -      727,738       727,738    
Compensation expense related to stock option grants                               -            -       669,433    
Net loss                                                                 (6,648,899)           -    (6,648,899)   
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1991                                                 (7,759,280)  (1,601,026)   (1,189,136)   

Issuance of Series C convertible preferred stock, net of cash                     -            -     4,579,709    
issuance costs of $20,291                                                                                     
Issuance of common stock related to restricted stock awards                       -            -       122,744    
Issuance of common stock related to the exercise of stock                         -            -         3,338    
options                                                                                                       
Issuance of warrants                                                              -            -     2,776,130    
Deferred compensation related to stock options and restricted                     -   (2,249,428)            -    
stock awards                                                                                                  
Amortization of deferred compensation                                             -    1,332,864     1,332,864    
Net loss                                                                (14,694,693)           -   (14,694,693)  
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1992                                                (22,453,973)  (2,517,590)   (7,069,044)   

Issuance of Series D convertible preferred stock in exchange                                                    
for convertible promissory notes payable, including accrued                    -            -     9,600,551    
interest, net of cash issuance costs of $113,955                                                              
Issuance of Series E convertible preferred stock, net of cash                    -            -     9,938,747    
issuance costs of $61,251                                                                                     
Issuance of Series F convertible preferred stock, net of cash                    -            -    18,292,396    
issuance costs of $2,097,604                                                                                  
Issuance of common stock related to the exercise of stock                        -            -        26,688    
options                                                                                                       
Reduction in deferred compensation due to stock option                           -      290,287             -    
termination prior to vesting                                                                                  
Amortization of deferred compensation                                            -    1,124,839     1,124,839    
Net loss                                                               (19,736,365)           -   (19,736,365)  
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1993                                                (42,190,338)  (1,102,464)   12,177,812    

Issuance of Series F convertible preferred stock, net of cash                     -            -     5,765,323    
issuance costs of $79,677                                                                                     
Issuance of Series G convertible preferred stock, net of cash                     -            -    11,725,255    
issuance costs of $1,006,841                                                                                  
Issuance of common stock related to the exercise of stock                         -            -        13,400    
options                                                                                                       
Cancellation of warrants                                                          -            -       (68,000)   
Reduction in deferred compensation due to stock option                            -       14,062             -    
termination prior to vesting                                                                                  
Amortization of deferred compensation                                             -      764,228       764,228    
Net loss                                                                (25,604,161)           -   (25,604,161)  
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1994                                                (67,794,499)    (324,174)    4,773,857    

Issuance of Series G convertible preferred stock, net of cash                     -            -    41,853,698    
issuance costs of $2,409,926                                                                                  
Issuance of common stock related to the exercise of stock                         -            -        41,500    
options                                                                                                       
Amortization of deferred compensation                                             -      324,174       324,174    
Net loss                                                                (34,546,676)           -   (34,546,676) 
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1995                                               (102,341,175)           -    12,446,553    

Issuance of common stock related to initial public offering,                                                    
net of issuance costs of  $ 5,268,756                                          -            -    52,231,244    
Conversion of convertible preferred stock to common stock                        -            -             -    
Issuance of common stock related to the exercise of stock                        -            -     1,089,676    
options                                                                                                       
Issuance of common stock related to the exercise of warrants                     -            -     3,176,741    
Deferred compensation related to grants of common stock                          -   (1,967,116)            -    
options to non-employees                                                                                      
Amortization of deferred compensation relating to grants of                                                     
common stock options to non-employees                                          -      763,190       763,190    
Net loss                                                               (46,852,600)           -   (46,852,600)  
-------------  -----------  ------------   

BALANCE, DECEMBER 31, 1996                                              $(149,193,775) $(1,203,926) $ 22,854,804   
=============  ===========  ============   

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

57

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

CUMULATIVE FROM
MAY 25, 1989
(INCEPTION) TO
YEARS ENDED DECEMBER 31,              DECEMBER 31, 
1994           1995           1996              1996

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                     $(25,604,161) $(34,546,676)  $(46,852,600)     $(149,193,775)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization                 1,110,167     2,023,553      2,393,751          6,697,735
Compensation on grant of stock options,
warrants and restricted stock                 764,228       324,174        763,190          7,807,731
Amortization of discount on convertible
promissory notes payable                            -             -              -            690,157
Amortization of deferred financing costs         34,000             -              -            216,732
Noncash interest on convertible
promissory notes payable                            -             -              -            260,799
Changes in assets and liabilities-
Prepaid and other current assets             (292,710)     (769,562)    (1,167,693)        (2,119,219)
Notes receivable from officers                 87,126         8,446         (9,845)          (317,978)
Amounts payable to related parties           (333,925)      (80,351)       (12,500)          (200,000)
Accounts payable and accrued expenses       2,781,934       483,585      2,747,122          8,255,185
Deferred revenue                                2,917             -              -             86,250
------------  ------------   ------------      -------------

Net cash used in operating            (21,450,424)  (32,556,831)   (42,138,575)      (127,816,383)
------------  ------------   ------------      -------------
activities

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments                      -             -     (3,785,146)        (3,785,146)
Purchases of property and equipment            (3,656,640)   (4,889,624)    (8,902,989)       (21,802,710)
(Increase) decrease in restricted cash and
other assets                                 (1,481,829)      (44,912)       401,990         (1,664,183)
Investment in real estate partnership                   -    (1,698,448)    (3,751,552)        (5,450,000)
-----------   -------------  -------------     -------------

Net cash used in investing             (5,138,469)   (6,632,984)   (16,037,697)       (32,702,039)
------------- -------------  -------------     -------------
activities

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible
preferred stock                              19,775,578    41,853,698              -         96,584,154
Proceeds from issuance of common stock
related to stock options and restricted
stock grants                                     13,400        41,500      1,089,676          1,174,602
Net proceeds from issuance of common stock              -             -     52,231,244         52,355,324
Repurchase of common stock                              -             -              -               (263)
Proceeds from notes payable                       750,000             -      7,500,000          9,450,000
Proceeds from issuance of convertible
promissory notes payable                              -             -              -          9,191,744
Proceeds from long-term debt                            -             -              -            662,107
Proceeds from issuance of common stock
related to stock warrants                             -             -      3,176,741          3,176,741
Proceeds from sale/leaseback                    1,073,183             -      1,722,333          2,795,516
Payments on long-term debt and capital           (394,585)     (537,977)      (446,163)        (1,801,612)
leases
(Increase) decrease in deferred financing               -      (278,927)       251,921           (436,149)
------------  ------------   ------------      -------------
costs

Net cash provided by financing
activities                             21,217,576    41,078,294     65,525,752        173,152,164
------------  ------------   ------------      -------------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                       (5,371,317)    1,888,479      7,349,480         12,633,742

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
8,767,100     3,395,783      5,284,262                  -
------------  ------------   ------------      -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD        $  3,395,783  $  5,284,262   $ 12,633,742      $  12,633,742
============  ============   ============      =============

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

58

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    ORGANIZATION

Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology.

The Company is in the development stage. Since inception, the Company has
devoted substantially all of its efforts toward product research and
development and raising capital. Management anticipates that
substantially all future revenues will be derived from the sale of
proprietary biopharmaceutical products under development or to be
developed in the future, and custom contract manufacturing of synthetic
DNA products and reagent products (by the Hybridon Specialty Products
Division (HSPD)), as well as from research and development revenues and
fees and royalties derived from licensing of the Company's technology.
Accordingly, although the Company has begun to generate revenues from its
custom contract manufacturing business, the Company is dependent on the
proceeds from possible future sales of equity securities, debt financings
and research and development collaborations in order to fund future
operations.

On March 26, 1997, the Company entered into a binding Agreement to
issue $50,000,000 of 9% convertible subordinated notes (the Notes). The
closing on the issuance of the Notes is to occur in April 1997. Under
the terms of the Notes, the Company must make semiannual interest
payments on the outstanding principle balance through the maturity date
of April 1, 2004. If the Notes are converted prior to April 1, 2000, the
Noteholders are entitled to receive accrued interest from the date of
the most recent interest payment through the conversion date. The Notes
are subordinate to substantially all of the Company's existing
indebtedness. The Notes are convertible at any time prior to the
maturity date at a conversion price equal to $7.0125, subject to
adjustment under certain circumstances, as defined.

Beginning April 1, 2000, the Company may redeem the Notes at its option
for a 4.5% premium over the original issuance price provided that from
April 1, 2000 to March 31, 2001, the Notes may not be redeemed unless
the closing price of the common stock equals or exceeds 150% of the
conversion price for a period of at least 20 out of 30 consecutive
trading days and the Notes are redeemed within 60 days after such
trading period. The premium decreases by 1.5% each year through March
31, 2003. Upon a change of control of the Company, as defined, the       
Company will be required to offer to repurchase the Notes at 150% of the
original issuance price.

The unaudited pro forma consolidated balance sheet as of December        
31, 1996 shows the financial position of the Company assuming that the
Notes were issued on December 31, 1996.

In January 1997, the Company entered into a five year $1,169,000 lease
with a leasing company to finance certain furniture and  fixtures in the
Cambridge facility. The lease bears interest at a rate of 13.7% and is
payable in 60 equal monthly installments of principle and interest of
approximately $26,500 through February 2002.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)    Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

F-7

59

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b)    Pro Forma Net Loss per Common Share

Pro forma net loss per common share is computed using the weighted
average number of shares of common stock outstanding during the
period. Pursuant to the requirements of the Securities and
Exchange Commission, common stock issued by the Company during the
12 months immediately preceding its initial public offering on
February 2, 1996, plus shares of common stock that became issuable
during the same period pursuant to the grant of common stock
options and preferred and common stock warrants, has been included
in the calculation of pro forma weighted average number of common
shares outstanding for all periods presented (using the
treasury-stock method and the initial public offering price of $10
per share). In addition, the calculation of the pro forma weighted
average number of common shares outstanding also includes shares
of common stock as if all shares of preferred stock were converted
into common stock on the respective original dates of issuance.

(c)    Principles of Consolidation

The accompanying consolidated financial statements include the
results of the Company and its subsidiaries, Hybridon S.A.
(Europe), a French corporation and Hybridon Canada, Inc. (an
inactive majority-owned subsidiary). The consolidated financial
statements also reflect the Company's 49% interest in MethylGene,
Inc. (MethylGene), a Canadian corporation which is accounted for
under the equity method (See Note 12). All material intercompany
balances and transactions have been eliminated in consolidation.

(d)    Cash Equivalents and Short-Term Investments

The Company applies Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Under SFAS No. 115, debt securities that the
Company has the positive intent and ability to hold to maturity
are reported at amortized cost and are classified as
held-to-maturity securities. These securities include cash
equivalents and short term investments. At December 31, 1995 and
1996, the Company has classified all investments as
held-to-maturity. The Company considers all highly liquid
investments with maturities of three months or less when purchased
to be cash equivalents. Short-term investments mature within one
year of the balance sheet date. Cash and cash equivalents and

F-8

60
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)    Cash Equivalents and Short-Term Investments (Continued)

short-term investments at December 31, 1995 and 1996 consisted of
the following (at amortized cost, which approximates fair market
value):

DECEMBER 31,
1995          1996

Cash and Cash Equivalents-
Cash and money market funds                       $5,284,262   $10,144,367
U.S. government securities                                 -     2,489,375
----------   -----------

Total Cash and Cash Equivalents             $5,284,262   $12,633,742
==========   ===========

Short-Term Investments-
U.S. government securities                        $        -   $ 3,785,146
==========   ===========

(e)    Depreciation and Amortization

Depreciation and amortization are computed using the straight-line
method based on the estimated useful lives of the related assets 
as follows:

ESTIMATED 
ASSET CLASSIFICATION                USEFUL LIFE

Laboratory equipment                         5 Years
Leasehold improvements                 Life of lease
Equipment under capital lease                5 Years
Office equipment                           3-5 Years
Furniture and fixtures                       5 Years

F-9

61
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f)    Accrued Expenses

Accrued expenses on the accompanying consolidated balance sheets
consist of the following:

DECEMBER 31,
1995         1996

Payroll and related costs                 $1,327,057   $1,593,451
Outside research and clinical costs        1,132,860    1,381,124
Professional and consulting fees             214,788      390,440
Construction costs                           205,920            -
Other                                        574,000      825,751
----------   ----------

$3,454,625    4,190,766
==========   ==========

(g)    Revenue Recognition

The Company has recorded revenue under the consulting and research
agreements discussed in Notes 6 and 7. Revenue is recognized as
earned on a straight-line basis over the term of the agreement,
which approximates when work is performed and costs are incurred.
Revenues from product sales are recognized when the products are
shipped. Product revenue for the year ended December 31, 1996
represents revenues from the sale of DNA and reagent products
manufactured on a custom contract basis by HSPD.

(h)    Research and Development Expenses

The Company charges research and development expenses to
operations as incurred.

(i)    Patent Costs

The Company charges patent expenses to operations as incurred.

(j)    Reclassifications

Certain amounts in the prior periods consolidated financial
statements have been reclassified to conform with the current
periods presentation.

F-10

62
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(3)    NOTES RECEIVABLE FROM OFFICERS

At December 31, 1995, and 1996 the Company had notes receivable,
including accrued interest, from officers of $308,133, and $317,978
respectively. The notes bear interest at rates varying between 6% and
6.5% per annum and mature at various dates through April 2001.

(4)    RESTRICTED CASH

At December 31, 1995, the Company classified $225,000 as restricted cash
related to the lease of its manufacturing plant discussed in Note 5(b).
The restricted cash was in the form of a two-year letter of credit held
in escrow until June 1996 in favor of the lessor of the manufacturing
facility. In addition at December 31, 1995 and 1996, the Company had
$800,856 and $437,714, respectively, in restricted cash related to the
capital lease obligations as discussed in Note 5(c). The Company's cash
balances may become subject to restrictions in accordance with the terms
of its note payable to a bank (see Note 5(a)).

(5)    LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

(a)    Note Payable to a Bank

In December 1996, the Company entered into a four year $7,500,000
note payable with a bank. The note bears interest at either the
bank's prime rate plus 1% or LIBOR plus 3.5% (9.25% at December
31, 1996), at the Company's election. The note is payable in 59
equal installments or $62,500 commencing on February 1, 1997 with
a balloon payment of $3,812,500, due on January 1, 2002. The note
contains certain financial covenants that require the Company to
maintain minimum tangible net worth and minimum liquidity and
prohibits the payment of dividends. The Company has secured the
obligations under the note with a lien on all of its assets. If,
at specified times, the Company's minimum liquidity is less than
$15,000,000, $10,000,000, or $5,000,000, the Company is required
to pledge cash collateral to the bank equal to 25%, 50% or 100%,
respectively, of the then outstanding balance under the note,
pursuant to a cash pledge agreement. The notes also contain
certain non-financial covenants. Also, in connection with the
note, the Company issued 5 year warrants to purchase 65,000 shares
of common stock at an exercise price of $6.90 per share. These
warrants are fully exercisable at December 31, 1996.

F-11

63
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(5)    LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued)

(b)    Note Payable to Landlord

In December 1994, the Company issued a $750,000 promissory note to
its landlord to fund specific construction costs associated with
the development of its manufacturing plant in Milford,
Massachusetts. The promissory note bears interest at 13% per annum
and is to be paid in equal monthly installments of principal and
interest over the remainder of the 10-year lease term.

(c)    Capital Lease Obligations

The Company has entered into various capital leases for equipment.
Under a lease line agreement with a leasing company, the Company
can borrow up to $1,200,000. In 1994, the Company borrowed
$1,073,000 under this agreement as a part of a sale/leaseback
transaction. These amounts are subject to interest at an effective
rate of 4.29% and are being paid in equal installments of
principal and interest over 48-months through June 1998.

In connection with this lease agreement, the Company is required
to maintain a certain amount of cash in escrow as collateral. At
December 31, 1996, the Company had $437,714 in escrow related to
the agreement.

In December 1996, the Company sold certain laboratory equipment to
a leasing company, at its original cost of $1,722,333 under a
$2,800,000 lease line. In connection with this transaction, the
Company entered into a capital lease to lease the equipment from
this leasing company for 48 monthly payments ranging from $36,169
to $49,948. The sale of the equipment resulted in a gain of
$291,960 which has been offset against the cost of the asset in
the accompanying consolidated balance sheet and will be amortized
over the life of the lease.

F-12

64
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(5)    LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued)

Future minimum payments due under various notes payable and capital lease
obligations are as follows at December 31, 1996:

CALENDAR YEAR                                      AMOUNT

1997                                            $ 1,495,389
1998                                              1,444,345
1999                                              1,420,324
2000                                              1,328,882
2001                                                841,832
Thereafter                                        4,112,956
-----------

Total minimum lease payments            10,643,728

Less--Amount representing interest                  303,365
-----------
Principal obligations                   10,340,363

Less--Current portion                             1,308,511
-----------
$ 9,031,852
===========

(6)    G.D. SEARLE & CO. AGREEMENT

In January 1996, the Company and G.D. Searle & Co. (Searle) entered into
a collaboration relating to research and development of therapeutic
antisense compounds directed at up to eight molecular targets in the
field of inflammation/immunomodulation (the Searle Field).

Pursuant to the collaboration, the parties are conducting research and
development relating to a compound directed at a molecular target in the
Searle Field designated by Searle. In this project, Searle is funding
certain research and development efforts by the Company, and each of
Searle and the Company have committed certain of its own personnel to the
collaboration. The initial phase of research and development activities
relating to the initial target will be conducted through the earlier of
(i) the achievement of certain product candidate milestones or (ii) 36
months after commencement of the collaboration, subject to early
termination by Searle (although in any event Searle is required to pay 18
months of research and development funding). The parties may extend the
initial collaboration by mutual agreement, including agreement as to
additional research funding by Searle.

F-13

65
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(6)    G.D. SEARLE & CO. AGREEMENT (Continued)

In addition, Searle has the right, at its option, to designate up to six
additional molecular targets in the Searle Field (the Additional Targets)
for collaborative research and development with the Company on terms
substantially consistent with the terms of the collaboration applicable
to the initial molecular target. This right is exercisable by Searle with
respect to each of the Additional Targets upon the payment by Searle of
certain research payments (beyond the project-specific payments relating
to the particular Additional Target) and the purchase of additional
common stock from the Company by Searle (at the then fair market value).
The aggregate amount to be paid by Searle for such research payments and
equity investment in order to designate each of the Additional Targets is
$10,000,000 per Additional Target. In the event that Searle designates
all of the Additional Targets, the aggregate amount to be paid by Searle
for research payments will be $24,000,000, and the aggregate amount to be
paid by Searle in equity investment will be $36,000,000. If Searle has
not designated all of the Additional Targets by the time it advances the
product candidate for the initial molecular target to certain stages of
preclinical development, Searle will be required to purchase an
additional $10,000,000 of common stock (at the then fair market value) on
specified dates in order to maintain its right to designate any of the
Additional Targets that it has not yet designated. The payment for any
such common stock will be creditable against the equity investment
portion of the payments to be made by Searle with respect to the
designation of any of the Additional Targets that Searle has not yet
designated.

Searle also has the right, at its option, to designate a molecular target
in the Searle Field to develop a therapeutic agent for cancer that acts
through immunomodulation (the Searle Cancer Target) for collaborative
research and development with the Company on terms substantially
consistent with the terms of the collaboration applicable to the initial
molecular target. At the time of such designation, Searle will be
required to make certain research payments to the Company and purchase
additional common stock from the Company (at the then fair market value).
The aggregate amount to be paid by Searle for such research payments and
equity investment will range from $12,000,000 (composed of $5,000,000 in
research payments and $7,000,000 in equity investment) if the Searle
Cancer Target is designated in 1997 to $26,000,000 (composed of
$21,000,000 in research payments and $5,000,000 in equity investment) if
the Searle Cancer Target is designated in 2000.

Searle has exclusive rights to commercialize any products resulting from
the collaboration. If Searle determines, in its sole discretion, to
commercialize a product, Searle will fund and perform preclinical tests
and clinical trials of the product candidate and will be responsible for
regulatory approvals for and marketing of the product. In certain
instances and for specified periods of time, the Company has agreed to
perform research and development work in the Searle Field exclusively
with Searle. In addition, as to each product candidate, the Company will
be entitled to milestone payments from Searle totaling up to an aggregate
of $10,000,000 upon the achievement of certain development benchmarks.
The Company also will be entitled to royalties from net sales of products
resulting from the

F-14

66
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(6)    G.D. SEARLE & CO. AGREEMENT (Continued)

collaboration. Subject to satisfying certain conditions relating to its
manufacturing capacities and capabilities, the Company will retain
manufacturing rights, and Searle will be required to purchase its
requirements of products from the Company on an exclusive basis at
specified transfer prices. Upon a change in control of the Company,
Searle would have the right to terminate the Company's manufacturing
rights, although the royalty payable would be increased in such event.

Under the collaboration, in the event that Searle designates (and makes
the required payments and equity investments for) all of the Additional
Targets or in certain other instances relating to Hybridon's failure to
satisfy certain requirements relating to its manufacturing capacities and
capabilities, Searle will have the right, exercisable in its sole
discretion, to require Hybridon to form a joint venture with Searle for
the development of products in the Searle Field (other than products
relating to molecular targets that have already been designated by
Searle) to which each party will contribute $50,000,000 in cash, although
the Company's cash contribution would be reduced by the value of the
technology and other rights contributed by the Company to the joint
venture. The Company and Searle would each own 50% of the joint venture,
although Searle's ownership interest in the joint venture would increase
based upon a formula to up to a maximum of 75% if the joint venture is
established in certain instances relating to the Company's failure to
satisfy certain requirements relating to its manufacturing capacities and
capabilities.

As of December 31, 1996, the Company has received $400,000 in research
and development revenues from Searle. Under the collaboration, Searle
also purchased 1,000,000 shares of common stock in the Company's initial
public offering of common stock at the initial public offering price as
discussed in Note 13(b).

(7)    F. HOFFMANN-LA ROCHE LTD. COLLABORATION

In December 1992, the Company and Roche entered into a collaboration
involving the application of Hybridon's antisense oligonucleotide
chemistry to the development of compounds for the treatment of hepatitis
B, hepatitis C and human papilloma virus.

Under this collaboration, Roche funded research and development efforts
relating to the collaboration and committed personnel of its own to the
collaboration. In 1995, Roche notified the Company that it had selected
an antisense oligonucleotide directed at hepatitis C as a lead compound
for further development and made a milestone payment to the Company in
connection with such designation. In the third quarter of 1996, Roche
notified the Company that it had selected an antisense oligonucleotide
directed at human papilloma virus as a lead compound for further
development, and in the fourth quarter of 1996, made a milestone payment
to the Company in connection with such designation. At such time, Roche
also notified the Company that Roche had elected not to continue the
hepatitis B

F-15

67
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(7)    F. HOFFMANN-LA ROCHE LTD. COLLABORATION (Continued)

program under the research and development collaboration. As a result, in
light of the selection by Roche of lead compounds directed at hepatitis C
and human papilloma virus for further development and its determination
to discontinue the hepatitis B program, Roche notified the Company that
Roche was exercising its option to terminate the research and development
phase of the collaboration as of March 31, 1997. The Company and Roche
are engaged in ongoing discussions as to the manner in which they will
collaborate in connection with the further development of the two
antisense oligonucleotides that have been selected by Roche as lead
compounds.

The Company had licensed to Roche any products resulting from the
collaboration on a royalty-bearing, worldwide exclusive basis. Subject to
compliance with certain production cost requirements, Roche is required
to purchase from the Company, and the Company is required to supply to
Roche, Roche's requirements of products at specified transfer prices. The
Company has recorded $1,032,083, $1,186,124, and $1,019,389 of research
and development revenue related to this collaboration in the years ended
December 31, 1994, 1995, and 1996, respectively.

In conjunction with the Roche Collaboration, Roche purchased 818,390
shares of common stock for $6,000,000. Roche was also issued five-year
warrants for the purchase of 551,724 shares of common stock at an initial
price of $11.50 per share, such exercise price increases commencing on
August 12, 1995 on an annual basis at a compound rate of 25%. At December
31, 1996, the exercise price of these warrants are $17.969 per share. The
warrants expire on February 12, 1998 (subject to early expiration if the
Roche Collaboration is terminated).

(8)    MEDTRONIC, INC. COLLABORATIVE STUDY AGREEMENT

In May 1994, the Company and Medtronic, Inc. (Medtronic) entered into a
collaborative study agreement (the Medtronic Agreement) involving the
development of antisense compounds for the treatment of Alzheimer's
disease and a drug delivery system to deliver such compounds into the
central nervous system. The Company will be responsible for the
development of, and hold all rights to, any drug developed pursuant to
this collaboration, and Medtronic will be responsible for the development
of, and hold all rights to, any delivery system developed pursuant to
this collaboration. The parties may extend this collaboration by mutual
agreement to other neurodegenerative disease targets. The research and
development to be conducted is determined and supervised by a committee
comprised of an equal number of designees of the Company and Medtronic.
As part of the Medtronic Agreement, Medtronic purchased 658,333 shares of
common stock for $5,000,000. In addition, the Company issued to
Medtronic, Inc. a warrant expiring on May 10, 1997 to purchase 53,333
shares of common stock at $7.50 per share.

F-16

68
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(9)    LICENSING AGREEMENT

The Company has entered into a licensing agreement with the Worcester
Foundation for Biomedical Research, Inc. (the Worcester Foundation),
under which the Company has received exclusive licenses to technology in
certain patents and patent applications. The Company is required to make
royalty payments based on future sales of products employing the
technology or falling under claims of a patent, as well as a specified
percentage of sublicense income received related to the licensed
technology. Additionally, the Company is required to pay an annual
maintenance fee through the life of the patents. In addition, in the year
ended December 31, 1993, the terms of the license agreement were amended
and, in conjunction with such amendment, the Company agreed to make a
$500,000 contribution to the Worcester Foundation. The Company paid
$210,000 in both 1993 and 1994; the remaining $80,000 was paid in 1995.
The Company expensed the $500,000 contribution in the year ended December
31, 1993.

(10)   PHARMACIA BIOTECH, INC. AGREEMENT

In December 1994, the Company and Pharmacia Biotech, Inc. (Pharmacia)
entered into a collaboration involving the design and development of a
large-scale oligonucleotide synthesis machine. Following completion of
the machine, the collaboration expired in December 1996, and Pharmacia
retained the right to sell the machine to third parties, subject to an
obligation to pay the Company royalties on such third party sales. For
the year ended December 31, 1996, the Company has received $62,321 of
royalty income related to such third party sales.

(11)   PERKIN-ELMER CORPORATION SUPPLY AGREEMENT

In September 1996 the Company and the Applied Biosystems Division of
Perkin-Elmer signed a four year sales and supply agreement under which
Perkin-Elmer agreed to refer potential customers to HSPD for the
manufacture of custom oligonucleotides and the Company agreed that
amidites for the manufacture of these oligonucleotides are purchased from
Perkin-Elmer and a percentage of the sales price will be paid to
Perkin-Elmer. In addition, Perkin-Elmer licensed to the Company its
oligonucleotide synthesis patents and agreed to discuss a future
collaboration with respect to the development, marketing and distribution
of the Company's proprietary intermediates.

(12)   INVESTMENT IN METHYLGENE, INC.

In January 1996, the Company and certain institutional investors formed a
Quebec company, MethylGene, Inc. (MethylGene) to develop and market
certain compounds and procedures to be agreed upon by the Company and
MethylGene.

F-17

69
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(12)   INVESTMENT IN METHYLGENE, INC. (Continued)

The Company has granted to MethylGene exclusive worldwide licenses and
sublicenses in respect of certain technology relating to the methylgene
fields. These fields are defined as (i) antisense compounds to inhibit
DNA methyltransferase for the treatment of cancers, (ii) other methods of
inhibiting DNA methyltransferase for the treatment of any indications,
and (iii) antisense compounds to inhibit a second molecular target other
than DNA methyltransferase for the treatment of cancers, to be agreed
upon by the Company and MethylGene. In addition, the Company and
MethylGene have entered into a supply agreement pursuant to which
MethylGene is obligated to purchase from the Company all required
formulated bulk oligonucleotides at specified transfer prices.

The Company acquired a 49% interest in MethylGene for approximately
$734,000, and the Canadian investors acquired a 51% interest in
MethylGene for a total of approximately $5,500,000. The institutional
investors have the right to exchange all (but not less than all) of their
shares of stock in MethylGene for an aggregate of 500,000 shares of
Hybridon common stock (subject to adjustment for stock splits, stock
dividends and the like). This option is exercisable only during a 90-day
period commencing on the earlier of the date five years after the closing
of the institutional investors' investment in MethylGene or the date on
which MethylGene ceases operations. This option terminates sooner if
MethylGene raises certain additional amounts of equity or debt financing
or if MethylGene enters into a corporation collaboration that meets
certain requirements. The Company is accounting for its investment in
MethylGene under the equity method and, due to the existence of the
investors exchange rights, the Company has recorded 100% of MethylGene's
losses in the accompanying consolidated statement of operations.

(13)   STOCKHOLDERS' EQUITY

(a)    Common Stock

The Company has 100,000,000 authorized shares of common stock,
$.001 par value, of which 25,146,577 shares were issued and
outstanding at December 31, 1996. Upon the consummation of the
Company's initial public offering of common stock in February 1996
all outstanding shares of preferred stock converted into
16,856,649 shares of common stock.

(b)    Initial Public Offering

On February 2, 1996, the Company completed its initial public
offering of 5,750,000 shares of common stock at $10.00 per share.
The sale of common stock resulted in net proceeds to the Company
of approximately $52,231,000 after deducting expenses related to
the offering.

F-18

70
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(c)    Warrants

The Company has the following warrants outstanding for the
purchase of common stock:

EXERCISE PRICE
PER SHARE
EXPIRATION DATE                        SHARES

February 12, 1998                        551,724       $17.97
March 31, 1998- October 25, 2000       4,769,670        10.00
November 10, 1997                        350,000         9.50
May 10, 1997- February 28, 2000          955,459         7.50
December 31, 2001                         65,000         6.90
September 16, 1997                       603,689         5.50
---------       ------

7,295,542
=========

Average price per share                                $ 9.85
======

In connection with the Roche Collaboration, the Company issued
Roche five-year warrants for the purchase of 551,724 shares of
common stock at an initial exercise price of $11.50 per share,
such exercise price increases commencing on August 12, 1995 on an
annual basis at a compound rate of 25% ($17.97 at December 31,
1996). The warrants expire on February 12, 1998, subject to
earlier expiration if the Roche Collaboration is terminated.

In connection with the Medtronic Agreement, the Company issued
Medtronic, Inc. a three-year warrant for the purchase of 53,333
shares of common stock at $7.50 per share.

As a component of the sale of preferred stock in 1994 and 1995,
the Company issued to the investors in such offering warrants for
the purchase of 2,927,124 shares of common stock at $8.00 to
$10.00 per share. Warrants to purchase 1,656,910 shares of common
stock at an exercise price of $10.00 per share expire on March 31,
1998, and the remaining warrants for the purchase of 1,270,214
shares of common stock at an exercise price of $8.00 per share
expire on October 25, 1996. During 1996, 396,336 of the $8.00
warrants were exercised and the unexercised $8.00 warrants expired
on October 25, 1996.

F-19

71
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(c)    Warrants (Continued)

Five-year warrants to purchase 1,843,100 shares of common stock at
$10.00 per share were issued in 1994 and 1995 as a component of
the compensation for services of several placement agents of the
Company's convertible preferred stock. Of these warrants,
1,521,674 were issued to a company that is controlled by two
directors of the Company (See Note 14(b)). The remaining 321,426
warrants were issued to various other companies that acted as
placement agents.

All of the warrants included in the aforementioned table are
exercisable as of December 31, 1996 except for the warrants to
purchase 500,000 shares at $10.00 per share which expire on
February 4, 1999; these warrants became exercisable subsequent to
December 31, 1996.

In addition, warrants for common stock may be issued under a
certain consulting agreement if the Company meets certain product
registration requirements in any of certain European countries
prior to December 31, 1997. These warrants have not been included
in the aforementioned table.

(d)    Stock Options

In 1990 and 1995, the Company established the 1990 Stock Option
Plan (the 1990 Option Plan) and the 1995 Stock Option Plan (the
1995 Option Plan), respectively, which provide for the grant of
incentive stock options and nonqualified stock options. Options
granted under these plans vest over various periods and expire no
later than 10 years from the date of grant. However, under the
1990 Option Plan in the event of a change in control (as defined
in the 1990 Plan), the exercise dates of all options then
outstanding shall be accelerated in full and any restrictions on
exercising outstanding options issued pursuant to the 1990 Option
Plan shall terminate. In October 1995, the Company terminated the
issuance of additional options under the 1990 Option Plan. As of
December 31, 1996, options to purchase a total of 3,356,840 shares
of common stock remained outstanding under the 1990 Option Plan.

A total of 3,500,000 shares of common stock may be issued upon the
exercise of options granted under the 1995 Option Plan. The
maximum number of shares with respect to which options may be
granted to any employee under the 1995 Option Plan shall not
exceed 500,000 shares of common stock during any calendar year.
The Compensation Committee of the Board of Directors has the
authority to select the employees to whom options are granted and
determine the terms of each option, including (i) the number of
shares of common stock subject to the option; (ii) when the option
becomes exercisable; (iii) the option exercise price, which, in
the

F-20

72
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(d)    Stock Options (Continued)

case of incentive stock options, must be at least 100% (110% in
the case of incentive stock options granted to a stockholder
owning in excess of 10% of the Company's common stock) of the fair
market value of the common stock as of the date of grant; and (iv)
the duration of the option (which, in the case of incentive stock
options, may not exceed 10 years). As of December 31, 1996,
options to purchase a total of 2,280,100 shares of common stock
remained outstanding under the 1995 Option Plan.

In October 1995, the Company adopted the 1995 Director Stock
Option Plan (the Director Plan). A total of 250,000 shares of
common stock may be issued upon the exercise of options granted
under the Director Plan. Under the terms of the Director Plan,
options to purchase 5,000 shares of common stock were granted to
eligible directors upon the closing of the Company's initial
public offering at the fair market value of the common stock on
the date of the closing. Thereafter, options to purchase 5,000
shares of common stock will be granted to each eligible director
on May 1 of each year commencing in 1997. All options will vest on
the first anniversary of the date of grant or, in the case of
annual options, on April 30 of each year with respect to options
granted in the previous year. As of December 31, 1996, options to
purchase a total of 45,000 shares of common stock remained
outstanding under the Director Plan.

F-21

73
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(d)    Stock Options (Continued)

All stock option activity since inception is summarized as
follows:

WEIGHTED
NUMBER       EXERCISE PRICE   AVERAGE PRICE
OF SHARES        PER SHARE        PER SHARE

Options granted                                     334,700     $             -       $   -
Options exercised                                  (167,300)                  -           -
----------     ---------------       -----

Outstanding, December 31, 1990                         167,400                   -           -
Options granted                                       8,500                   -           -
Options terminated                                   (2,700)                  -           -
----------     ---------------       -----

Outstanding, December 31, 1991                         173,200                   -           -
Options granted                                     962,702       .25  -   5.00        1.98
Options exercised                                  (173,075)        -      1.00         .02
Options terminated                                  (24,325)      .50  -   1.00         .56
----------     ---------------       -----

Outstanding, December 31, 1992                         938,502         -      5.00        2.01
Options granted                                   1,440,538      3.50  -  12.50        8.38
Options exercised                                   (43,625)        -      1.00         .61
Options terminated                                 (126,375)        -     10.00         .79
----------     ---------------       -----

Outstanding, December 31, 1993                       2,209,040         -     12.50        6.26
Options granted                                     672,500      5.00  -   7.00        5.33
Options exercised                                   (24,000)        -      1.00         .56
Options terminated                                  (75,000)        -      5.00        3.83
----------     ---------------       -----

Outstanding, December 31, 1994                       2,782,540         -     12.50        6.10
Options granted                                   2,035,538      7.50  -  10.00        7.55
Options exercised                                   (29,400)      .50  -   5.00        1.41
Options terminated                               (1,097,641)      .50  -  12.50        9.82
----------     ---------------       -----

Outstanding, December 31, 1995                       3,691,037         -     10.00        5.83
Options granted                                   2,380,100      5.00  -  13.12        9.91
Options exercised                                  (288,700)        -      7.50        3.77
Options terminated                                 (100,497)     5.00  -  11.57        8.04
----------     ---------------       -----

Outstanding, December 31, 1996                       5,681,940     $ .25  -  13.12       $7.61
==========     ===============       =====

Exercisable, December 31, 1996                       3,114,650     $ .25  -  11.57       $6.51
==========     ===============       =====

F-22

74
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(d)    Stock Options (Continued)

In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No.
123 requires the measurement of the fair value of stock options or
warrants to be included in the statement of operations or
disclosed in the notes to financial statements. The Company has
determined that it will continue to account for stock-based
compensation for employees under Accounting Principles Board
Opinion No. 25 and elect the disclosure-only alternative under
SFAS No. 123. The Company has recorded compensation expense of
$763,190 for options granted to non-employees. In addition, the
Company has recorded $1,203,926 of deferred compensation related
to these grants which will be amortized over the vesting period of
the options.

Options and warrants granted in 1995 and 1996 have been valued
using the Black-Scholes option pricing model prescribed by SFAS
No. 123. The weighted-average assumptions used for the year ended
December 31, 1995 and 1996 are as follows:

DECEMBER 31,
1995              1996

Risk free interest rate              6.41%             6.14%
Expected dividend yield                -                 -
Expected lives                     6 Years           6 Years
Expected volatility                    60%               60%

The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition,
option-pricing models require the input of highly subjective
assumptions including expected stock price volatility. Because the
Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.

F-23

75
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(13)   STOCKHOLDERS' EQUITY (Continued)

(d)    Stock Options (Continued)

Had compensation cost for these plans been determined consistent
with SFAS No. 123, the Company's net loss and pro forma net loss
per common share would have been affected as follows:

DECEMBER 31,
1995               1996

Net Loss:                  As Reported     $(34,546,676)      $(46,852,600)
============       ============
Pro Forma       $(41,447,381)      $(52,890,455)
============       ============
Net Loss
Per Common Share:          As Reported     $      (2.13)      $      (1.93)
============       ============
Pro Forma       $      (2.56)      $      (2.18)
============       ============

(e)    Employee Stock Purchase Plan

In October 1995, the Company adopted the 1995 Employee Stock
Purchase Plan (the Purchase Plan), under which up to 500,000
shares of common stock may be issued to participating employees of
the Company or its subsidiaries. All full-time employees of the
Company, except those who would immediately after the grant own 5%
or more of the total combined voting power or value of the stock
of the Company or any subsidiary, are eligible to participate.

On the first day of a designated payroll deduction period (the
Offering Period), the Company will grant to each eligible employee
who has elected to participate in the Purchase Plan an option to
purchase shares of common stock as follows: the employee may
authorize an amount (a whole percentage from 1% to 10% of such
employee's regular pay) to be deducted by the Company from such
pay during the Offering Period. On the last day of the Offering
Period, the employee is deemed to have exercised the option, at
the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the Purchase Plan, the option price
is an amount equal to 85% of the fair market value per share of
the common stock on either the first day or the last day of the
Offering Period, whichever is lower. In no event may an employee
purchase in any one Offering Period a number of shares which is
more than 15% of the employee's annualized base pay divided by 85%
of the market value of a share of common stock on the commencement
date of the Offering Period. The Compensation Committee may, in
its discretion, choose an Offering Period of 12 months or less for
each of the Offerings and choose a different Offering Period for
each Offering. No shares have been issued under the Plan.

F-24

76
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(14)   COMMITMENTS

(a)    Operating Leases

The Company has entered into a lease for a production plant in
Milford, Massachusetts. The lease has a 10-year term, which
commenced on July 1, 1994, with certain extension options. In
addition, the Company entered into a nine-year lease for office
space in Paris, France, commencing on May 1, 1994. The Company
previously occupied office and laboratory space at the
Massachusetts Biotechnology Research Park in Worcester,
Massachusetts. The Company's extended lease agreement expired in
February 1997, at which time the Company moved to a new facility,
described below.

On February 4, 1994, the Company entered into a lease for an
approximately 90,000-square-foot building in Cambridge,
Massachusetts. In 1996, this lease was amended as discussed below
and is herein referred to as the Cambridge Lease. The Cambridge
Lease is with a partnership that is affiliated with three
directors of the Company. The Cambridge Lease has an initial term
of 10 years, commencing February 1, 1997, and may be extended for
three additional five-year terms at the option of the Company. The
Cambridge Lease provides for annual rent of $37.79 per square foot
for the first five years and $41.57 per square foot for the second
five years. As compensation for arranging this lease, the Company
issued Pillar Limited (see Note 14(b)) five-year warrants for the
purchase of 500,000 shares of the Company's common stock at an
exercise price of $10.00 per share. These warrants become
exercisable subsequent to December 31, 1996 and are exercisable
through February 4, 1999.

Under the terms of the Cambridge Lease, the Company elected to
treat $5,450,000 of its payments for a portion of the costs of the
construction of the leased premises (primarily relating to tenant
improvements) as contributions to the capital of the Cambridge
landlord in exchange for a limited partnership interest in the
Cambridge landlord (the Partnership Interest). The Company's
Partnership Interest represents a 32.15% interest in the Cambridge
Landlord. The Company's right to receive distributions of cash
generated from operations or from any sale or refinancing of the
property would be subordinate to the distribution to certain other
limited partners of priority amounts currently totaling
approximately $6,500,000 (approximately $3,500,000 of which is
subject to annual increase at a rate of between 12% and 15% as a
result of a cumulative return to one of the limited partners of
the Cambridge Landlord). In the case of a sale or refinancing of
the property, after payment of the priorities described in the
preceding sentence, the Company would be entitled to a return of
its capital contribution and, thereafter, to its pro rata share of
the remaining funds available for distribution. The Company has
the right, for a period of three years following completion of the
building, to sell the Partnership Interest back to certain limited
partners of the Cambridge Landlord for a price equal to the
greater of

F-25

77
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(14)   COMMITMENTS (Continued)

(a)    Operating Leases (Continued)

(i) the total paid for the Partnership Interest ($5,450,000) or
(ii) the fair market value of the Partnership Interest at the
time. The assets of these limited partners are limited to their
investment in the Cambridge Landlord.

Future approximate minimum rent payments as of December 31, 1996,
under the lease agreements discussed above are as follows:

CALENDAR YEAR                 AMOUNT

1996                       $ 4,072,000
1997                         4,091,000
1998                         4,109,000
2000                         4,118,000
2001                         4,127,000
Thereafter                  20,930,000
-----------

$41,447,000
===========

During the years ended December 31, 1994, 1995, 1996, facility
rent expense was approximately $1,142,000, $2,142,000, and
$2,352,000 respectively.

(b)    Consulting Agreements with Affiliates of Stockholders and 
Directors

The Company has entered into consulting agreements, stock
placement agreements and an advisory agreement with several
companies that are controlled by two shareholders and directors of
the Company. The terms of the agreements with the affiliated
companies, S.A. Pillar Investment N.V. (Pillar Investment), Pillar
S.A. (formerly Commerce Consult S.A.) and Pillar Investment
Limited (formerly Ash Properties Limited) (Pillar Limited), are
described below.

In March 1994, the Company entered into a consulting agreement
with Pillar S.A., which was amended in March 1995 (the 1994 Pillar
Consulting Agreement). Under the 1994 Pillar Consulting Agreement,
the Company agreed to pay to Pillar S.A. cash compensation for
financial advisory and managerial services in connection with the
Company's overseas operations, including support services in
connection with contracts, agreements and arrangements with the
Agence Nationale de Recherches sur le SIDA (ANRS), and for
overhead costs and reimbursement of certain authorized
out-of-pocket expenditures. The Company is

F-26

78
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(14)   COMMITMENTS (Continued)

(b)    Consulting Agreements with Affiliates of Stockholders and 
Directors (Continued)

committed to pay Pillar S.A. a monthly fee of approximately
$96,000 with respect to this agreement. The agreement expires on
February 28, 1997. For the years ended December 31, 1994, 1995 and
1996, the Company had expensed $830,000, $1,226,000 and $1,106,000
under this consulting agreement, respectively.

In connection with the 1994 Pillar Consulting Agreement, the
Company issued to Pillar S.A. two, five-year warrants to purchase
up to 200,000 shares of the Company's common stock. The first
warrant was issued on March 1, 1994 at an exercise price of $10.00
per share and will expire on February 28, 1999. This warrant vests
in four equal quarterly installments in arrears commencing on
March 1, 1994. The second warrant was issued on March 1, 1995 at
an exercise price of $7.50 per share and will expire on February
28, 2000 and began vesting in four equal quarterly installments in
arrears commencing on June 1, 1995.

The 1994 Pillar Consulting Agreement also provides that if the
Company obtains all necessary governmental and regulatory
approvals for the commercial sale of an antisense drug for the
treatment of AIDS and HIV infection (the Drug) in one or more of
certain specified European countries prior to December 31, 1997,
the Company will issue Pillar S.A. a five-year warrant to purchase
a number of shares of common stock equal to 25,000 shares for each
quarter sooner than the last quarter of 1997 in which the Company
has approval for commercial sale of the Drug. The exercise price
will be equal to the average closing price of a share of the
Company's common stock for the 20 trading days preceding the last
day of the quarter preceding the quarter in which the Drug is
registered, or, if the Company's common stock is not publicly
traded, the fair market value of one share of common stock as
determined by the Company's Board of Directors. The Company will
expense the fair market value of these warrants as they are earned
by Pillar S.A. These warrants have not been included in the table
in Note 13(c).

All of the warrants issued to Pillar S.A. under the 1994 Pillar
Consulting Agreements and certain other warrants previously issued
to Pillar S.A. provide that within 15 days after the date of any
exercise, in full or in part, Pillar S.A. will pay to the Company
an amount in cash equal to the lesser of (i) 50% of all amounts
paid to Pillar S.A. as compensation under the various Pillar S.A.
consulting agreements and (ii) the positive difference, if any,
between the aggregate fair market value of the shares of common
stock purchased upon such exercise and the aggregate exercise
price for such shares.

F-27

79
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(14)   COMMITMENTS (Continued)

(b)    Consulting Agreements with Affiliates of Stockholders and 
Directors (Continued)

On September 9, 1994, the Company entered into modifications to
its arrangements with Pillar S.A. and its affiliates, including:
(i) a reduction in the exercise price of certain warrants
previously issued to $10.00 per share; (ii) an amendment to the
terms of each of the warrants issued to Pillar S.A. and its
affiliates described above to provide for cashless exercise in
connection with a sale or change in control of the Company; (iii)
a grant of additional five-year warrants (the "Additional Pillar
Warrants") to purchase 114,000 shares of Common Stock at an
exercise price of $10.00 per share; and (iv) an amendment to the
1994 Pillar Consulting Agreement to provide for (a) a fixed term
of three years and (b) a right of first negotiation for Pillar
S.A. to provide seed financing for any spin-offs by the Company
which do not involve or relate to antisense therapeutic compounds.

On July 8, 1995, the Company entered into an agreement (the Pillar
Europe Agreement) with Pillar S.A. pursuant to which Pillar S.A.
agreed to provide to the Company certain consulting, advisory and
related services and serve as the Company's exclusive agent in
connection with potential corporate partnerships in Europe and as
a nonexclusive placement agent of the Company in connection with
future private placements of securities of the Company for a
period of two years. As discussed below, the Pillar Europe
Agreement was significantly amended on November 1, 1995.

The Company and Pillar S.A. agreed to modify the Pillar Europe
Agreement to provide that (i) Pillar would cease to serve as the
Company's exclusive agent in connection with potential corporate
partnerships in Europe but would continue to serve as a
nonexclusive agent in such respect; (ii) Pillar would receive a
retainer of $26,470 per month for the balance of the term of the
Pillar Europe Agreement; (iii) certain fees to be received by
Pillar in connection with European license or collaboration
agreements would only be payable to Pillar in connection with
potential collaborations with five specified French pharmaceutical
companies; and (iv) any compensation payable to Pillar S.A. in
connection with its services with respect to other corporate
collaborations or any placements of securities would be negotiated
on a case-by-case basis and would be subject to the approval of
the independent members of the Board of Directors of the Company.
In consideration of such modification, the Company paid Pillar a
fee totaling $300,000.

Pillar Limited acted as a placement agent for the Company for
certain sales of convertible preferred stock outside the United
States and, in addition, provided the Company with certain
financial advisory services with respect to the sale of such
preferred stock outside the United States. In connection with such
services, Pillar earned fees of $492,604 and $2,020,751 in the

F-28

80
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(14)   COMMITMENTS (Continued)

(b)    Consulting Agreements with Affiliates of Stockholders and 
Directors (Continued)

years ended December 31, 1994 and 1995, respectively. Pillar
received payment for such fees through $2,435,883 of cash payments
and through the issuance of five-year warrants for the purchase of
2,191,334 shares of common stock at $10.00 per share, expiring on
various dates beginning on July 14, 1998 through October 25, 2000.

(c)    Other Research and Development Agreements

The Company has entered into consulting and research agreements
with the Foundation, universities, research and testing
organizations and individuals, under which consulting and research
support is provided to the Company. These agreements are for
varying terms through and provide for certain minimum annual or
per diem fees plus reimbursable expenses to be paid during the
contract periods. Future minimum fees payable under these
contracts as of December 31, 1996 are approximately as follows:

CALENDAR YEAR                AMOUNT

1997                       $2,096,000
1998                          339,000
1999                          211,000
2000                           82,000
----------

$2,728,000
==========

Total fees and expenses under these contracts were approximately
$2,715,000, $5,470,000, and $7,171,000 during the years ended
December 31, 1994, 1995 and 1996 respectively.

(d)    Employment Agreements

The Company has entered into employment agreements with certain of
its executive officers which provide for, among other things, each
officer's annual salary, cash bonus, fringe benefits, and
vacation and severance arrangements. Under the agreements, the
officers are generally entitled to receive severance payments of
two to three year's base salary.

F-29

81
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(15)   INCOME TAXES

The Company applies SFAS No. 109, Accounting for Income Taxes. At
December 31, 1996, the Company had net operating loss and tax credit
carryforwards for income tax purposes of approximately $138,191,000 and
$2,989,000, respectively, available to reduce federal taxable income and
federal income taxes, respectively. The Tax Reform Act of 1986 (the Act),
enacted in October 1986, limits the amount of net operating loss and
credit carryforwards that companies may utilize in any one year in the
event of cumulative changes in ownership over a three-year period in
excess of 50%. The Company has completed several financings since the
effective date of the Act, which, as of December 31, 1996, have resulted
in ownership changes in excess of 50%, as defined under the Act. The
Company does not believe that such ownership changes will significantly
impact the Company's ability to utilize the net operating loss and credit
carryforwards existing at December 31, 1996. Ownership changes in future
periods may limit the Company's ability to utilize net operating loss and
tax credit carryforwards.

The federal net operating loss carryforwards and tax credit carryforwards
expire approximately as follows:

NET
OPERATING LOSS     TAX CREDIT
EXPIRATION DATE            CARRYFORWARDS    CARRYFORWARDS

December 31-
2005                     $    666,000     $   15,000
2006                        3,040,000         88,000
2007                        7,897,000        278,000
2008                       18,300,000        627,000
2009                       25,670,000        689,000
2010                       36,134,000        496,000
2011                       46,484,000        796,000
------------     ----------

$138,191,000     $2,989,000
============     ==========

F-30

82
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(15)   INCOME TAXES (Continued)

The components of the deferred tax amounts, carryforwards and the
valuation allowance are approximately as follows:

DECEMBER 31,
1995             1996

Operating loss carryforwards            $ 36,664,000    $ 55,276,000
Temporary differences                      1,108,000         851,000
Tax credit carryforwards                   2,193,000       2,989,000
------------    ------------

39,965,000      59,116,000

Valuation allowance                      (39,965,000)    (59,116,000)
------------    ------------

$          -    $          -
============    ============

A valuation allowance has been provided, as it is uncertain if the
Company will realize the deferred tax asset. The net change in the total
valuation allowance during the year ended December 31, 1996 was an
increase of approximately $19,151,000.

(16)   EMPLOYEE BENEFIT PLAN

On October 10, 1991, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code. The plan allows employees to
make contributions up to a specified percentage of their compensation.
Under the plan, the Company may, but is not obligated to, match a portion
of the employees' contributions up to a defined maximum. The Company is
currently matching 50% of employee contributions to the plan, up to 6% of
the employee's annual base salary, and charged to operations
approximately $77,000, $125,000, and $224,000 for the years ended
December 31, 1994, 1995, and 1996, respectively, for such matching
contributions.

F-31

83
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

(17)   SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

The accompanying consolidated financial statements include the following
noncash investing and financing activities:

CUMULATIVE FROM
MAY 25, 1989
(INCEPTION) TO
DECEMBER 31.                         DECEMBER 31, 
---------------------------------------------            1996
1994             1995             1996

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for        $   69,045      $   172,757      $    124,052       $    365,854
interest

SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
Purchase of property and equipment
under capital leases                  1,343,720           90,562         1,722,333          3,229,868
==========      ===========      ============       ============

SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Issuance of Series C convertible
preferred stock in exchange for
convertible promissory notes         $        -      $         -      $          -       $  1,700,000
Issuance of convertible promissory
notes in exchange for
subscriptions receivable                      -                -                 -            937,000
Issuance of stock warrants in
exchange for deferred financing               -                -                              238,000
costs
Issuance of Series D convertible
preferred stock in exchange for
convertible promissory notes and
accrued interest                              -                -                 -          9,382,384
Issuance of Series E convertible
preferred stock in exchange for
subscriptions receivable                      -                -                 -            555,117
Issuance of Series F convertible
preferred stock in exchange for
subscriptions receivable                250,000                -                 -          2,535,000
Issuance of Series G convertible
preferred stock in exchange for
subscriptions receivable                      -                -                 -            906,016
Cancellation of warrants and
reduction of deferred financing          68,000                -                 -             68,000
costs
Conversion of preferred stock into
common stock                                  -                -           159,822            159,822
==========      ===========      ============       ============

F-32

84

EXHIBIT INDEX

EXHIBIT NO.    DESCRIPTION
- - ----------     -----------

3.1**   Restated Certificate of Incorporation of the Registrant.

3.2*    Amended  and Restated By-Laws of the Registrant.

4.*     Specimen Certificate for shares of Common Stock, $.001 par
value, of the Registrant.

+10.1*    License Agreement dated February 21, 1990 and restated as of
September 8, 1993 between the Registrant and the Worcester
Foundation for Biomedical Research, Inc., as amended.

+10.2*    Patent License Agreement dated September 21, 1995 between the
Registrant and National Institutes of Health.

+10.3*    License Agreement effective as of October 13, 1994 between the
Registrant and McGill University.

+10.4*    License Agreement effective as of October 25, 1995 between the
Registrant and The General Hospital Corporation.

+10.5*    License Agreement dated as of October 30, 1995 between the
Registrant and Yoon S. Cho-Chung.

+10.6*    Agreement dated as of December 30, 1992 between the Registrant
and Hoffmann- La Roche Inc.

+10.7*    Research and License Agreement effective as of December 30, 1992
between the Registrant and F. Hoffmann-La Roche Ltd.

+10.8*    Collaborative Study Agreement effective as of December 30, 1992
between the Registrant and Medtronic, Inc.

+10.9*    System Design and Procurement Agreement dated as of December 16,
1994 between the Registrant and Pharmacia Biotech, Inc.

10.10*    Lease dated April 9, 1992 between Worcester Business Development
Corporation and the Registrant for offices and laboratory space
located in Two Biotech Park, Worcester, Massachusetts.

10.11*    Lease dated February 15, 1991 between Worcester Business
Development Corporation and the Registrant, as amended, for
offices and laboratory space located in Three Biotech Park,
Worcester, Massachusetts.

10.12*    Sublease dated November 1, 1994 between EcoScience Corporation
and the Registrant, as amended, for offices and laboratory space
located in Four Biotech Park, Worcester, Massachusetts.

10.13*    Lease dated March 10, 1994 between the Registrant and Laborer's
Pension/Milford Investment Corporation for space located at 155
Fortune Boulevard, Milford, Massachusetts, including Note in the
original principal amount of $750,000.

85

10.14*      Lease dated February 4, 1994 between the Registrant and Charles
River Building Limited Partnership for space located at 620
Memorial Drive, Cambridge, Massachusetts.

10.15*      Loan and Security Agreement dated as of March 29, 1991 between
the Registrant and Technology Funding Secured Investors II.

10.16*      Series G Convertible Preferred Stock and Warrant Purchase
Agreement dated as of September 9, 1994 among the Registrant and
certain Purchasers, as amended (the "Series G Agreement").

10.17*      Registration Rights Agreement dated as of February 21, 1990
between the Registrant, the Worcester Foundation for Biomedical
Research, Inc. and Paul C. Zamecnik.

10.18*      Registration Rights Agreement dated as of June 25, 1990 between
the Registrant and Nigel L. Webb.

10.19*      Registration Rights Agreement dated as of February 6, 1992
between the Registrant and E. Andrews Grinstead, III.

10.20*      Registration Rights Agreement dated as of February 6, 1992
between the Registrant and Anthony J. Payne.

++10.21*      1990 Stock Option Plan, as amended.

++10.22*      1995 Stock Option Plan.

++10.23*      1995 Director Stock Plan.

++10.24*      1995 Employee Stock Purchase Plan.

10.25*      Form of Warrant to purchase shares of Series C Convertible
Preferred Stock originally issued to Pillar Investment Limited
(formerly known as Ash Properties Limited), as amended.

10.26*      Form of Warrant to purchase shares of Common Stock issued in
connection with the issuance of the Registrant's series of notes
known as its 10% Convertible Subordinated Notes due September 16,
1993 and the Registrant's 10% Convertible Subordinated Note Due
March 19, 1993, as amended.

10.27*      Warrant issued to Pillar S.A. to purchase up to 175,000 shares of
Common Stock dated as of December 1, 1992, as amended.

10.28*      Warrant issued to F. Hoffmann-La Roche Ltd. to purchase 551,724
shares of Common Stock dated as of February 12, 1993.

10.29*      Form of Warrant originally issued to Pillar Investment Limited to
purchase 427,126 shares of Common Stock dated as of February 15,
1993, as amended.

10.30*      Form of Warrant originally issued to Pillar Investment Limited to
purchase 350,000 shares of Common Stock dated as of February 15,
1993, as amended.

10.31*      Warrant issued to Pillar Investment Limited to purchase 500,000
shares of Common Stock dated as of February 4, 1994, as amended.

86

10.32*      Form of Warrant issued to Pillar Investment Limited to purchase
shares of Common Stock issued as placement commissions in
connection with the sale of shares of Series F Convertible
Preferred Stock and in consideration of financial advisory
services, as amended.

10.33*      Warrant issued to Pillar S.A. to purchase 100,000 shares of
Common Stock dated as of March 1, 1994, as amended.

10.34*      Form of Warrant to purchase shares of Common Stock issued as part
of the Units (as defined in the Series G Agreement) issued and
sold to investors pursuant to the Series G Agreement on or prior
to March 31, 1995, as amended.

10.35*      Form of Warrant to purchase shares of Common Stock issued as part
of the Units issued and sold to investors pursuant to the Series
G; Agreement after March 31, 1995.

10.36*      Warrant issued to Pillar S.A. to purchase 100,000 shares of
Common Stock dated as of March 1, 1995.

10.37*      Form of Warrant issued to Pillar Investment Limited to purchase
shares of Common Stock issued as placement commissions in
connection with the sale of Units pursuant to the Series G
Agreement.

++10.38       Employment Agreement dated as of March 1, 1997 between the
Registrant and E. Andrews Grinstead, III.

10.39*      Indemnification Agreement dated as of February 6, 1992 between
the Registrant and E. Andrews Grinstead, III.

++10.40       Employment Agreement dated as of March 1, 1997 between the
Registrant and Anthony J. Payne.

10.41*      Indemnification Agreement dated as of February 6, 1992 between
the Registrant and Anthony J. Payne.

++10.42       Employment Agreement dated March 1, 1997 between the Registrant
and Dr. Sudhir Agrawal.

++10.43*      Employment Agreement dated October 1, 1993 between the Registrant
and Dr. Paul Schechter.

++10.44*      Consulting Agreement dated as of February 21, 1990 between the
Registrant and Dr. Paul C. Zamecnik.

10.45*      Consulting Agreement dated as of March 1, 1994 between the
Registrant and Pillar S.A.

10.46*      Consulting Agreement dated as of July 8, 1995 between the
Registrant and Pillar S.A., as amended.

10.47*      Master Lease Agreement dated as of March 1, 1994 between the
Registrant and General Electric Capital Corporation.

87

10.48*      First Amendment to Lease dated as of November 30, 1995 between
the Registrant and Charles River Building Limited Partnership for
space located at 620 Memorial Drive, Cambridge, Massachusetts.

+10.49**     Research, Development and License Agreement dated as of January
24, 1996 between the Registrant and G.D. Searle & Co.

+10.50**     Manufacturing and Supply Agreement dated as of January 24, 1996
between the Registrant and G.D. Searle & Co.

10.51**     Registration Rights Agreement dated as of January 24, 1996
between the Registrant and G.D. Searle & Co.

10.52**     Second Amendment to Lease dated as of February 23, 1996 between
the Registrant and Charles River Building Limited Partnership for
space located at 620 Memorial Drive, Cambridge, Massachusetts.

10.53**     Third Amendment to Lease dated as of February 28, 1996 between
the Registrant and Charles River Building Limited Partnership for
space located at 620 Memorial Drive, Cambridge, Massachusetts.

10.54       Fourth Amendment to Lease dated as of July 25, 1996 between the
Registrant and Charles River Building Limited Partnership for
space located at 620 Memorial Drive, Cambridge, Massachusetts.

10.55       Fifth Amendment to Lease dated as of March 14, 1997 between the
Registrant and Charles River Building Limited Partnership for
space located at 620 Memorial Drive, Cambridge, Massachusetts.

10.56       Loan and Security Agreement dated as of December 31, 1996 between
the Registrant and Silicon Valley Bank.

10.57       Warrant issued to Silicon Valley Bank to purchase 65,000 shares
of Common Stock dated as of December 31, 1996.

10.58       Registration Rights Agreement dated as of December 31, 1996
between the Registrant and Silicon Valley Bank.

10.59       Master Equipment Lease Agreement dated as of October 25, 1996
between the Registrant and Finova Technology Finance, Inc.

+++10.60       Supply and Sales Agreement dated as of September 1, 1996 between
the Registrant and P.E. Applied Biosystems.

11.         Computation of pro forma net loss per common share.

21.*        Subsidiaries of the Registrant.

23.1        Consent of Arthur Andersen LLP.

88

23.2        Consent of Banner & Witcoff, Ltd.

27          Financial Data Schedule [EDGAR]

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

*    Incorporated by reference to Exhibits to the Registrant's Registration
Statement on Form S-1 (File No. 33-99024).

**   Incorporated by reference to Exhibits to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995.

+    Confidential treatment granted as to certain portions, which portions are
omitted and filed separately with the Commission.

++   Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to this Annual Report on Form 10-K.

+++  Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.

ANNEX E
-------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

-------

For the Quarterly Period Ended:                                  0-27352
September 30, 1997                                 Commission File Number

HYBRIDON, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE                                           04-3072298
(State or other jurisdiction of                            (I.R.S. Employer
organization or incorporation)                          Identification Number)

620 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
------------------------------------------------------------
(Address of principal executive offices, including zip code)

(617) 528-7000
----------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

YES   X      NO
---        ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, Par Value $.001 Per Share                   25,292,252
- - ---------------------------------------                   ----------
Class                       Outstanding as of October 31, 1997

2

HYBRIDON, INC.

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 AND
DECEMBER 31, 1996

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 AND CUMULATIVE FROM MAY 25,
1989 (INCEPTION) TO SEPTEMBER 30, 1997

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996, AND CUMULATIVE FROM MAY 25,
1989 (INCEPTION) TO SEPTEMBER 30, 1997

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION

ITEM 5 - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

3

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

ASSETS
SEPTEMBER 30,      DECEMBER 31,
1997              1996
-------------     -------------

CURRENT ASSETS:
Cash and cash equivalents                                                     $   5,892,967     $  12,633,742
Short-term investments                                                            8,898,715         3,785,146
Accounts receivable                                                                 297,351           573,896
Prepaid expenses and other current assets                                         1,956,043         1,545,324
-------------     -------------

Total current assets                                                       17,045,076        18,538,108
-------------     -------------

PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements                                                           14,266,008         9,257,516
Laboratory equipment                                                              6,681,385         5,884,861
Equipment under capital leases                                                    5,371,707         2,904,688
Office equipment                                                                  1,785,376         1,496,639
Furniture and fixtures                                                              684,595           499,958
Construction-in-progress                                                          1,176,785         2,193,400
-------------     -------------
29,965,856        22,237,062

Less--Accumulated depreciation and amortization                                  10,678,014         6,596,294
-------------     -------------
19,287,842        15,640,768
-------------     -------------

OTHER ASSETS:
Restricted cash                                                                   1,326,840           437,714
Notes receivable from officers                                                      262,026           317,978
Deferred financing costs and other assets                                         3,230,945         1,152,034
Investment in real estate partnership                                             5,450,000         5,450,000
-------------     -------------

10,269,811         7,357,726
-------------     -------------

$  46,602,729     $  41,536,602
=============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Current portion of long-term debt and capital lease obligations               $   8,062,535     $   1,308,511
Accounts payable                                                                  4,476,576         4,064,419
Accrued expenses                                                                  7,128,573         4,190,766
Deferred revenue                                                                         --            86,250
-------------     -------------
Total current liabilities                                                  19,667,684         9,649,946
-------------     -------------

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION                 3,556,763         9,031,852
-------------     -------------
CONVERTIBLE SUBORDINATED NOTES PAYABLE                                              50,000,000                --
-------------     -------------

STOCKHOLDERS' EQUITY(DEFICIT):
Preferred stock, $.01 par value-
Authorized--5,000,000 shares
Issued and outstanding--None                                                           --                --
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding--25,292,252 shares at September 30, 1997, and
25,146,577 shares at December 31, 1996 respectively                              25,292            25,147
Additional paid-in capital                                                      173,672,464       173,227,358
Deficit accumulated during the development stage                               (199,171,091)     (149,193,775)
Deferred Compensation                                                            (1,148,383)       (1,203,926)
-------------     -------------
Total stockholders' equity(deficit)                                       (26,621,718)       22,854,804
-------------     -------------

$  46,602,729     $  41,536,602
=============     =============

The accompanying notes are an integral part of these consolidated condensed
financial statements.

4

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

CUMULATIVE FROM
MAY 25, 1989
THREE MONTHS ENDED                  NINE MONTHS ENDED          (INCEPTION) TO
SEPTEMBER 30,                       SEPTEMBER 30,            SEPTEMBER 30,
1997             1996              1997              1996            1997

REVENUES:
Research and development         $    200,000     $    358,750      $    980,150      $  1,076,250    $   5,534,413
Product revenue                       155,368          611,520         1,231,226           611,520        2,311,401
Interest income                       294,246          560,376           898,160         1,195,871        3,039,777
Royalty and other income               18,247               --            33,218            62,321           95,539
------------     ------------      ------------      ------------    -------------

667,861        1,530,646         3,142,754         2,945,962       10,981,130
------------     ------------      ------------      ------------    -------------

OPERATING EXPENSES:
Research and development          11,338,913       10,242,296        37,784,718        27,326,434      156,416,618
General and administrative         3,057,380        2,766,429         9,011,879         7,989,722       45,801,747
Restructuring charge               3,100,000               --         3,100,000                --        3,100,000
Interest                           1,605,918           18,070         3,223,473            87,651        4,833,856
------------     ------------      ------------      ------------    -------------

19,102,211       13,026,795        53,120,070        35,403,807      210,152,221
------------     ------------      ------------      ------------    -------------

Net loss                  $(18,434,350)    $(11,496,149)     $(49,977,316)     $(32,457,845)   $(199,171,091)
------------     ------------      ------------      ------------    -------------

NET LOSS PER COMMON SHARE
(Note 2)                           $       (.73)    $       (.45)     $      (1.98)     $      (1.35)
============     ============      ============      ============

SHARES USED IN COMPUTING NET
LOSS PER COMMON SHARE (Note 2)       25,277,563       25,732,987        25,234,031        23,989,439
============     ============      ============      ============

The accompanying notes are an integral part of these consolidated condensed
financial statements

5

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

CUMULATIVE FROM
MAY 25,1989
NINE MONTHS ENDED         (INCEPTION) TO
SEPTEMBER 30,            SEPTEMBER 30,
1997              1996             1997

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                           $(49,977,316)     $(32,457,845)   $(199,171,091)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization                                       4,081,720         1,626,080       10,779,455
Issuance of common  stock for services rendered                       146,875                --          146,875
Compensation on grant of stock options, warrants and                  261,519                --        8,069,250
restricted stock
Amortization of discount on convertible promissory notes                   --                --          690,157
payable
Amortization of deferred financing costs                              358,904                --          575,636
Noncash interest on convertible promissory notes payable                   --                --          260,799
Write-down of assets related to restructuring                         331,000                            331,000
Changes in operating assets and liabilities-
Accounts receivable                                                 276,545                --         (297,350)
Prepaid and other current assets                                   (541,718)       (1,427,049)      (2,087,042)
Notes receivable from officers                                       55,952            (7,371)        (262,026)
Amounts payable to related parties                                       --            21,500         (200,000)
Accounts payable and accrued expenses                             3,349,962           756,899       11,605,147
Deferred revenue                                                    (86,250)               --               --
------------      ------------    -------------

Net cash used in operating activities                    (41,742,807)      (31,487,786)    (169,559,190)
------------      ------------    -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments                                   (5,113,569)      (11,063,626)      (8,898,715)
Purchases of property and equipment, net                             (6,645,439)       (7,576,520)     (28,448,149)
Decrease (increase)  in restricted cash and other assets               (626,985)          418,118       (2,291,168)
Investment in real estate partnership                                        --        (3,751,552)      (5,450,000)
------------      ------------    -------------

Net cash used in investing activities                    (12,385,993)      (21,973,580)     (45,088,032)
------------      ------------    -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock                        --                --       96,584,154
Proceeds from issuance of common stock related to stock                  83,327           598,676        1,257,929
options and restricted stock grants
Proceeds from issuance of common stock related to stock                   9,075         1,539,386        3,185,816
warrants
Net proceeds from issuance of common stock                                   --        52,231,244       52,355,324
Repurchase of common stock                                                   --                --             (263)
Proceeds from notes payable                                                  --                --        9,450,000
Proceeds from issuance of convertible promissory notes payable       50,000,000                --       59,191,744
Proceeds from long-term debt                                                 --                --          662,107
Payments on long-term debt and capital leases                        (1,169,656)         (351,849)      (2,971,268)
Proceeds from sale/leaseback                                          1,165,236                --        3,960,752
(Increase) decrease in deferred financing costs                      (2,699,957)          526,721       (3,136,106)
------------      ------------    -------------

Net cash provided by financing activities                 47,388,025        54,544,178      220,540,189
------------      ------------    -------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    (6,740,775)        1,082,812        5,892,967

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                          12,633,742         5,284,262               --
------------      ------------    -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                              $  5,892,967      $  6,367,074    $   5,892,967
============      ============    =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest                                             $    786,005      $     87,651    $   2,396,388
============      ============    =============

The accompanying notes are an integral part of these consolidated condensed
financial statements.

6

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(1)    ORGANIZATION

Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology.

The Company is in the development stage. Since inception, the Company has
been engaged primarily in research and development efforts, development
of its manufacturing capabilities and organizational efforts, including
recruiting of scientific and management personnel and raising capital. To
date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it based on antisense technology.
In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with
comprehensive regulatory requirements. Accordingly, it is not possible to
predict the amount of funds that will be required or the length of time
that will pass before the Company receives revenues from sales of any of
these products. All revenues received by the Company to date have been
derived from collaboration agreements, interest on investment funds and
revenues from the custom contract manufacturing of synthetic DNA and
reagent products by the Company's Hybridon Specialty Products Division.
As a result, although the Company has begun to generate revenues from its
contract manufacturing business, the Company is dependent on the proceeds
from possible future sales of equity securities, debt financings and
research and development collaborations in order to fund future
operations. Based on its current operating plan, the Company believes
that its existing resources, together with committed collaborative
research payments, the Company will have sufficient capital requirements
to fund its operations into December 1997. As noted, the Company will
require substantial additional funding to enable the Company to continue
operations beyond such time.

The unaudited consolidated condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and include, in
the opinion of management, all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of interim
period results. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. The Company believes, however, that its
disclosures are adequate to make the information presented not
misleading. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full fiscal
year. It is suggested that these financial statements be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, as filed with the Securities and Exchange
Commission.

7

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net Loss per Common Share

Net loss per common share is computed using the weighted average number
of shares of common stock outstanding during the period. Pursuant to the
requirements of the Securities and Exchange Commission, common stock
issued by the Company during the 12 months immediately preceding its
initial public offering, plus shares of common stock that became issuable
during the same period pursuant to the grant of common stock options and
preferred and common stock warrants, has been included in the calculation
of weighted average number of shares outstanding for the period from
January 1, 1996 through February 2, 1996 (using the treasury-stock method
and the initial public offering price of $10 per share). In addition, the
calculation of the weighted average number of shares outstanding includes
shares of common stock as if all shares of preferred stock were converted
into common stock on the respective original dates of issuance.

(3)    CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company applies Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Accordingly, the Company has classified its cash equivalents
and short-term investments as held-to-maturity, and has recorded them at
amortized cost, which approximates market value. Short-term investments
mature within one year of the balance sheet date. Cash equivalents have
original maturities of less than three months. Cash and cash equivalents
and short-term investments at September 30, 1997 and December 31, 1996
consisted of the following:

SEPTEMBER 30,       DECEMBER 31,
1997                1996

Cash and cash equivalents-
Cash and money market funds                           $5,892,967         $10,144,367
U.S. government securities                                    --           2,489,375
----------         -----------

$5,892,967         $12,633,742
==========         ===========

Short-term investments-
U.S. government securities                            $       --         $ 3,785,146
Commercial paper and certificates of deposit           8,898,715                  --
----------         -----------

$8,898,715         $ 3,785,146
==========         ===========

(4)    CONVERTIBLE SUBORDINATED NOTES PAYABLE

On April 2, 1997, the Company issued $50,000,000 of 9% convertible
subordinated notes (the Notes). Under the terms of the Notes, the Company
must make semi-annual interest payments on the outstanding principal
balance through the maturity date of April 1, 2004. If the Notes are
converted prior to April 1, 2000, the Noteholders are entitled to receive
accrued interest from the date of the most recent interest payment
through the conversion date. The Notes are subordinate to substantially
all of the Company's existing indebtedness. The Notes are convertible at
any time prior to the maturity date at a conversion price equal to
$7.0125 per share, subject to adjustment under certain circumstances, as
defined.

8

Beginning April 1, 2000, the Company may redeem the Notes at its option
for a 4.5% premium over the original issuance price, provided that from
April 1, 2000 to March 31, 2001, the Notes may not be redeemed unless the
closing price of the common stock equals or exceeds 150% of the
conversion price for a period of at least 20 out of 30 consecutive
trading days and the Notes redeemed within 60 days after such trading
period. The premium decreases by 1.5% each year through March 31, 2003.
Upon a change of control of the Company, as defined, the Company will be
required to offer to repurchase the Notes at 150% of the original
issuance price.

(5)    NEW ACCOUNTING STANDARDS

On March 31, 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, Earnings per Share. SFAS No. 128 establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. SFAS No. 128 is
effective for fiscal years ending after December 15, 1997 and early
adoption is not permitted. When adopted by the Company, SFAS No. 128 will
require restatement of prior years' earnings per share. The Company will
adopt SFAS No. 128 for its fiscal year ended December 31, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a
material effect on its financial statements.

In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. SFAS No. 130 requires disclosure of all components of
comprehensive income on an annual basis and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during
a period from transactions and other events and circumstances from
nonowner sources. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997.

In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. SFAS No. 131 requires certain
financial and supplementary information to be disclosed on an annual and
interim basis for each reportable segment of an enterprise. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. Unless
impracticable, companies would be required to restate prior period
information upon adoption.

(6)    RESTRUCTURING

In July and August 1997 the Company implemented a restructuring plan to
reduce expenditures on a phased basis over the balance of 1997 in an
effort to conserve its cash resources. As part of this restructuring
plan, in addition to stopping the clinical development of GEM 91, the
Company's first generation antisense drug for the treatment of AIDS and
HIV the Company reduced or suspended selected programs unrelated to its
core drug development programs involving four second generation antisense
compounds based on the Company's proprietary mixed backbone chemistries.
To begin the implementation of these changes the Company terminated the
employment of 34 employees at its Cambridge and Milford, Massachusetts
facilities in July 1997 and substantially reduced operations at its
Paris, France office and terminated 10 employees at that location in
August 1997. 

Also, in connection with the restructuring the Company entered into two
different sub-leasing arrangements. The Company has sub-leased one
facility in Cambridge, MA and a portion of its corporate headquarters
located at 620 Memorial Drive, Cambridge, MA. The Company incurred
expenses relating to these sub-leases for broker fees and renovation
expenses incurred in preparing the Memorial Drive space for the new
tenant. In addition, the Company plans to sub-lease its office in Paris,
France and has accrued the remaining lease payments net of anticipated
sub-lease income.

The Company is continuing to review its expenditure rate and implement
additional measures to conserve its cash resources. See Note 9(a).

9

Because of the significant costs involved in terminating employees and
substantially reducing operations at its Paris, France office, the
Company does not expect its expenditure rate to materially decrease
until at least October 1997. The following are the significant components
of the charge for restructuring:

Employee severance, benefits and related costs              $2,214,000
Development programs terminated                                356,000
Facility costs                                                 330,000
Writedown of assets to net realizable value                    200,000
----------

$3,100,000
==========

The total cash impact of the restructuring amounted to approximately $2.7
million. The total cash paid as of September 30, 1997 was approximately
$500,000 and the remaining amount of approximately $2.2 million will be
paid through the first quarter of 1998.

(7)    NOTE PAYABLE TO A BANK

The note payable to Silicon Valley Bank (the "Bank") contains certain
financial covenants that require the Company to maintain minimum tangible
net worth (as defined) and minimum liquidity (as defined) and prohibits
the payment of dividends. The Company has secured the obligations under
the note with a lien on all of its assets. If, at specified times, the
Company's minimum liquidity is less than $15,000,000, $10,000,000, or
$5,000,000, the Company is required to pledge cash collateral to the bank
equal to 25%, 50% or 100%, respectively, of the then outstanding balance
under the note, pursuant to a cash pledge agreement. The notes also
contain certain non-financial covenants. As of September 30, 1997, the
Company's minimum liquidity had fallen below $15,000,000 and subsequent
to September 30, 1997 the Company pledged cash collateral to the bank of
$1,750,000. If the Company does not obtain additional financing by the
end of November, the Company's minimum liquidity as of November 30, 1997
may be less than $5,000,000 and the balance of the note will need to be
pledged by December 31, 1997. The Company has classified the entire
balance as a current liability in the accompanying September 30, 1997
balance sheet as it does not currently have the financing to remain in
compliance with the financial covenants as of November 19, 1997 (see
Note 9(c)). Failure by the Company to pledge cash collateral when
required would result in a default under the Company's credit facility
with the bank.

(8)    RESTRICTED CASH

In November 1997 the Company was notified by Bank Fur Vermogensanlagen
Und Handel AG ("BVH") that the Federal Banking Supervisory Office
("BAKred") in Germany had imposed a moratorium, effective as of August
19, 1997 on BVH and had closed BVH for business. Accordingly, the Company
classified its $1,021,000 deposit with BVH as restricted at September 30,
1997. The Company has contacted BVH and is actively pursuing the release
of its deposit or sale of the deposit to a third party, including
possibly an entity affiliated with a director of the Company. The Company
expects to recover substantially all of its deposit in BVH through such
means. However, the timing of the recovery may be over a period of up to
one year. There can be no assurance that the Company will be able to
recover any or all of its deposit or that the Company will not be
required to write off all or a portion of the $1,021,000.

(9)    SUBSEQUENT EVENTS

a) Additional Restructuring

In November 1997, the Company implemented an additional restructuring
plan by reducing the number of employees in its Cambridge and Milford,
Massachusetts facilities by approximately 50 employees. The Company
estimates that the restructuring charge with respect to such reductions,
which will be taken in the fourth quarter of 1997, will total between
approximately $1.5 million and $2.0 million, and expects that it will
make the associated cash payments through the first quarter of 1998.

b) NASDAQ Delisting

On September 19, 1997, the Company received a notice of delisting from
the Nasdaq Stock Market, Inc. ("NASDAQ") indicating that because the
Company was not in compliance with the continued listing requirements of
the Nasdaq National Market, the Company's Common Stock would be delisted
from the Nasdaq National Market. The Company appealed the decision with
NASDAQ and a hearing was held on November 6, 1997. On November 17, 1997,
NASDAQ informed the Company that the Company's Common Stock would not be
delisted and would continue to trade on the Nasdaq National Market,
subject to certain specified conditions, including (i) the closing of a
minimum $12,000,000 from the Private Offering on or before December 1,
1997, (ii) the closing of an additional minimum $20,000,000 from the
Private Offering on or before January 2, 1998, (iii) the closing of      
certain corporate transactions on or before January 2, 1998, and (iv)
the filing of a report on or before January 2, 1998 evidencing that the
Company had a minimum of $12,000,000 in net tangible assets as of
November 30, 1997, with pro forma adjustments for any transactions
occurring prior to the filing of such report. The Company is seeking
clarification with respect to certain of these conditions. There can be
no assurance that the Company will be able to satisfy one or more of
these conditions and that the Company's Common Stock will continue to be 
listed on the Nasdaq National Market.

c) Private Offering of Equity Securities

The Company has entered into a letter of intent with a placement agent
related to a proposed "best efforts" private offering (the "Private
Offering") by the placement agent on behalf of the Company of shares of
the Company's Common Stock pursuant to which the Company is seeking to
sell at one or more closing s up to $50.0 million of its Common Stock
(with a minimum first closing of $12.5 million). If the Private Offering
is consummated as contemplated by the letter of intent, the Common Stock
to be issued and sold in the Private Offering will be offered and sold at
all closings at an effective price per share equal to the lowest of (i)
$1.25 per shares, (ii) 85% of the closing bid price of the Company's
Common Stock at the time the Private Offering is commenced, (iii) the
average closing bid price of the Company's Common Stock for the 30
consecutive days immediately preceding any closing and (iv) the average
closing bid price of the Company's Common Stock for the five consecutive
trading days immediately preceding any closing. The letter of intent also
contemplates that the purchasers of Common Stock sold in the Private
Offering will be afforded significant contractual voting rights and other
protective provisions. For example, if the average closing price of the
Company's Common Stock for 20 consecutive trading days immediately
preceding the first anniversary of the Final closing Date is less than
125% of the offering price, the Company will be required to issue to the
purchasers additional shares of Common Stock such that the value of their
original investment, plus these newly issued shares, equals 125% of their
original investment; provided that the Company will not be obligated in
any event to issue at such time a number of shares in excess of the
number of shares originally issued. The Company has agreed that the
placement agent will serve as its exclusive agent for a period of up to
120 days and that the Company will not engage in specified activities
pending completion or termination of the Private Offering, subject to
certain specified limitations.

10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The Company is engaged in the discovery and development of genetic medicines
based primarily on antisense technology. The Company commenced operations in
February 1990 and since that time has been engaged primarily in research and
development efforts, development of its manufacturing capabilities and
organizational efforts, including recruitment of scientific and management
personnel and raising capital. To date, the Company has not received revenue
from the sale of biopharmaceutical products developed by it based on antisense
technology. In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with comprehensive
regulatory requirements. Accordingly, it is not possible to predict the amount
of funds that will be required or the length of time that will pass before the
Company receives revenues from sales of any of these products. All revenues
received by the Company to date have been derived from collaborative agreements,
interest on invested funds and revenues from the custom contract manufacturing
of synthetic DNA and reagent products by the Company's Hybridon Specialty
Products Division.

In July and August 1997 the Company implemented a restructuring plan to reduce
expenditures on a phased basis over the balance of 1997 in an effort to conserve
its cash resources. As part of this restructuring plan, in addition to stopping
the clinical development of GEM 91, the Company's first generation antisense
drug for the treatment of AIDS and HIV infection, the Company reduced or
suspended selected programs unrelated to its core drug development programs
involving four second generation antisense compounds based on the Company's
proprietary mixed backbone chemistries. To begin the implementation of these
changes the Company terminated the employment of 34 employees at its Cambridge
and Milford, Massachusetts facilities in July 1997 and substantially reduced
operations at its Paris, France office and terminated 10 employees at that
location in August 1997.

Also, in connection with the restructuring the Company entered into two
different sub-leasing arrangements. The Company has sub-leased one facility in
Cambridge, MA and a portion of its corporate headquarters located at 620
Memorial Drive, Cambridge, MA. The Company incurred expenses relating to these
sub-leases for broker fees and renovation expenses incurred in preparing the
Memorial Drive space for the new tenant. In addition, the Company plans to
sub-lease its office in Paris, France and has accrued the remaining lease
payments net of anticipated sub-lease income.

Because of the significant costs involved in terminating employees and
substantially reducing operations at its Paris, France office, the Company does
not expect its expenditure rate to materially decrease until at least October
1997. The Company recorded a restructuring charge of $3,100,000 from the actions
taken to date and will make the remaining associated cash payments through the 
first quarter of 1998.

In November 1997, the Company implemented an additional restructuring plan by
further reducing the number of employees in its Cambridge and Milford,
Massachusetts facilities by approximately 50 employees. The Company estimates
that the restructuring charge to be taken in the fourth quarter will total
between approximately $1.5 million and $2.0 million, and expects that it will
make the related cash payments through the first quarter of 1998.

The Company has incurred losses since its inception and, despite its
restructuring plan, expects to incur significant operating losses in the future.
The Company expects that its research and development expenses will continue to
be significant during the balance of 1997 and in future years as it pursues its
four core development programs. The Company has incurred cumulative losses from
inception through September 30, 1997 of approximately, $199,171,000.

This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "intends," "may," and
other similar expressions are intended to identify forward-looking statements.

11

There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors include the matters set forth under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors that May Affect Future Results" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which is hereby
incorporated herein by this reference. Any statement contained in such matters
shall be deemed to be modified or superseded for purposes of this Quarterly
Report on Form 10-Q to the extent that a statement contained herein modifies or
supersedes such statement. Moreover, there can be no assurance that the Company
will be able to successfully implement its restructuring plan or as to the
timing thereof.

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 1997 and 1996

REVENUES

The Company had total revenues of $668,000 and $1,531,000 in the three months
ended September 30, 1997 and 1996, respectively, and $3,143,000 and $2,946,000
in the nine months ended September 30, 1997 and 1996, respectively.

Revenues from research and development collaborations were $200,000 and $359,000
for the three months ended September 30, 1997 and 1996, respectively, and
$980,000 and $1,076,000 for the nine months ended September, 1997 and 1996,
respectively. Revenues for the three months ended September 30, 1997 decreased
because the research funding, which the Company received under the Company's
research phase of a collaboration with F. Hoffmann-La Roche Ltd. ("Roche") was
terminated as of March 31, 1997 in connection with Roche's termination of the
research phase of the collaboration. On September 3, 1997 the Company
announced that it had received notification that Roche had decided not to pursue
further its antisense collaboration with Hybridon, and was terminating the
development phase of the collaboration effective February 28, 1998. During the
three and nine months ended September 30, 1997 and 1996, revenues also included
payments under the Company's collaboration with G. D. Searle & Co. (Searle).

Revenues from the custom contract manufacturing of synthetic DNA and reagent
products by the Hybridon Specialty Products Division ("HSPD") were $155,000 and
$1,231,000, respectively, for the three and nine months ended September 30,
1997. Revenues from the custom contract manufacturing of synthetic DNA and
reagent products by HSPD for the three and nine months ended September 30 were
$612,000. HSPD commenced operations in the third quarter of 1996. The decrease
in revenues for the three months ended September 30, 1997 was the result of a
decrease in orders due to the timing of customer requirements. The Specialty
Products Division currently has firm bookings of $800,000 which it anticipates
shipping in the three months ending December 31, 1997. There can be no assurance
however that such bookings will not be cancelled prior to shipping or that
shipping will occur in the three months ending December 31, 1997.

Interest income was $294,000 and $560,000 for the three months ended September
30, 1997 and 1996, respectively, and $898,000 and $1,196,000 for the nine months
ended September 30, 1997 and 1996, respectively. The decrease in interest income
in the three and nine months ended September 30, 1997 was the result of lower
cash balances in such periods than in the corresponding periods in 1996.

RESEARCH AND DEVELOPMENT EXPENSES

The Company had research and development expenses of $37,785,000 and $27,326,000
in the nine months ended September 30, 1997 and 1996, respectively. The increase
in research and development expenses for the nine months ended September 30,
1997 primarily reflected increased

12
expenses related to ongoing clinical trials of the Company's product candidates,
including trials of GEM 91 (which were terminated in July of 1997), trials of
two different formulations of GEM 132 (an antisense compound for the treatment
of systemic CMV and CMV retinitis), which were first initiated with respect to
GEM 132 intravenous in Europe during the third quarter of 1996 and with respect
to GEM 132 intravitreal for the treatment of CMV retinitis in the United States
during the first quarter of 1997, and trials of the Company's second generation
GEM 92 product for the treatment of AIDS and HIV infection which were initiated
in Europe in 1997. The increase in research and development expenses for the
nine months ended September 30, 1997 also reflects an increase in preclinical
costs related to GEM 132, GEM 92 and the Company's GEM 231 product for the
treatment of solid tumors for which an Investigational New Drug application was
filed in November 1997 with respect to which the Company anticipates initiating
clinical trials for this product during the beginning of 1998. Significant
preclinical costs were incurred to meet the filing requirements to launch the
domestic clinical trials for GEM 132 intravitreal and systemic, and GEM 231.

The $11,339,000 in research and development expenses for the three months ended
September 30, 1997 is $1,097,000 higher than the corresponding quarter of 1996
and $3,630,000 lower than the research and development expenses reported for the
three months ended June 30, 1997. This decrease from the second quarter of 1997
is substantially due to the Company suspending development of GEM 91, its first
generation antisense drug for the treatment of AIDS and HIV infection and the
related restructuring efforts at the Company. All ongoing research and
development efforts related to GEM 91 at the Company and at all clinical sites
were suspended in July. Also, during July 1997 as part of the Company's
restructuring, approximately 24 research and development positions were
eliminated. As part of the restructuring all outside testing and consulting
arrangements were reviewed and where appropriate the terms were renegotiated or
the arrangements were cancelled. The Company does not anticipate that its
expenditure rate will materially decrease as a result of these measures until at
least October 1997.

GENERAL AND ADMINISTRATIVE EXPENSES

The Company had general and administrative expenses of $9,012,000 and $7,990,000
in the nine months ended September 30, 1997 and 1996, respectively. The increase
in general and administrative expenses for the nine months ended September 30,
1997 was attributable primarily to increased public relations and business
development costs as the Company continued to focus its efforts on obtaining
financing and strategic pharmaceutical collaborations. In addition, during the
nine months ended September 30, 1997 the increase was due to higher facilities
costs related to its Cambridge facility, certain financing activities which were
terminated during such period, and a one-time charge related to the Company's
investment in MethylGene, Inc., a Canadian company in which the Company owns a
minority interest.

The Company had general and administrative expenses of $3,057,000 and
$2,766,000 in the three months ended September 30, 1997 and 1996,
respectively. This increase is primarily due to the increase in facilities
costs and the termination of certain financing activities during the period. In
July 1997, as part of the restructuring, approximately  7  general and
administrative positions were eliminated. Also as part of the restructuring all
expenses including outside consulting, public relations, travel and
entertainment were reviewed and where appropriate eliminated or significantly
reduced.

13

RESTRUCTURING CHARGE

In July and August 1997, the Company implemented a restructuring plan to reduce
expenditures on a phased basis over the balance of 1997 in an effort to conserve
its cash resources. As part of this restructuring plan, in addition to stopping
the clinical development of GEM 91, the Company reduced or suspended selected
programs unrelated to its four core programs. To begin the implementation of
these changes the Company terminated the employment of 34 employees at its
Cambridge and Milford, Massachusetts facilities in July 1997 and substantially
reduced operations at its Paris, France office and terminated 10 employees at
that location in August 1997. Because of the significant costs involved in
terminating employees and substantially reducing operations at its Paris, France
offices, the Company does not expect its expenditure rate to materially decrease
until at least October 1997. Also, in connection with the restructuring the
Company entered into two different sub-leasing arrangements. The Company has
sub-leased one facility in Cambridge, MA and a portion of its corporate
headquarters located at 620 Memorial Drive, Cambridge, MA. The Company incurred
expenses relating to these sub-leases for broker fees and renovation expenses
incurred in preparing the Memorial Drive space for the new tenant. In addition,
the Company plans to sub-lease its office in Paris, France and has accrued the
remaining lease payments net of anticipated sub-lease income. As a result of the
above actions the Company has recorded a restructuring charge of $3,100,000 in
the three and nine months ending September 30, 1997.

The Company is continuing to review its expenditure rate and implement
additional measures to conserve its cash resources. In November 1997, the
Company implemented an additional restructuring plan by reducing the number of
employees at its Cambridge and Milford, Massachusetts facilities by
approximately 50 employees. The Company estimates that the restructuring charges
taken in the fourth quarter of 1997 will range between $1,500,000 and
$2,000,000, and expects to make the related cash payments during the fourth
quarter of 1997 and through the first quarter of 1998.

INTEREST EXPENSE

The Company had interest expense of $1,606,000 and $18,000 in the three months
ended September 30, 1997 and 1996, respectively, and $3,223,000 and $88,000 in
the nine months ended September 30, 1997 and 1996, respectively. The increase in
interest expense for the three and nine months ended September 30, 1997
reflected an increase in the debt outstanding associated with the Company's
issuance of $50,000,000 of 9% Convertible Subordinated Notes (the"Notes") on
April 2, 1997 and interest incurred on borrowing to finance the purchase of
property and equipment, and leasehold improvements.

NET LOSS

As a result of the above factors, the Company incurred net losses of $18,434,000
and $11,496,000 for the three months ended September 30, 1997 and 1996,
respectively, and $49,977,000 and $32,458,000 for the nine months ended
September 30, 1997 and 1996, respectively.

LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended September 30,1997, the Company used $41,743,000 of
net cash for

14

operating activities, principally for ongoing research and development programs,
and $11,364,000 of net cash for investment in property and equipment, consisting
primarily of costs related to leasehold improvements, equipment and furnishings
of the Cambridge facility which the Company moved into on February 1, 1997.

The Company had cash, cash equivalents and short term investments of $14,792,000
at September 30, 1997. Based on its current operating plan, including the
expenditure rate reduction initiatives being undertaken by the Company as part
of its restructuring plan, the Company believes that its existing capital
resources, together with the committed collaborative research and development
payments from Searle, and anticipated sales of the Hybridon Specialty Products
Division and margins on such sales, will be adequate to fund the Company's
capital requirements into December 1997. The Company will require substantial
additional funds from external sources in the fourth quarter of 1997 to support
the Company's operations through the end of the fourth quarter of 1997 and
thereafter.

The Company is seeking additional equity, debt and lease financing to fund
future operations as well as additional collaborative development and
commercialization relationships with potential corporate partners in order to
fund certain of its programs. In particular, the Company is exploring selling
certain assets or business units to third parties or conducting a financing
which could be significantly dilutive to holders of the Company's existing
securities and contain certain terms that would adversely affect the rights of
holders of the Company's existing securities. 

In connection with these efforts, the Company has entered into a letter of
intent with a placement agent related to a proposed "best efforts" private
offering (the "Private Offering") by the placement agent on behalf of the
Company of shares of the Company's Common Stock pursuant to which the Company is
seeking to sell at one or more closings up to $50.0 million of its Common Stock
(with a minimum first closing of $12.5 million). If the Private Offering is
consummated as contemplated by the letter of intent, the Common Stock to be
issued and sold in the Private Offering will be offered and sold at all closings
at an effective price per share equal to the lowest of (i) $1.25 per share, (ii)
85% of the closing bid price of the Company's Common Stock at the time the
Private Offering is commenced, (iii) the average closing bid price of the
Company's Common Stock for the 30 consecutive trading days immediately preceding
any closing and (iv) the average closing bid price of the Company's Common Stock
for the five consecutive trading days immediately preceding any closing. The
letter of intent also contemplates that the purchasers of Common Stock sold in
the Private Offering will be afforded significant contractual voting rights and
other protective provisions. For example, if the average closing price of the
Company's Common Stock for 20 consecutive trading days immediately preceding the
first anniversary of the Final Closing Date is less than 125% of the offering
price, the Company will be required to issue to the purchasers additional shares
of Common Stock such that the value of their original investment, plus these
newly issued shares, equals 125% of their original investment; provided that the
Company will not be obligated in any event to issue at such time a number of
shares in excess of the number of shares originally issued. The Company has
agreed that the placement agent will serve as its exclusive agent for a period
of up to 120 days and that the Company will not engage in specified activities
pending completion or termination of the Private Offering, subject to certain
specified limitations.

If none of these transactions are consummated by the second week in December,
the Company will likely cease operations or be required to seek relief under the
applicable bankruptcy laws. There can be no assurance that the Company will be
able to consummate any of these transactions including the financing
contemplated in the letter of intent by the second week in December, if at all,
or as to the terms of any such transactions.

Except for research and development funding from Searle under Hybridon's
collaborative agreement with Searle (which is subject to early termination in
certain circumstances), Hybridon has no committed external sources of capital,
and, as discussed above, expects no product revenues for several years from
sales of the products that it is developing (as opposed to sales of DNA products
and reagents manufactured on a custom contract basis by the Hybridon Specialty
Products Division).

On April 2, 1997, the Company sold $50.0 million of Notes to certain investors.
The Notes bear interest at a rate of 9% per annum and have a maturity date of
April 1, 2004. Under the Notes, the Company is required to make semi-annual
interest payments on the outstanding principal balance through the maturity date
of April 1, 2004. The Notes are unsecured and subordinate to substantially all
of the Company's existing indebtedness. The Notes are convertible at the option
of the holder into the Company's Common Stock at any time prior to maturity,
unless previously redeemed or repurchased by the Company under certain specified
circumstances, at a conversion price of $7.0125 per share (subject to
adjustment). Upon change of control of the Company (as defined), the Company is
required to offer to repurchase the Notes at 150% of the original issuance
price.

The note payable to Silicon Valley Bank (the "Bank") contains certain financial
covenants that require the Company to maintain minimum tangible net worth (as
defined) and minimum liquidity (as defined) and prohibits the payment of
dividends. The Company has secured the obligations under the note with a lien on
all of its assets. If, at specified times, the Company's minimum liquidity is
less than $15,000,000, $10,000,000, or $5,000,000, the Company is required to
pledge cash collateral to the bank equal to 25%, 50% or 100%, respectively, of
the then outstanding balance under the note, pursuant to a cash pledge
agreement. The notes also contain certain non-financial covenants. As of
September 30, 1997, the Company's minimum liquidity had fallen below $15,000,000
and subsequent to September 30, 1997 Company pledged cash collateral to the bank
of $1,750,000. If the Company does not obtain additional financing by the end of
November, the Company's minimum liquidity as of November 30, 1997 may be less
than $5,000,000 and the balance of the note will need to be pledged by December
31, 1997. The Company has classified the entire balance as a current liability
in the accompanying September 30, 1997 balance sheet as it does not currently
have the financing to remain in compliance with the financial covenants as of
November 19, 1997 (see Note 9(c)) during the fourth quarter of 1997. Failure by
the Company to pledge cash collateral when required would result in a default
under the Company's credit facility with the bank.

15

HYBRIDON, INC.

PART II

OTHER INFORMATION

-------

ITEM 5.  OTHER INFORMATION

On September 18, 1997, the Company received a notice of delisting from
The Nasdaq Stock Market, Inc. ("NASDAQ") indicating that because the
Company was not in compliance with the continued listing requirements
of the Nasdaq National Market, the Company's Common Stock would be
delisted from the Nasdaq National Market. The Company appealed the
decision with NASDAQ and a hearing was held on November 6, 1997. On
November 17, 1997, NASDAQ informed the Company that the Company's
Common Stock would not be delisted and would continue to trade on the
Nasdaq National Market, subject to certain specified conditions,
including (i) the closing of a minimum $12,000,000 from the Private
Offering on or before December 1, 1997, (ii) the closing of an
additional minimum $20,000,000 from the Private Offering on or before
January 2, 1998, (iii) the closing of certain corporate transactions
on or before January 2, 1998 and (iv) the filing of a report on or
before January 2, 1998 evidencing that the Company had a minimum of
$12,000,000 in net tangible assets as of November 30, 1997, with pro
forma adjustments for any transactions occurring prior to the filing
of such report. The Company is seeking clarification with respect to
certain of these conditions. There can be no assurance that the
Company will be able to satisfy one or more of these conditions and
that the Company's Common Stock will continue to be listed on the
Nasdaq National Market. 

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

The Exhibits listed in the Exhibit Index immediately preceding
such Exhibits are filed as part of this Quarterly Report on
Form 10-Q.

(b)   Reports on Form 8-K

1.   On July 25, 1997, the Company filed a Current Report on
Form 8-K dated July 25, 1997 reporting, among other things, its
announcement that (i) it had elected to stop further development
of its lead compound GEM 91, (ii) it would be focusing its
resources on its second generation chemistries and (iii) its
goal for the second half of 1997 was to effect a reduction in its
expenditure rate on a phased basis over the balance of 1997.  

2.   On September 5, 1997, the Company filed a Current
Report on Form 8-K dated September 3, 1997 reporting its
announcement of the termination of the Company's research and
development collaboration with Hoffman-La Roche Ltd.

3.   On September 19, 1997, the Company filed a Current
Report on Form 8-K dated September 19, 1997 reporting its
announcement of the scheduled delisting of its Common Stock from
the Nasdaq National Market. 

4.   On September 24, 1997, the Company filed a Current
Report on Form 8-K dated September 23, 1997 reporting its
announcement that the Company was moving forward with the appeal
process with respect to the scheduled delisting.

16

SIGNATURES

----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HYBRIDON, INC.

November 13, 1997               /s/ E. Andrews Grinstead III
- -----------------               -----------------------------------------------
Date                            E. Andrews Grinstead, III
Chairman, President and Chief Executive Officer
(Principal Executive Officer)

November 13, 1997               /s/ Lynne J. Rudert
- -----------------               ----------------------------------------------  
Date                            Lynne J. Rudert
Director of Finance and Controller
(Chief Accounting Officer)

HYBRIDON, INC.

EXHIBIT INDEX

Exhibit No.                       Description
- - -----------                       -----------

11            Computation of Net Loss Per Common Share.

27            Financial Data Schedule (EDGAR)

99            Pages 39-48 of the Company's Annual Report on Form 10-K for the
period ended December 31, 1996 (which is not deemed to be filed
except to the extent that portions thereof are expressly
incorporated by reference herein).

ANNEX F
-------

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.       )

FILED BY THE REGISTRANT [X]       FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]

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

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

Hybridon, Inc.
(Name of Registrant as Specified In Its Charter)

[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

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

HYBRIDON, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1997

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
Hybridon, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
November 18, 1997 at 10:00 a.m. at the offices of the Company, 620 Memorial
Drive, Cambridge, Massachusetts 02139 (the "Meeting") for the purpose of
considering and voting upon the following matters:

1.  To approve an amendment to the Company's Certificate of Incorporation
to effect a reverse split of the Company's Common Stock, $.001 par
value per share (the "Common Stock"), pursuant to which each five
shares of Common Stock then outstanding will be converted into one
share.

2.  To transact such other business, if any, as may properly come before
the Meeting or any adjournment thereof.

The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.

The Board of Directors has fixed the close of business on Thursday, October
30, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof. A list of
the Company's stockholders is open for examination to any stockholder at the
principal executive offices of the Company, 620 Memorial Drive, Cambridge,
Massachusetts 02139 and will be available at the Meeting.

By Order of the Board of Directors,

E. ANDREWS GRINSTEAD, III,
Chairman of the Board,
President and Chief Executive
Officer

October 30, 1997

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.

HYBRIDON, INC.
620 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139

PROXY STATEMENT

FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 1997

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Hybridon, Inc., a Delaware corporation (the
"Company"), of proxies for use at the Special Meeting of Stockholders to be held
on Tuesday, November 18, 1997 at 10:00 a.m. at the offices of the Company, 620
Memorial Drive, Cambridge, Massachusetts 02139 and at any adjournments thereof
(the "Meeting").

All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Meeting. Attendance at the Meeting will not itself
be deemed to revoke a proxy unless the stockholder gives affirmative notice at
the Meeting that the stockholder intends to revoke the proxy and vote in person.

THE NOTICE OF MEETING, THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT OCTOBER 31, 1997.

VOTING SECURITIES AND VOTES REQUIRED

On October 30, 1997, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of [          ] shares of Common Stock of the Company, $.001 par value
per share (the "Common Stock"). Each recordholder of Common Stock is entitled to
one vote per share.

The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.

The affirmative vote of the holders of a majority of the shares of Common
Stock issued and outstanding is required for approval of the amendment to the
Company's Certificate of Incorporation. Shares which abstain from voting as to
the amendment to the Company's Certificate of Incorporation, and shares held in
"street name" by brokers or nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a such matter are
nonetheless considered outstanding shares and will have the same effect as a
vote again the amendment to the Company's Certificate of Incorporation.

4

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of October 1, 1997,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the directors of the Company, (iii) the Chief
Executive Officer of the Company and the most highly compensated executive
officer (other than the Chief Executive Officer) whose total annual salary and
bonus exceeded $100,000 in fiscal 1996, and (iv) all current directors and
executive officers of the Company as a group.

AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
----------------------------
NUMBER OF         PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                   SHARES            CLASS(2)
- -------------------------------------------------------------------  ---------         ----------

5% STOCKHOLDERS

Morgan Grenfell International Funds Management Limited.............  2,441,026(3)          9.65%
c/o The Royal Bank of Scotland PLC
London, England

Yahia M.A. Bin Laden...............................................  2,043,750(4)          8.03%
2, rue Charles Bonnet
1206 Geneva, Switzerland

HTI Investments, N.V...............................................  1,708,335             6.75%
c/o Healthcare Technologies
International, Ltd.
P.O. Box 42124
Jeddah, 21541
Saudi Arabia

Nicris Limited.....................................................  1,550,000             6.13%
2, rue Charles Bonnet
1206 Geneva, Switzerland

Youssef El-Zein....................................................  1,498,945(5)          5.61%
c/o Pillar S.A
28, Avenue de Messine
75008 Paris, France

F. Hoffmann-La Roche Ltd...........................................  1,370,114(6)          5.30%
Postfach
CH 4002 Basel
Switzerland

OTHER DIRECTORS AND EXECUTIVE OFFICERS
Nasser Menhall.....................................................  1,276,204(7)          4.81%
E. Andrews Grinstead, III..........................................  1,177,266(8)          4.48%
Mohamed A. El-Khereiji.............................................    904,666(9)          3.51%
Paul C. Zamecnik...................................................    555,100(10)         2.18%
Sudhir Agrawal.....................................................    476,063(11)         1.85%
James B. Wyngaarden................................................     80,000(12)            *
All directors and executive officers as a group (7 persons)........  5,164,175(13)        18.02%

2

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

* Less than 1%

(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission (the "SEC"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has
sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days after October 1,
1997 through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named stockholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares such power with his or
her spouse) with respect to all shares of capital stock listed as
beneficially owned by such person or entity.

(2) Number of shares deemed outstanding includes 25,300,252 shares outstanding
as of October 1, 1997, plus any shares subject to options or warrants held
by the person or entity in question that are currently exercisable or
exercisable within 60 days following October 1, 1997.

(3) Share ownership based on Schedule 13D filed with the Commission on
September 6, 1996.

(4) Includes (a) 156,250 shares issuable upon the exercise of warrants held by
Mr. Bin Laden, and (b) 1,550,000 shares held by Nicris Limited ("Nicris").
Mr. Bin Laden, a controlling stockholder of Nicris, may be considered a
beneficial owner of the shares beneficially owned by such entity.

(5) Includes (a) 780,697 shares issuable upon the exercise of warrants held by
Mr. El-Zein, (b) 284,416 shares issuable upon the exercise of warrants held
by Pillar Limited, (c) 64,000 shares held by Pillar Investment, (d) 1,832
shares issuable upon the exercise of warrants held by Pillar Investment,
and (e) 325,000 shares issuable upon the exercise of warrants held by
Pillar S.A. Also includes 35,000 shares subject to outstanding stock
options held by Mr. El-Zein which are exercisable within the 60-day period
following October 1, 1997. Mr. El-Zein, an affiliate of Pillar Investment,
Pillar Limited and Pillar S.A., may be considered a beneficial owner of the
shares beneficially owned by such entities.

(6) Includes 551,724 shares issuable upon the exercise of a warrant.

(7) Includes (a) 565,956 shares issuable upon the exercise of warrants held by
Mr. Menhall, (b) 284,416 shares issuable upon the exercise of warrants held
by Pillar Limited, (c) 64,000 shares held by Pillar Investment, (d) 1,832
shares issuable upon the exercise of warrants held by Pillar Investment,
and (e) 325,000 shares issuable upon the exercise of warrants held by
Pillar S.A. Also includes 35,000 shares subject to outstanding stock
options held by Mr. Menhall which are exercisable within the 60-day period
following October 1, 1997. Mr. Menhall, an affiliate of Pillar Limited,
Pillar Investment, and Pillar S.A., may be considered a beneficial owner of
the shares beneficially owned by such entities.

(8) Includes 959,370 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

(9) Includes (a) 420,300 shares issuable upon the exercise of warrants held by
Mr. El-Khereiji and (b) 30,000 shares subject to outstanding stock options
held by Mr. El-Khereiji which are exercisable within the 60-day period
following October 1, 1997. Also includes 454,366 shares beneficially owned
by Solter Corporation. Mr. El-Khereiji, an affiliate of Solter Corporation,
may be considered a beneficial owner of the shares beneficially owned by
such entity.

(10) Includes 125,000 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

3

(11) Includes 402,263 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

(12) Includes 3,000 shares held by Dr. Wyngaarden's children and 50,000 shares
subject to outstanding stock options which are exercisable within the
60-day period following October 1, 1997.

(13) Includes an aggregate of 1,728,201 shares issuable upon the exercise of
outstanding warrants exercisable within the 60-day period following October
1, 1997 and an aggregate of 1,636,633 shares issuable upon the exercise of
outstanding stock options exercisable within the 60-day period following
October 1, 1997.

APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT
ONE-FOR-FIVE REVERSE STOCK SPLIT

The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation (the "Proposed Amendment") to effect a
reverse split of the Company's Common Stock, pursuant to which each five shares
of Common Stock will be automatically converted into one share without any
action on the part of the stockholder (the "Reverse Split"). The text of the
Proposed Amendment is set forth in Exhibit A to this Proxy Statement.

Consummation of the Reverse Split will not change the number of shares of
Common Stock authorized by the Company's Certificate of Incorporation, which
will remain at 100,000,000 shares, or the par value of the Common Stock per
share. The Reverse Split will become effective as of 5:00 p.m., Boston time (the
"Effective Date"), on the date that the certificate of amendment to the
Company's Certificate of Incorporation is filed with the Secretary of State of
Delaware. If for any reason the Board of Directors deems it advisable, the
Proposed Amendment may be abandoned at any time before the Effective Date,
whether before or after the Meeting (even if such proposal has been approved by
the stockholders).

In lieu of issuing less than one whole share resulting from the Reverse
Split to holders of an odd number of shares, the Company will determine the fair
value of each outstanding share of Common Stock held on the Effective Date of
the Reverse Split (the "Fractional Share Purchase Price"). The Company currently
anticipates that the Fractional Share Purchase Price will be based on the
average daily closing bid price per share of the Common Stock as reported by the
primary trading market for the Company's Common Stock for the ten (10) trading
days immediately preceding the Effective Date. In the event the Company
determines that unusual trading activity would cause such amount to be an
inappropriate measure of the fair value of the Common Stock, the Company may
base the Fractional Share Purchase Price on the fair market value of the Common
Stock as reasonably determined in good faith by the Board of Directors of the
Company. Stockholders who hold an odd number of shares on the Effective Date
will be entitled to receive, in lieu of the less than one whole share arising as
a result of the Reverse Split, cash in the amount of the relevant portion of the
Fractional Share Purchase Price.

As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for certificates representing the number of whole shares of Common
Stock (plus the relevant portion of the Fractional Share Purchase Price, if any)
into which the shares of Common Stock have been converted as a result of the
Reverse Split. No cash payment will be made or new certificate issued to a
stockholder until he has surrendered his outstanding

4

certificates together with the letter of transmittal to the Company's exchange
agent. See "-- Exchange of Stock Certificates."

THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT.

PURPOSE OF THE REVERSE SPLIT

The Company's shares of Common Stock have been listed, and have traded, on
the Nasdaq National Market ("Nasdaq NM") since January 1996 when the Company
completed its initial public offering. On September 18, 1997, the Company
received a notice of delisting from The Nasdaq Stock Market, Inc. ("NASDAQ")
indicating that because the Company was not in compliance with the continued
listing requirements of the Nasdaq NM, the Company's Common Stock would be
delisted from the Nasdaq NM. The Company has appealed the decision with NASDAQ
and a hearing has been scheduled for Thursday, November 6, 1997. The delisting
action has been stayed pending the outcome of the appeal.

The rules of the Nasdaq NM require that as a condition of the continued
listing of a company's securities on the Nasdaq NM, a company satisfy at least
one of several alternative maintenance requirements, which generally require
that a company meet certain minimum criteria relating to its financial
condition, results of operations and trading market for its listed securities.
Under one such maintenance requirement, the minimum bid price of the Company's
shares of Common Stock must equal or exceed $5.00, among other criteria. The
closing price of the Company's Common Stock on October 9, 1997 was $1.875 per
share.

The Company believes that if the Reverse Split is approved by the
stockholders at the Meeting, and the Reverse Split is effectuated, the Company's
shares of Common Stock will have a minimum bid price in excess of $5.00 per
share, and therefore will satisfy one of the criteria of the above-mentioned
Nasdaq NM maintenance requirement. However, the Company would also need to
satisfy other criteria to continue to have the Common Stock be eligible for
continued listing and trading on the Nasdaq NM. These other criteria consist of
maintaining (i) a market capitalization of at least $50 million, (ii) a public
float of at 1.1 million shares, (iii) a market value of the public float of at
least $15 million, (iv) at least 400 shareholders (round lot holders), (v) at
least four market makers and (vi) compliance with certain corporate governance
requirements. The Company believes that it satisfies all of these other
maintenance criteria except for the market capitalization criteria. As of
October 9, 1997, the Company's market capitalization was approximately $47.4
million. The Company is currently exploring financing alternatives to permit it
to meet the market capitalization criteria even if the price per share of the
Common Stock does not increase. There can be no assurance, however, that the
Company will be successful in meeting all requisite maintenance criteria.

If the Reverse Split is not approved by the stockholders at the Meeting,
then it is highly likely that the Company's shares of Common Stock will cease to
be listed and traded on the Nasdaq NM, which could adversely affect the
liquidity of the Company's Common Stock and the ability of the Company to raise
capital. In such event, the Company intends to make application for listing on
the Nasdaq Small Cap Market. If not approved for listing on the Nasdaq Small Cap
Market, the shares of Common Stock will likely be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board and the spread between the bid and ask price of the shares of
Common Stock is likely to be greater than at present and stockholders may
experience a greater degree of difficulty in engaging in trades of shares of
Common Stock.

In addition, the Board of Directors further believes that low trading
prices of the Company's Common Stock may have an adverse impact upon the
efficient operation of the trading market in the securities. In particular,
brokerage firms often charge a greater percentage commission on low-priced
shares than that which would be charged on a transaction in the same dollar
amount of securities with a higher per share price. A

5

number of brokerage firms will not recommend purchases of low-priced stock to
their clients or make a market in such shares, which tendencies may adversely
affect the Company.

Stockholders should note that the effect of the Reverse Split upon the
market prices for the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that prices for shares of the Common Stock
after the Reverse Split will be five times the prices for shares of the Common
Stock immediately prior to the Reverse Split. Furthermore, there can be no
assurance that the proposed Reverse Split will achieve the desired results which
have been outlined above, nor can there be any assurance that the Reverse Split
will not adversely impact the market price of the Common Stock or,
alternatively, that any increased price per share of the Common Stock
immediately after the proposed Reverse Split will be sustained for any prolonged
period of time. In addition, the Reverse Split may have the effect of creating
odd lots of stock for some stockholders and such odd lots may be more difficult
to sell or have higher brokerage commissions associated with the sale of such
odd lots.

EFFECT OF THE REVERSE SPLIT

As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of Common Stock held immediately
prior to the close of business on the Effective Date divided by five, plus cash
in lieu of any fractional share. The Reverse Split will not affect a
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares. The rights and privileges of the holders of shares of
Common Stock will be unaffected by the Reverse Split. The par value of the
Common Stock will remain at $.001 per share following the Effective Date of the
Reverse Split, and the number of shares of Common Stock issued will be reduced.
Consequently, the aggregate par value of the issued Common Stock also will be
reduced. In addition, the number of authorized but unissued shares of Common
Stock will be increased by the Reverse Split, the issuance of which may have the
effect of diluting the earnings per share and book value per share, as well as
the stock ownership and voting rights, of outstanding Common Stock. As the
Reverse Split will increase the number of authorized but unissued shares of
Common Stock, it may be construed as having an anti-takeover effect by
permitting the issuance of shares to purchasers who might oppose a hostile
takeover bid or oppose any efforts to amend or repeal certain provisions of the
Company's Certificate of Incorporation or By-laws.

Stockholders have no right under Delaware law or under the Company's
Certificate of Incorporation or By-laws to dissent from the Reverse Split.

The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act, and the Company has
no current intention of terminating its registration under the Exchange Act.

Upon consummation of the Reverse Split, the total number of shares
currently reserved for grants of stock options and all stock options previously
granted would be decreased proportionately. The cash consideration payable per
share upon exercise of the stock options would be increased proportionately.

EXCHANGE OF STOCK CERTIFICATES

As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates ("Old Certificates")
for new certificates ("New Certificates") representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split (as well as cash in lieu of
fractional shares resulting from the reverse split). Stockholders

6

9

will be furnished with the necessary materials and instructions for the
surrender and exchange of stock certificates at the appropriate time by the
Company's transfer agent. Stockholders will not be required to pay a transfer or
other fee in connection with the exchange of certificates. STOCKHOLDERS SHOULD
NOT SUBMIT ANY CERTIFICATES TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.

FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT

The following description of the material federal income tax consequences
of the Reverse Split is based upon the Internal Revenue Code of 1986, as
amended, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices all as in effect on
the date of this Proxy Statement. The Company has not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding
the federal income tax consequences of the Reverse Split. This discussion is for
general information only and does not discuss consequences which may apply to
special classes of taxpayers (e.g., non-resident aliens, broker-dealers or
insurance companies) and does not discuss the tax consequences under the laws of
any foreign, state or local jurisdictions. Stockholders are urged to consult
their own tax advisors to determine the particular consequences to them.

In general, the federal income tax consequences of the proposed Reverse
Split will vary among stockholders depending upon whether they receive the
Fractional Share Purchase Price or solely New Certificates in exchange for Old
Certificates. The Company believes that because the Reverse Split is not part of
a plan to increase periodically a stockholder's proportionate interest in the
Company's assets or earnings and profits, the Reverse Split probably will have
the following federal income tax effects:

1.  A stockholder who receives solely New Certificates will not
recognize gain or loss on the exchange. In the aggregate, the stockholder's
basis in the Common Stock represented by New Certificates will equal the
holder's basis in the Common Stock represented by Old Certificates.

2.  A stockholder who receives a portion of the Fractional Share
Purchase Price as a result of the Reverse Split will generally be treated
as having received the payment as a distribution in redemption of the
Fractional Share, as provided in Section 302(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Each affected stockholder will be
required to consult such stockholder's own tax advisor for the tax effect
of such redemption (i.e., exchange or dividend treatment) in light of such
stockholder's particular facts and circumstances.

3.  The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Code, and the Company will not
recognize any gain or loss as a result of the Reverse Split.

7

10

GENERAL

OTHER MATTERS

The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
principal executive offices, 620 Memorial Drive, Cambridge, Massachusetts 02139,
no later than December 19, 1997 in order to be considered for inclusion in the
proxy statement relating to that meeting.

COSTS OF SOLICITATION

The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will also request brokerage houses,
custodians, nominees and fiduciaries to forward copies of the proxy material to
those persons for whom they hold shares and request instructions for voting the
Proxies. The Company will reimburse such brokerage houses and other persons for
their reasonable expenses in connection with this distribution.

By Order of the Board of Directors,

E. ANDREWS GRINSTEAD, III,
Chairman of the Board,
President and Chief Executive
Officer

October 30, 1997

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED.

8

ANNEX F-1
---------

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO.       )

FILED BY THE REGISTRANT [X]       FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]

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

Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

Hybridon, Inc.
(Name of Registrant as Specified In Its Charter)

[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

2) Aggregate number of securities to which transaction applies:

3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):

4) Proposed maximum aggregate value of transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

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

HYBRIDON, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1997

NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
Hybridon, Inc., a Delaware corporation (the "Company"), will be held on Tuesday,
November 18, 1997 at 10:00 a.m. at the offices of the Company, 620 Memorial
Drive, Cambridge, Massachusetts 02139 (the "Meeting") for the purpose of
considering and voting upon the following matters:

1.  To approve an amendment to the Company's Certificate of Incorporation
to effect a reverse split of the Company's Common Stock, $.001 par
value per share (the "Common Stock"), pursuant to which each five
shares of Common Stock then outstanding will be converted into one
share.

2.  To transact such other business, if any, as may properly come before
the Meeting or any adjournment thereof.

The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.

The Board of Directors has fixed the close of business on Thursday, October
30, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof. A list of
the Company's stockholders is open for examination to any stockholder at the
principal executive offices of the Company, 620 Memorial Drive, Cambridge,
Massachusetts 02139 and will be available at the Meeting.

By Order of the Board of Directors,

E. ANDREWS GRINSTEAD, III,
Chairman of the Board,
President and Chief Executive
Officer

October 30, 1997

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO POSTAGE
NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.

HYBRIDON, INC.
620 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139

PROXY STATEMENT

FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 1997

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Hybridon, Inc., a Delaware corporation (the
"Company"), of proxies for use at the Special Meeting of Stockholders to be held
on Tuesday, November 18, 1997 at 10:00 a.m. at the offices of the Company, 620
Memorial Drive, Cambridge, Massachusetts 02139 and at any adjournments thereof
(the "Meeting").

All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation or a subsequently dated proxy to the Secretary of the Company
or by voting in person at the Meeting. Attendance at the Meeting will not itself
be deemed to revoke a proxy unless the stockholder gives affirmative notice at
the Meeting that the stockholder intends to revoke the proxy and vote in person.

THE NOTICE OF MEETING, THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD ARE
BEING MAILED TO STOCKHOLDERS ON OR ABOUT OCTOBER 31, 1997.

VOTING SECURITIES AND VOTES REQUIRED

On October 30, 1997, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote an
aggregate of [          ] shares of Common Stock of the Company, $.001 par value
per share (the "Common Stock"). Each recordholder of Common Stock is entitled to
one vote per share.

The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.

The affirmative vote of the holders of a majority of the shares of Common
Stock issued and outstanding is required for approval of the amendment to the
Company's Certificate of Incorporation. Shares which abstain from voting as to
the amendment to the Company's Certificate of Incorporation, and shares held in
"street name" by brokers or nominees who indicate on their proxies that they do
not have discretionary authority to vote such shares as to a such matter are
nonetheless considered outstanding shares and will have the same effect as a
vote again the amendment to the Company's Certificate of Incorporation.

4

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of October 1, 1997,
with respect to the beneficial ownership of shares of Common Stock by (i) each
person known to the Company to beneficially own more than 5% of the outstanding
shares of Common Stock, (ii) the directors of the Company, (iii) the Chief
Executive Officer of the Company and the most highly compensated executive
officer (other than the Chief Executive Officer) whose total annual salary and
bonus exceeded $100,000 in fiscal 1996, and (iv) all current directors and
executive officers of the Company as a group.

AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
----------------------------
NUMBER OF         PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                   SHARES            CLASS(2)
- -------------------------------------------------------------------  ---------         ----------

5% STOCKHOLDERS

Morgan Grenfell International Funds Management Limited.............  2,441,026(3)          9.65%
c/o The Royal Bank of Scotland PLC
London, England

Yahia M.A. Bin Laden...............................................  2,043,750(4)          8.03%
2, rue Charles Bonnet
1206 Geneva, Switzerland

HTI Investments, N.V...............................................  1,708,335             6.75%
c/o Healthcare Technologies
International, Ltd.
P.O. Box 42124
Jeddah, 21541
Saudi Arabia

Nicris Limited.....................................................  1,550,000             6.13%
2, rue Charles Bonnet
1206 Geneva, Switzerland

Youssef El-Zein....................................................  1,498,945(5)          5.61%
c/o Pillar S.A
28, Avenue de Messine
75008 Paris, France

F. Hoffmann-La Roche Ltd...........................................  1,370,114(6)          5.30%
Postfach
CH 4002 Basel
Switzerland

OTHER DIRECTORS AND EXECUTIVE OFFICERS
Nasser Menhall.....................................................  1,276,204(7)          4.81%
E. Andrews Grinstead, III..........................................  1,177,266(8)          4.48%
Mohamed A. El-Khereiji.............................................    904,666(9)          3.51%
Paul C. Zamecnik...................................................    555,100(10)         2.18%
Sudhir Agrawal.....................................................    476,063(11)         1.85%
James B. Wyngaarden................................................     80,000(12)            *
All directors and executive officers as a group (7 persons)........  5,164,175(13)        18.02%

2

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

* Less than 1%

(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission (the "SEC"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual has
sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days after October 1,
1997 through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that the
named stockholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares such power with his or
her spouse) with respect to all shares of capital stock listed as
beneficially owned by such person or entity.

(2) Number of shares deemed outstanding includes 25,300,252 shares outstanding
as of October 1, 1997, plus any shares subject to options or warrants held
by the person or entity in question that are currently exercisable or
exercisable within 60 days following October 1, 1997.

(3) Share ownership based on Schedule 13D filed with the Commission on
September 6, 1996.

(4) Includes (a) 156,250 shares issuable upon the exercise of warrants held by
Mr. Bin Laden, and (b) 1,550,000 shares held by Nicris Limited ("Nicris").
Mr. Bin Laden, a controlling stockholder of Nicris, may be considered a
beneficial owner of the shares beneficially owned by such entity.

(5) Includes (a) 780,697 shares issuable upon the exercise of warrants held by
Mr. El-Zein, (b) 284,416 shares issuable upon the exercise of warrants held
by Pillar Limited, (c) 64,000 shares held by Pillar Investment, (d) 1,832
shares issuable upon the exercise of warrants held by Pillar Investment,
and (e) 325,000 shares issuable upon the exercise of warrants held by
Pillar S.A. Also includes 35,000 shares subject to outstanding stock
options held by Mr. El-Zein which are exercisable within the 60-day period
following October 1, 1997. Mr. El-Zein, an affiliate of Pillar Investment,
Pillar Limited and Pillar S.A., may be considered a beneficial owner of the
shares beneficially owned by such entities.

(6) Includes 551,724 shares issuable upon the exercise of a warrant.

(7) Includes (a) 565,956 shares issuable upon the exercise of warrants held by
Mr. Menhall, (b) 284,416 shares issuable upon the exercise of warrants held
by Pillar Limited, (c) 64,000 shares held by Pillar Investment, (d) 1,832
shares issuable upon the exercise of warrants held by Pillar Investment,
and (e) 325,000 shares issuable upon the exercise of warrants held by
Pillar S.A. Also includes 35,000 shares subject to outstanding stock
options held by Mr. Menhall which are exercisable within the 60-day period
following October 1, 1997. Mr. Menhall, an affiliate of Pillar Limited,
Pillar Investment, and Pillar S.A., may be considered a beneficial owner of
the shares beneficially owned by such entities.

(8) Includes 959,370 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

(9) Includes (a) 420,300 shares issuable upon the exercise of warrants held by
Mr. El-Khereiji and (b) 30,000 shares subject to outstanding stock options
held by Mr. El-Khereiji which are exercisable within the 60-day period
following October 1, 1997. Also includes 454,366 shares beneficially owned
by Solter Corporation. Mr. El-Khereiji, an affiliate of Solter Corporation,
may be considered a beneficial owner of the shares beneficially owned by
such entity.

(10) Includes 125,000 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

3

(11) Includes 402,263 shares subject to outstanding stock options which are
exercisable within the 60-day period following October 1, 1997.

(12) Includes 3,000 shares held by Dr. Wyngaarden's children and 50,000 shares
subject to outstanding stock options which are exercisable within the
60-day period following October 1, 1997.

(13) Includes an aggregate of 1,728,201 shares issuable upon the exercise of
outstanding warrants exercisable within the 60-day period following October
1, 1997 and an aggregate of 1,636,633 shares issuable upon the exercise of
outstanding stock options exercisable within the 60-day period following
October 1, 1997.

APPROVAL OF AN AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT
ONE-FOR-FIVE REVERSE STOCK SPLIT

The Board of Directors has adopted a resolution declaring the advisability
of, and submitting to the stockholders for approval, a proposal to amend the
Company's Certificate of Incorporation (the "Proposed Amendment") to effect a
reverse split of the Company's Common Stock, pursuant to which each five shares
of Common Stock will be automatically converted into one share without any
action on the part of the stockholder (the "Reverse Split"). The text of the
Proposed Amendment is set forth in Exhibit A to this Proxy Statement.

Consummation of the Reverse Split will not change the number of shares of
Common Stock authorized by the Company's Certificate of Incorporation, which
will remain at 100,000,000 shares, or the par value of the Common Stock per
share. The Reverse Split will become effective as of 5:00 p.m., Boston time (the
"Effective Date"), on the date that the certificate of amendment to the
Company's Certificate of Incorporation is filed with the Secretary of State of
Delaware. If for any reason the Board of Directors deems it advisable, the
Proposed Amendment may be abandoned at any time before the Effective Date,
whether before or after the Meeting (even if such proposal has been approved by
the stockholders).

In lieu of issuing less than one whole share resulting from the Reverse
Split to holders of an odd number of shares, the Company will determine the fair
value of each outstanding share of Common Stock held on the Effective Date of
the Reverse Split (the "Fractional Share Purchase Price"). The Company currently
anticipates that the Fractional Share Purchase Price will be based on the
average daily closing bid price per share of the Common Stock as reported by the
primary trading market for the Company's Common Stock for the ten (10) trading
days immediately preceding the Effective Date. In the event the Company
determines that unusual trading activity would cause such amount to be an
inappropriate measure of the fair value of the Common Stock, the Company may
base the Fractional Share Purchase Price on the fair market value of the Common
Stock as reasonably determined in good faith by the Board of Directors of the
Company. Stockholders who hold an odd number of shares on the Effective Date
will be entitled to receive, in lieu of the less than one whole share arising as
a result of the Reverse Split, cash in the amount of the relevant portion of the
Fractional Share Purchase Price.

As soon as practical after the Effective Date, the Company will mail a
letter of transmittal to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
such certificate or certificates to the Company's designated exchange agent in
exchange for certificates representing the number of whole shares of Common
Stock (plus the relevant portion of the Fractional Share Purchase Price, if any)
into which the shares of Common Stock have been converted as a result of the
Reverse Split. No cash payment will be made or new certificate issued to a
stockholder until he has surrendered his outstanding

4

certificates together with the letter of transmittal to the Company's exchange
agent. See "-- Exchange of Stock Certificates."

THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT.

PURPOSE OF THE REVERSE SPLIT

The Company's shares of Common Stock have been listed, and have traded, on
the Nasdaq National Market ("Nasdaq NM") since January 1996 when the Company
completed its initial public offering. On September 18, 1997, the Company
received a notice of delisting from The Nasdaq Stock Market, Inc. ("NASDAQ")
indicating that because the Company was not in compliance with the continued
listing requirements of the Nasdaq NM, the Company's Common Stock would be
delisted from the Nasdaq NM. The Company has appealed the decision with NASDAQ
and a hearing has been scheduled for Thursday, November 6, 1997. The delisting
action has been stayed pending the outcome of the appeal.

The rules of the Nasdaq NM require that as a condition of the continued
listing of a company's securities on the Nasdaq NM, a company satisfy at least
one of several alternative maintenance requirements, which generally require
that a company meet certain minimum criteria relating to its financial
condition, results of operations and trading market for its listed securities.
Under one such maintenance requirement, the minimum bid price of the Company's
shares of Common Stock must equal or exceed $5.00, among other criteria. The
closing price of the Company's Common Stock on October 9, 1997 was $1.875 per
share.

The Company believes that if the Reverse Split is approved by the
stockholders at the Meeting, and the Reverse Split is effectuated, the Company's
shares of Common Stock will have a minimum bid price in excess of $5.00 per
share, and therefore will satisfy one of the criteria of the above-mentioned
Nasdaq NM maintenance requirement. However, the Company would also need to
satisfy other criteria to continue to have the Common Stock be eligible for
continued listing and trading on the Nasdaq NM. These other criteria consist of
maintaining (i) a market capitalization of at least $50 million, (ii) a public
float of at 1.1 million shares, (iii) a market value of the public float of at
least $15 million, (iv) at least 400 shareholders (round lot holders), (v) at
least four market makers and (vi) compliance with certain corporate governance
requirements. The Company believes that it satisfies all of these other
maintenance criteria except for the market capitalization criteria. As of
October 9, 1997, the Company's market capitalization was approximately $47.4
million. The Company is currently exploring financing alternatives to permit it
to meet the market capitalization criteria even if the price per share of the
Common Stock does not increase. There can be no assurance, however, that the
Company will be successful in meeting all requisite maintenance criteria.

If the Reverse Split is not approved by the stockholders at the Meeting,
then it is highly likely that the Company's shares of Common Stock will cease to
be listed and traded on the Nasdaq NM, which could adversely affect the
liquidity of the Company's Common Stock and the ability of the Company to raise
capital. In such event, the Company intends to make application for listing on
the Nasdaq Small Cap Market. If not approved for listing on the Nasdaq Small Cap
Market, the shares of Common Stock will likely be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board and the spread between the bid and ask price of the shares of
Common Stock is likely to be greater than at present and stockholders may
experience a greater degree of difficulty in engaging in trades of shares of
Common Stock.

In addition, the Board of Directors further believes that low trading
prices of the Company's Common Stock may have an adverse impact upon the
efficient operation of the trading market in the securities. In particular,
brokerage firms often charge a greater percentage commission on low-priced
shares than that which would be charged on a transaction in the same dollar
amount of securities with a higher per share price. A

5

number of brokerage firms will not recommend purchases of low-priced stock to
their clients or make a market in such shares, which tendencies may adversely
affect the Company.

Stockholders should note that the effect of the Reverse Split upon the
market prices for the Company's Common Stock cannot be accurately predicted. In
particular, there is no assurance that prices for shares of the Common Stock
after the Reverse Split will be five times the prices for shares of the Common
Stock immediately prior to the Reverse Split. Furthermore, there can be no
assurance that the proposed Reverse Split will achieve the desired results which
have been outlined above, nor can there be any assurance that the Reverse Split
will not adversely impact the market price of the Common Stock or,
alternatively, that any increased price per share of the Common Stock
immediately after the proposed Reverse Split will be sustained for any prolonged
period of time. In addition, the Reverse Split may have the effect of creating
odd lots of stock for some stockholders and such odd lots may be more difficult
to sell or have higher brokerage commissions associated with the sale of such
odd lots.

EFFECT OF THE REVERSE SPLIT

As a result of the Reverse Split, the number of whole shares of Common
Stock held by stockholders of record as of the close of business on the
Effective Date will automatically, without any action required by the
stockholders, be equal to the number of shares of Common Stock held immediately
prior to the close of business on the Effective Date divided by five, plus cash
in lieu of any fractional share. The Reverse Split will not affect a
stockholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment of cash in
lieu of fractional shares. The rights and privileges of the holders of shares of
Common Stock will be unaffected by the Reverse Split. The par value of the
Common Stock will remain at $.001 per share following the Effective Date of the
Reverse Split, and the number of shares of Common Stock issued will be reduced.
Consequently, the aggregate par value of the issued Common Stock also will be
reduced. In addition, the number of authorized but unissued shares of Common
Stock will be increased by the Reverse Split, the issuance of which may have the
effect of diluting the earnings per share and book value per share, as well as
the stock ownership and voting rights, of outstanding Common Stock. As the
Reverse Split will increase the number of authorized but unissued shares of
Common Stock, it may be construed as having an anti-takeover effect by
permitting the issuance of shares to purchasers who might oppose a hostile
takeover bid or oppose any efforts to amend or repeal certain provisions of the
Company's Certificate of Incorporation or By-laws.

Stockholders have no right under Delaware law or under the Company's
Certificate of Incorporation or By-laws to dissent from the Reverse Split.

The Common Stock is currently registered under Section 12(g) of the
Exchange Act and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Split will not affect
the registration of the Common Stock under the Exchange Act, and the Company has
no current intention of terminating its registration under the Exchange Act.

Upon consummation of the Reverse Split, the total number of shares
currently reserved for grants of stock options and all stock options previously
granted would be decreased proportionately. The cash consideration payable per
share upon exercise of the stock options would be increased proportionately.

EXCHANGE OF STOCK CERTIFICATES

As soon as practicable after the Effective Date, the Company intends to
require stockholders to exchange their stock certificates ("Old Certificates")
for new certificates ("New Certificates") representing the number of whole
shares of Common Stock into which their shares of Common Stock have been
converted as a result of the Reverse Split (as well as cash in lieu of
fractional shares resulting from the reverse split). Stockholders

6

9

will be furnished with the necessary materials and instructions for the
surrender and exchange of stock certificates at the appropriate time by the
Company's transfer agent. Stockholders will not be required to pay a transfer or
other fee in connection with the exchange of certificates. STOCKHOLDERS SHOULD
NOT SUBMIT ANY CERTIFICATES TO THE TRANSFER AGENT UNTIL REQUESTED TO DO SO.

FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT

The following description of the material federal income tax consequences
of the Reverse Split is based upon the Internal Revenue Code of 1986, as
amended, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices all as in effect on
the date of this Proxy Statement. The Company has not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding
the federal income tax consequences of the Reverse Split. This discussion is for
general information only and does not discuss consequences which may apply to
special classes of taxpayers (e.g., non-resident aliens, broker-dealers or
insurance companies) and does not discuss the tax consequences under the laws of
any foreign, state or local jurisdictions. Stockholders are urged to consult
their own tax advisors to determine the particular consequences to them.

In general, the federal income tax consequences of the proposed Reverse
Split will vary among stockholders depending upon whether they receive the
Fractional Share Purchase Price or solely New Certificates in exchange for Old
Certificates. The Company believes that because the Reverse Split is not part of
a plan to increase periodically a stockholder's proportionate interest in the
Company's assets or earnings and profits, the Reverse Split probably will have
the following federal income tax effects:

1.  A stockholder who receives solely New Certificates will not
recognize gain or loss on the exchange. In the aggregate, the stockholder's
basis in the Common Stock represented by New Certificates will equal the
holder's basis in the Common Stock represented by Old Certificates.

2.  A stockholder who receives a portion of the Fractional Share
Purchase Price as a result of the Reverse Split will generally be treated
as having received the payment as a distribution in redemption of the
Fractional Share, as provided in Section 302(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). Each affected stockholder will be
required to consult such stockholder's own tax advisor for the tax effect
of such redemption (i.e., exchange or dividend treatment) in light of such
stockholder's particular facts and circumstances.

3.  The Reverse Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Code, and the Company will not
recognize any gain or loss as a result of the Reverse Split.

7

10

GENERAL

OTHER MATTERS

The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at its
principal executive offices, 620 Memorial Drive, Cambridge, Massachusetts 02139,
no later than December 19, 1997 in order to be considered for inclusion in the
proxy statement relating to that meeting.

COSTS OF SOLICITATION

The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will also request brokerage houses,
custodians, nominees and fiduciaries to forward copies of the proxy material to
those persons for whom they hold shares and request instructions for voting the
Proxies. The Company will reimburse such brokerage houses and other persons for
their reasonable expenses in connection with this distribution.

By Order of the Board of Directors,

E. ANDREWS GRINSTEAD, III,
Chairman of the Board,
President and Chief Executive
Officer

October 30, 1997

THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED.

8

11

EXHIBIT A

RESOLVED:  That, subject to stockholder approval, the following paragraph be
inserted prior to the first paragraph of Article FOURTH of the
Certificate of Incorporation:

"That upon the filing date of the Certificate of Amendment of
Restated Certificate of Incorporation of the Corporation (the
"Effective Date"), a one-for-five reverse split of the Corporation's
Common Stock (as defined below) shall become effective, such that
each five shares of Common Stock outstanding and held of record by
each stockholder of the Corporation (including treasury shares)
immediately prior to the Effective Date shall represent one share of
Common Stock from and after the Effective Date."

A-1

12
HYBRIDON, INC.

PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 18, 1997

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE

The undersigned, having received notice of the Special Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) E. Andrews Grinstead, III, Douglas J.
Jensen and David E. Redlick, and each of them, attorneys or attorney of the
undersigned (with full power of substitution in them and each of them) for and
in the name(s) of the undersigned to attend the Special Meeting of Stockholders
of HYBRIDON, INC. (the "Company") to be held on Tuesday, November 18, 1997 at
10:00 a.m. at the offices of the Company, 620 Memorial Drive, Cambridge,
Massachusetts 02139, and any adjournments thereof, and there to vote and act
upon the following matters in respect of all shares of stock of the Company
which the undersigned may be entitled to vote or act upon, with all the powers
the undersigned would possess if personally present.

In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
thereof. The shares represented by this proxy will be voted as directed by the
undersigned. If no direction is given with respect to any election to office or
proposal, this proxy will be voted as recommended by the Board of Directors.
Attendance of the undersigned at the meeting or at any adjournment thereof will
not be deemed to revoke this proxy unless the undersigned shall revoke this
proxy in writing.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE,
DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.

A VOTE "FOR" THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION IS
RECOMMENDED BY THE BOARD OF DIRECTORS.

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT
THEREOF.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.

13

1.   To approve the amendment to the Company's Certificate of Incorporation to
effect a one-for-five reverse split of the Common Stock.

[ ]  FOR                    [ ]  AGAINST                    [ ]  ABSTAIN

Please mark your votes
as indicated in this example   [X]

MARK HERE                                      MARK HERE IF
FOR ADDRESS     [ ]                            YOU PLAN TO     [ ]
CHANGE AND                                     ATTEND THE
NOTE AT LEFT                                   MEETING

Dated: ______________________, 1997

-----------------------------------
Signature

-----------------------------------
Signature if held jointly

NOTE: PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. WHEN SHARES ARE HELD BY
JOINT OWNERS, BOTH SHOULD SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY AUTHORIZED OFFICER,
GIVING FULL TITLE. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON, GIVING FULL TITLE.

ANNEX G
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

-------

For the Quarter Ended:  March 31, 1997           Commission File Number 0-27352

Hybridon, Inc.
(Exact name of registrant as specified in its charter)

Delaware                                   04-3072298
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
organization or incorporation)

620 Memorial Drive
Cambridge, MA 02139
(Address of principal executive offices, including zip code)

(508) 752-7000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

YES  X   NO 
---     ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.001 per share                    25,246,352
- - ---------------------------------------         --------------------------------
Class                          Outstanding as of April 30, 1997

2
HYBRIDON, INC.

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 1997 AND 
DECEMBER 31, 1996 AND PROFORMA BALANCE SHEET AS OF MARCH 31, 1997

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS 
ENDED MARCH 31, 1997 AND 1996 AND CUMULATIVE FROM MAY 25, 1989 
(INCEPTION) TO MARCH 31, 1997

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND 1996, AND CUMULATIVE FROM MAY 25, 1989 
(INCEPTION) TO MARCH 31, 1997

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

3
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

ASSETS
DECEMBER 31,           MARCH 31,              PRO FORMA
1996                 1997              MARCH 31, 1997
(SEE NOTE 1)

CURRENT ASSETS:
Cash and cash equivalents                                            $  12,633,742         $   2,489,882         $  49,489,882
Short-term investments                                                   3,785,146                    --                    --
Accounts receivable                                                        573,896               737,880               737,880
Prepaid expenses and other current assets                                1,545,324             1,735,601             1,735,601
-------------         -------------         -------------

Total current assets                                              18,538,108             4,963,363            51,963,363
-------------         -------------         -------------

PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements                                                   9,257,516             9,235,836             9,235,836
Laboratory equipment                                                     5,884,861             6,096,150             6,096,150
Equipment under capital leases                                           2,904,688             4,042,140             4,042,140
Office equipment                                                         1,496,639             1,525,998             1,525,998
Furniture and fixtures                                                     499,958               548,076               548,076
Construction-in-progress                                                 2,193,400             5,739,721             5,739,721
-------------         -------------         -------------
22,237,062            27,187,921            27,187,921

Less -- Accumulated depreciation and amortization                        6,596,294             7,823,430             7,823,430
-------------         -------------         -------------
15,640,768            19,364,491            19,364,491
-------------         -------------         -------------
OTHER ASSETS:
Restricted cash                                                            437,714               395,000               395,000
Notes receivable from officers                                             317,978               320,282               320,282
Deferred financing costs and other assets                                1,152,034               474,028             3,474,028
Investment in real estate partnership                                    5,450,000             5,450,000             5,450,000
-------------         -------------         -------------

7,357,726             6,639,310             9,639,310
-------------         -------------         -------------

$  41,536,602         $  30,967,164         $  80,967,164
=============         =============         =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current portion of long-term debt and capital lease                  $   1,308,511             1,583,230             1,583,230
obligations
Accounts payable                                                         4,064,419             6,270,436             6,270,436
Accrued expenses                                                         4,190,766             4,361,677             4,361,677
Deferred revenue                                                            86,250                86,250                86,250
-------------         -------------         -------------
Total current liabilities                                          9,649,946            12,301,593            12,301,593
-------------         -------------         -------------

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION                                                                     9,031,852             9,500,463            59,500,463
-------------         -------------         -------------

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -                                               --                                          --
Authorized -- 5,000,000 shares at March 31, 1997
Issued and outstanding -- None                                                --                                          --
Common stock, $.001 par value -
Authorized -- 100,000,000 shares
Issued and outstanding -- 25,146,577 shares at December 31,
1996, and 25,232,352 shares at March 31, 1997
respectively                                                            25,147                25,233                25,233
Additional paid-in capital                                             173,227,358           173,612,808           173,612,808
Deficit accumulated during the development stage                      (149,193,775)         (163,211,408)         (163,211,408)
Deferred Compensation                                                   (1,203,926)           (1,261,525)           (1,261,525)
-------------         -------------         -------------
Total stockholders' equity                                        22,854,804             9,165,108             9,165,108
-------------         -------------         -------------

$  41,536,602         $  30,967,164         $  80,967,164
=============         =============         =============

The accompanying notes are an integral part of these
consolidated condensed financial statements.

4
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

CUMULATIVE FROM
MAY 25, 1989
THREE MONTHS ENDED                 (INCEPTION)
MARCH 31                           TO
1997                 1996             MARCH 31, 1997

REVENUES:
Research and development              $    593,900         $     259,350         $   5,148,163
Product Revenue                           348,154                    --             1,428,329
Interest income                            117,412               294,873             2,259,029
Royalty and other income                        --                    --                62,321
------------         -------------         -------------

1,059,466               554,223             8,897,842
------------         -------------         -------------

OPERATING EXPENSES:
Research and development                11,476,439             7,383,297           130,108,337
General and administrative               3,430,453             2,418,386            40,220,321
Interest                                   170,207                39,604             1,780,590
------------         -------------         -------------

15,077,099             9,841,287           172,109,248
------------         -------------         -------------

Net loss                        $(14,017,633)        $  (9,287,064)        $(163,211,406)
------------         -------------         =============

NET LOSS PER COMMON SHARE
(Note 2)                                 $       (.56)        $        (.41)
============         =============

SHARES USED IN COMPUTING NET LOSS
PER COMMON SHARE (Note 2)                  25,224,728            22,708,394
============         =============

The accompanying notes are an integral part of these
consolidated condensed financial statements.

5
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

CUMULATIVE FROM
MAY 25, 1989
THREE MONTHS ENDED                (INCEPTION) TO
MARCH 31                        MARCH 31,
1997                  1996                 1997

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                          $(14,017,633)        $ (9,287,064)        $(163,211,406)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization                                      1,227,136              499,930             7,924,871
Issuance of common  stock for services rendered                      146,875                   --               146,875
Compensation on grant of stock options, warrants and
restricted stock                                                   133,859                   --             7,941,590
Amortization of discount on convertible promissory
notes payable                                                           --                   --               690,157
Amortization of deferred financing costs                             274,800                   --               491,532
Noncash interest on convertible promissory notes payable
--                   --               260,799
Changes in operating assets and liabilities -
Accounts Receivable                                               (163,984)                  --              (737,880)
Prepaid and other current assets                                  (190,277)          (1,079,723)           (1,735,600)
Notes receivable from officers                                      (2,304)              (2,516)             (320,282)
Amounts payable to related parties                                      --               73,000              (200,000)
Accounts payable and accrued expenses                            2,376,928             (675,583)           10,632,113
Deferred revenue                                                        --                   --                86,250
------------         ------------         -------------

Net cash used in operating activities                   (10,214,600)         (10,471,956)         (138,030,981)
------------         ------------         -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in short-term investments                        3,785,146           (9,914,429)                   --
Purchases of property and equipment, net                            (3,831,655)          (1,867,151)          (25,634,365)
Decrease (increase)  in restricted cash and other assets               445,919               (3,827)           (1,218,264)
Investment in real estate partnership                                       --           (2,911,456)           (5,450,000)
------------         ------------         -------------

Net cash used in investing activities                       399,410          (14,696,863)          (32,302,629)
------------         ------------         -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock                       --                   --            96,584,154
Proceeds from issuance of common stock related to stock
options and restricted stock grants                                   47,203               43,750             1,221,805
Proceeds from issuance of common stock related to stock
warrants                                                                  --                   --             3,176,741
Net proceeds from issuance of common stock                                  --           52,231,244            52,355,324
Repurchase of common stock                                                  --                   --                  (263)
Proceeds from notes payable                                                 --                   --             9,450,000
Proceeds from issuance of convertible
promissory notes payable                                                  --                   --             9,191,744
Proceeds from long-term debt                                                --                   --               662,107
Payments on long-term debt and capital leases                         (375,874)            (108,148)           (2,177,487)
Proceeds from sale/leaseback                                                --                   --             2,795,516
Decrease (increase) in deferred financing costs                             --              526,721              (436,149)
------------         ------------         -------------

Net cash provided by financing activities                  (328,671)          52,693,567           172,823,492
------------         ------------         -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                  (10,143,861)          27,524,748             2,489,882

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                         12,633,742            5,284,262                    --
------------         ------------         -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                             $  2,489,882         $ 32,809,010         $   2,489,882
============         ============         =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest                                            $    170,207         $     39,604         $   1,780,590
============         ============         =============

The accompanying notes are an integral part of these
consolidated condensed financial statements.

6
HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(1)    ORGANIZATION

Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology.

The Company is in the development stage. Since inception, the Company has
devoted substantially all of its efforts toward product research and
development and raising capital. Management anticipates that
substantially all future revenues will be derived from the sale of
proprietary biopharmaceutical products under development or to be
developed in the future, and contract manufacturing of synthetic DNA/RNA
products and reagent products (manufactured by the Hybridon Specialty
Products Division), as well as from research and development revenues and
fees and royalties derived from licensing of the Company's technology.
Accordingly, although the Company has begun to generate revenues from its
contract manufacturing business, the Company is dependent on the proceeds
from possible future sales of equity securities, debt financings and
research and development collaborations in order to fund future
operations.

On April 2, 1997, the Company issued $50,000,000 of 9% convertible
subordinated notes (the Notes). Under the terms of the Notes, the Company
must make semi-annual interest payments on the outstanding principle
balance through the maturity date of April 1, 2004. If the Notes are
converted prior to April 1, 2000, the Noteholders are entitled to receive
accrued interest from the date of the most recent interest payment
through the conversion date. The Notes are subordinate to substantially
all of the Company's existing indebtedness. The Notes are convertible at
any time prior to the maturity date at a conversion price equal to
$7.0125, subject to adjustment under certain circumstances, as defined.

Beginning April 1, 2000, the Company may redeem the Notes at its option
for a 4.5% premium over the original issuance price, provided that from
April 1, 2000 to March 31, 2001, the Notes may not be redeemed unless the
closing price of the common stock equals or exceeds 150% of the
conversion price for a period of at least 20 out of 30 consecutive
trading days and the Notes are redeemed within 60 days after such trading
period. The premium decreases by 1.5% each year through March 31, 2003.
Upon a change of control of the Company, as defined, the Company will be
required to offer to repurchase the Notes at 150% of the original
issuance price.

The unaudited pro forma consolidated balance sheet as of March 31, 1997
shows the financial position of the Company assuming the Notes were
issued on March 31, 1997.

7
HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(Continued)

(1)    ORGANIZATION (Continued)

The unaudited consolidated condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and include, in
the opinion of management, all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of interim
period results. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. The Company believes, however, that its
disclosures are adequate to make the information presented not
misleading. The results for the interim periods presented are not
necessarily indicative of results to be expected for the full fiscal
year. It is suggested that these financial statements be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, as filed with the Securities and Exchange
Commission.

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net Loss per Common Share

Net loss per common share is computed using the weighted average number
of shares of common stock outstanding during the period. Pursuant to the
requirements of the Securities and Exchange Commission, common stock
issued by the Company during the 12 months immediately preceding its
initial public offering, plus shares of common stock that became issuable
during the same period pursuant to the grant of common stock options and
preferred and common stock warrants, has been included in the calculation
of weighted average number of shares outstanding for the period from
January 1, 1996 through February 2, 1996 (using the treasury-stock method
and the initial public offering price of $10 per share). In addition, the
calculation of the weighted average number of shares outstanding includes
shares of common stock as if all shares of preferred stock were converted
into common stock on the respective original dates of issuance.

8
HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(Continued)

(3)   CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company applies SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Accordingly, the Company has classified its
cash equivalents and short-term investments as held-to-maturity, and has
recorded them at amortized cost, which approximates market value.
Short-term investments mature within one year of the balance sheet date.
Cash equivalents have original maturities of less than three months. Cash
and cash equivalents and short-term investments at March 31, 1997 and
December 31, 1996 consisted of the following:

March 31,        December 31,
1997               1996

Cash and Cash Equivalents -
Cash and money market funds        $ 1,492,184        $10,144,367
U.S. government securities             997,698          2,489,375
-----------        -----------

$ 2,489,882        $12,633,742
===========        ===========
Short-term Investments -
U.S. government securities         $        --        $ 3,785,146
===========        ===========

9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The Company is engaged in the discovery and development of genetic medicines
based primarily on antisense technology. The Company commenced operations in
February 1990 and since that time has been engaged primarily in research and
development efforts, development of its manufacturing capabilities and
organizational efforts, including recruitment of scientific and management
personnel and raising capital. To date, the Company has not received revenue
from the sale of biopharmaceutical products developed by it based on antisense
technology. In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with comprehensive
regulatory requirements. Accordingly, it is not possible to predict the amount
of funds that will be required or the length of time that will pass before the
Company receives revenues from sales of any of these products. All revenues
received by the Company to date have been derived from collaborative agreements,
interest on invested funds and revenues from the custom contract manufacturing
of synthetic DNA and reagent products by the Company's Hybridon Specialty
Products Division.

The Company has incurred losses since its inception and expects to incur
significant operating losses in the future. The Company expects that its
research and development expenses will increase significantly during the balance
of 1997 and in future years as it moves its principal research and development
programs to more advanced preclinical studies, clinical trials and later phase
clinical trials. In addition, the Company expects that its facilities costs will
increase in 1997 and future years over 1996 levels as a result of the relocation
of the Company's executive offices and its primary research and development
laboratories to Cambridge, Massachusetts on February 1, 1997. The Company also
expects that its personnel and patent costs will increase significantly in the
future. Costs associated with the Company's patent applications are expected to
increase as the Company continues to file and prosecute such applications.
Patent costs also would increase significantly if the Company became involved in
litigation or administrative proceedings involving its patents or those of third
parties. The Company has incurred cumulative losses from inception through March
31, 1997 of 163.2 million.

This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "intends," "may," and
other similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors include the matters set forth under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Certain Factors that May Affect Future Results" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, which is hereby
incorporated herein by this reference.

RESULTS OF OPERATIONS

Three Months Ended March 31, 1997 and 1996

The Company had total revenues of $1,059,000 and $554,000 in the three months
ended March 31, 1997 and 1996, respectively. Revenues from research and
development collaborations were $594,000 and $259,000 for the three months ended
March 31, 1997 and 1996, respectively. Revenues for the three month period ended
March 31, 1997 and 1996 included payments earned under a collaborative agreement
with F. Hoffmann-La Roche Ltd (Roche). For the three month period ended March
31, 1997, revenues also included payments under a collaborative agreement with
G. D. Searle & Co. (Searle). Revenues from the custom contract manufacturing of
synthetic DNA and reagent products by the Hybridon Specialty Products Division
were $348,000 for the three month period ended March 31, 1997. Revenues from
interest income were $117,000 and $295,000 for the three months ended March 31,
1997 and 1996, respectively. The decrease in interest income in the three month
period ended March 31, 1997 was the result of substantially lower cash balances

10
available for investment during the three month period ended March 31, 1997 as
compared to the three month period ended March 31, 1996 during which the Company
completed its initial public offering on February 2, 1996.

The Company had research and development expenses of $11,476,000 and 7,383,000
in the three months ended March 31, 1997 and 1996, respectively. The increase in
research and development expenses for the three months ended March 31, 1997
reflects increased expenses related primarily to ongoing clinical trials of the
Company's product candidates, including trials of two different formulations of
GEM(R) 132 (an antisense compound for the treatment of systemic CMV and CMV   
Retinitis) which were initiated in the United States and Europe during the
three months ended March 31, 1997. The increase also reflects increased expenses
associated with salaries and related costs, facilities equipment costs related
to additional laboratories, consulting and professional expense, expenses
related to the production of GEM(R) 91 (an antisense oligonucleotide targeted
at AIDS), and GEM(R) 132 and expenses for preclinical compounds. Research and
development staffing and related costs increased significantly as the number of
employees engaged in research and development activities increased by
approximately 32% for the three month period ending March 31, 1997. The
Company expects to invest significant resources during the remainder of 1997
and in future years in connection with the ongoing clinical trials of GEM(R)91
and GEM(R)132, the performance of preclinical studies, and the preparation of
IND applications and the initiation of clinical trials.

The Company had general and administrative expenses of $3,430,000 and $2,418,000
in the three months ended March 31, 1997 and 1996, respectively. The increase in
general and administrative expenses for the three months ended March 31, 1997
was attributable primarily to an increase in expenses associated with the
termination of certain financing activities, a one time expense associated with
the Company's investment in MethylGene, consulting services and salaries and 
related costs.

The Company had interest expense of $170,207 and $40,000 in the three months
ended March 31, 1997 and 1996, respectively. Interest expense for the three
months ended March 31, 1997 and 1996 primarily consisted of interest incurred on
borrowings to finance the purchase of property and equipment, and leasehold
improvements. The increase in interest expense for the three months ended March
31, 1997 reflected an increase in the debt outstanding during the three months
ended March 31, 1997. The Company's future interest expense will increase
significantly in the future as a result of the issuance of $50,000,000 of 9%
Convertible Subordinated Notes (the Notes) which was completed on April 2, 1997.

As a result of the above factors, the Company incurred net losses of $14,017,000
and $9,287,000 for the three months ended March 31, 1997 and 1996, respectively.

LIQUIDITY AND CAPITAL RESOURCES

During the three months ended March 31,1997, the Company's net cash used in
operating activity was $10,214,600, principally for use in the Company's ongoing
research and development programs. The Company also increased its investment in
property and equipment by $3,831,655, consisting primarily of costs associated
with finishing the buildout of the Company's Milford manufacturing facility and
costs associated with leasehold improvements and furnishings of the Cambridge
facility which the Company moved into on February 1, 1997.

On April 2, 1997, the Company sold $50.0 million of Notes to certain investors.
The Notes bear interest at a rate of 9% per annum and have a maturity date of
April 1, 2004. Under the Notes, the Company is required to make semi-annual
interest payments on the outstanding principal balance through the maturity date
of April 1, 2004. The Notes are convertible at the option of the holder into the
Company's Common Stock at any time prior to maturity, unless previously redeemed
or repurchased by the Company under certain specified circumstances, at a
conversion price of $7.0125 per share (subject to adjustment). In connection
with the sale of the Notes, the Company also granted a 60-day option (which
expires on May 25, 1997) to purchase up to an additional $10,000,000 principal
amount of the Notes.

11
The Company had cash and cash equivalents of $2,490,000 at March 31, 1997.
Based on its current operating plan, the Company believes that its existing
capital resources, together with the committed collaborative research and
development payments from Searle, anticipated sales of the Hybridon Specialty
Products Division and margins on such sales, which are expected to increase
significantly over historic levels, and the net proceeds from the sale of the
Notes and the interest earned thereon, will be adequate to fund the Company's
capital requirements through at least the first quarter of 1998.

The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research, drug discovery and development
programs, the magnitude of these programs, progress with preclinical and
clinical trials, sales of DNA products and reagents manufactured on a custom
contract basis by the Hybridon Specialty Products Division and the margins on
such sales, the time and costs involved in obtaining regulatory approvals, the
costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the ability of the Company to establish
and maintain collaborative academic and commercial research, development and
marketing relationships, the ability of the Company to obtain third party
financing for leasehold improvements and other capital expenditures and the cost
of manufacturing scale-up and commercialization activities and arrangements.

The Company intends to seek additional equity, debt and lease financing to fund
future operations. The Company also intends to seek additional collaborative
development and commercialization relationships with potential corporate
partners in order to fund certain of its programs. Except for research and
development funding from Searle under Hybridon's collaborative agreement with
Searle (which is subject to early termination in certain circumstances),
Hybridon has no committed external sources of capital, and, as discussed above,
expects no product revenues for several years from sales of the products that it
is developing (as opposed to sales of DNA products and reagents manufactured on
a custom contract basis by the Hybridon Specialty Products Division). If the
Company is unable to obtain necessary additional funds, it would be required to
scale back or eliminate certain of its research and development programs or
license to third parties certain technologies which the Company would otherwise
pursue on its own.

12
HYBRIDON, INC.

PART II

OTHER INFORMATION

-------

Item 1   None

Item 2   Changes in Securities

During the quarter ended March 31, 1997, the Company issued and sold
the following securities that were not registered under the Securities Act of
1933, as amended (the "Securities Act"):

1. On January 20, 1997, the Company issued 25,000 shares of its Common
Stock to an investment bank as compensation under a financial advisory services
agreement entered into with such investment bank on such date.

2. On January 25, 1997, the Company issued, for an aggregate purchase
price of $9,075, 1650 shares of its Common Stock to one investor upon exercise
by such investor of warrants to purchase Common Stock.

The shares of Common Stock issued in the above transaction were offered
and sold in reliance upon the exemption from registration under Section 4(2) of
the Securities Act, relating to sales by an issuer not involving any public
offering.

Item 3-5 None

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

11       Computation of Net Loss Per Common Share.

27       Financial Data Schedule (EDGAR)

99       Pages 39-48 of the Company's Annual Report on Form
10-K for the period ended December 31, 1996 (which is
not deemed to be filed except to the extent that
portions thereof are expressly incorporated by
reference herein).

(b)      No reports were filed on Form 8-K during the three months
ended March 31, 1997.

13
SIGNATURES

-------

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HYBRIDON, INC.

May 15, 1997                /s/ E. Andrews Grinstead III
- - ----------------            -----------------------------------------------
Date                        E. Andrews Grinstead, III
Chairman, President and Chief Executive Officer
(Principal Executive Officer)

May 15, 1997                /s/ Anthony J. Payne
- - ----------------            -----------------------------------------------
Date                        Anthony J. Payne
Senior Vice President of Finance and Administration
and Chief Financial Officer (Principal Financial
and Accounting Officer)

14
HYBRIDON, INC.

EXHIBIT INDEX

-------

11       Computation of Net Loss Per Common Share.

27       Financial Data Schedule (EDGAR)

99       Pages 39-48 of the Company's Annual Report on Form 10-K for the period
ended December 31, 1996 (which is not deemed to be filed except to the
extent that portions thereof are expressly incorporated by reference
herein).

ANNEX H
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 1997     Commission File Number 0-27352

Hybridon, Inc.
--------------
(Exact name of registrant as specified in its charter)

Delaware                                  04-3072298
--------                                  ----------
(State or other jurisdiction of       (I.R.S. Employer Identification Number)
organization or incorporation)

620 Memorial Drive
Cambridge, MA 02139
-------------------
(Address of principal executive offices, including zip code)

(617) 528-7000
-------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

YES  X      NO
------     ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.001 per share                      25,260,252
- - ---------------------------------------                      ----------
Class                             Outstanding as of July 31, 1997

2
HYBRIDON, INC.

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEETS AS OF JUNE 30, 1997 AND
DECEMBER 31, 1996

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE
AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 AND
CUMULATIVE FROM MAY 25, 1989 (INCEPTION) TO JUNE 30,
1997

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND 1996, AND CUMULATIVE
FROM MAY 25, 1989 (INCEPTION) TO JUNE 30, 1997

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5 - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURES

HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED BALANCE SHEETS

(UNAUDITED)

ASSETS                                              JUNE 30,        DECEMBER 31,
1997              1996

CURRENT ASSETS:
Cash and cash equivalents                             $   8,594,921     $  12,633,742
Short-term investments                                   20,052,761         3,785,146
Accounts receivable                                         644,505           573,896
Prepaid expenses and other current assets                 1,660,867         1,545,324
-------------     -------------
Total current assets                                  30,953,054        18,538,108
-------------     -------------

PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements                                   13,606,246         9,257,516
Laboratory equipment                                      6,051,548         5,884,861
Equipment under capital leases                            5,353,458         2,904,688
Office equipment                                          1,760,020         1,496,639
Furniture and fixtures                                      515,012           499,958
Construction-in-progress                                  2,086,000         2,193,400
-------------     -------------
29,372,284        22,237,062
Less--Accumulated depreciation and amortization           8,837,668         6,596,294
-------------     -------------
20,534,616        15,640,768
-------------     -------------
OTHER ASSETS:
Restricted cash                                             350,000           437,714
Notes receivable from officers                              322,641           317,978
Deferred financing costs and other assets                 3,698,501         1,152,034
Investment in real estate partnership                     5,450,000         5,450,000
-------------     -------------
9,821,142         7,357,726
-------------     -------------
$  61,308,812     $  41,536,602
=============     =============

LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)

CURRENT LIABILITIES:
Current portion of long-term debt and
capital lease obligations                           $   1,887,863     $   1,308,511
Accounts payable                                          3,895,988         4,064,419
Accrued expenses                                          3,786,842         4,190,766
Deferred revenue                                                 --            86,250
-------------     -------------
Total current liabilities                              9,570,693         9,649,946
-------------     -------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT PORTION                                    10,019,593         9,031,852
-------------     -------------
CONVERTIBLE SUBORDINATED NOTES                             50,000,000                --
-------------     -------------

STOCKHOLDERS' EQUITY(DEFICIT):
Preferred stock, $.01 par value-
Authorized--5,000,000 shares
Issued and outstanding--None                                    --                --
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding--25,250,252 shares
at June 30, 1997, and 25,146,577 shares
at December 31, 1996 respectively
25,250            25,147
Additional paid-in capital                               173,636,989       173,227,358
Deficit accumulated during the development stage        (180,736,741)     (149,193,775)
Deferred Compensation                                     (1,206,972)       (1,203,926)
-------------     -------------
Total stockholders' equity(deficit)                   (8,281,474)       22,854,804
-------------     -------------
$  61,308,812     $  41,536,602
=============     =============

The accompanying notes are an integral part of these consolidated condensed
financial statements.

4
HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

CUMULATIVE FROM
MAY 25,1989
THREE MONTHS ENDED                 SIX MONTHS ENDED              (INCEPTION)
JUNE 30,                          JUNE 30,               TO JUNE 30, 1997
1997             1996             1997             1996

REVENUES:
Research and development           $    186,250     $    458,150     $    780,150     $     717,500     $   5,334,413
Product Revenue                         727,704               --        1,075,858                --         2,156,033
Interest income                         486,502          340,622          603,914           635,495         2,745,531
Royalty and other income                 14,971           62,321           14,971            62,321            77,292
------------     ------------     ------------     -------------     -------------

1,415,427          861,093        2,474,893         1,415,316        10,313,269
------------     ------------     ------------     -------------     -------------

OPERATING EXPENSES:
Research and development             14,969,366        9,700,841       26,445,805        17,084,138       145,077,705
General and administrative            2,524,046        2,804,907        5,954,499         5,223,293        42,744,367
Interest                              1,447,348           29,978        1,617,555            69,581         3,227,938
------------     ------------     ------------     -------------     -------------

18,940,760       12,535,726       34,017,859        22,377,012       191,050,010
------------     ------------     ------------     -------------     -------------

Net loss                       $(17,525,333)    $(11,674,633)    $(31,542,966)    $ (20,961,696)    $(180,736,741)
------------     ------------     ------------     -------------     -------------

NET LOSS PER COMMON SHARE
(Note 2)                             $       (.69)    $       (.48)    $       (1.25)   $        (.89)
============     ============     ============     =============

SHARES USED IN COMPUTING NET LOSS
PER COMMON SHARE (Note 2)             25,241,956       24,518,126       25,211,845        23,613,260
============     ============     ============     =============

The accompanying notes are an integral part of these consolidated condensed
financial statements.

5
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

SIX MONTHS ENDED          CUMULATIVE FROM
JUNE 30,                MAY 25, 1989
(INCEPTION) TO
JUNE 30,
1997             1996              1997

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                       $(31,542,966)    $(20,961,696)    $(180,736,741)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization                                                   2,241,374          985,840         8,939,109
Issuance of common  stock for services rendered                                   146,875               --           146,875
Compensation on grant of stock options, warrants and restricted stock             188,412               --         7,996,143
Amortization of discount on convertible promissary notes payable                       --               --           690,157
Amortization of deferred financing costs                                          250,395               --           467,127
Noncash interest on convertible promissory notes payable                               --               --           260,799
Changes in operating assets and liabilities-
Accounts Receivable                                                             (70,609)              --          (644,505)
Prepaid and other current assets                                               (108,610)        (931,251)       (1,653,933)
Notes receivable from officers                                                   (4,663)          (4,953)         (322,641)
Amounts payable to related parties                                                   --          (12,500)         (200,000)
Accounts payable and accrued expenses                                          (572,356)        (269,454)        7,682,830
Deferred revenue                                                                (86,250)              --                --
------------     ------------     -------------
Net cash used in operating activities                                    (29,558,398)     (21,194,014)     (157,374,780)
------------     ------------     -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments                                              (16,267,615)     (19,282,850)      (20,052,761)
Purchases of property and equipment, net                                         (5,838,183)      (3,991,072)      (27,640,893)
Decrease (increase)  in restricted cash and other assets                            133,878          184,588        (1,530,305)
Investment in real estate partnership                                                    --       (4,230,539)       (5,450,000
------------     ------------     -------------
Net cash used in investing activities                                    (21,971,920)     (27,319,873)      (54,673,959)
------------     ------------     -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock                                    --               --        96,584,154
Proceeds from issuance of common stock related to
stock options and restricted stock grants                                          62,327          260,426         1,236,929
Proceeds from issuance of common stock related to stock warrants                      9,075                          3,185,816
Net proceeds from issuance of common stock                                               --       52,231,244        52,355,324
Repurchase of common stock                                                               --               --              (263)
Proceeds from notes payable                                                              --               --         9,450,000
Proceeds from issuance of convertible promissory notes payable                   50,000,000                         59,191,744
Proceeds from long-term debt                                                             --               --           662,107
Payments on long-term debt and capital leases                                      (895,183)        (206,913)       (2,696,796)
Proceeds from sale/leaseback                                                      1,165,236        2,042,811         3,960,752
(Increase) decrease in deferred financing costs                                  (2,849,958)         526,721        (3,286,107)
------------     ------------     -------------
Net cash provided by financing activities                                 47,491,497       54,854,289       220,643,660
------------     ------------     -------------
NET (DECREASE)  INCREASE IN CASH AND CASH EQUIVALENTS                              (4,038,821)       6,340,042         8,594,921

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     12,633,742        5,284,262                --
------------     ------------     -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                         $  8,594,921     $ 11,624,664     $   8,594,921
============     ============     =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest                                                         $    492,555     $     69,581     $   2,102,938
============     ============     =============

The accompanying notes are an integral part of these consolidated condensed
financial statements.

6
HYBRIDON, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(1)   ORGANIZATION

Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology. 

The Company is in the development stage. Since inception, the Company has
been engaged primarily in research and development efforts, development 
of its manufacturing capabilities and organizational efforts, including
recruitment of scientific and management personnel and raising capital. To
date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it based on antisense technology.
In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with comprehensive
regulatory requirements. Accordingly, it is not possible to predict the
amount of funds that will be required or the length of time that will pass
before the Company receives revenues from sales of any of these products.
All revenues received by the Company to date have been derived from
collaborative agreements, interest on invested funds and revenues from the
custom contract manufacturing of synthetic DNA and reagent products by the
Company's Hybridon Specialty Products Division. As a result, although the
Company has begun to generate revenues from its contract manufacturing
business, the Company is dependent on the proceeds from possible future
sales of equity securities, debt financings and research and development
collaborations in order to fund future operations.

7
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(Continued)

(1)   ORGANIZATION (Continued)

The unaudited consolidated condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and include, in
the opinion of management, all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of interim period
results. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that its disclosures
are adequate to make the information presented not misleading. The results
for the interim periods presented are not necessarily indicative of
results to be expected for the full fiscal year. It is suggested that
these financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
as filed with the Securities and Exchange Commission.

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net Loss per Common Share

Net loss per common share is computed using the weighted average number of
shares of common stock outstanding during the period. Pursuant to the
requirements of the Securities and Exchange Commission, common stock
issued by the Company during the 12 months immediately preceding its
initial public offering, plus shares of common stock that became issuable
during the same period pursuant to the grant of common stock options and
preferred and common stock warrants, has been included in the calculation
of weighted average number of shares outstanding for the period from
January 1, 1996 through February 2, 1996 (using the treasury-stock method
and the initial public offering price of $10 per share). In addition, the
calculation of the weighted average number of shares outstanding includes
shares of common stock as if all shares of preferred stock were converted
into common stock on the respective original dates of issuance.

8
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(Continued)

(3)   CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company applies SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Accordingly, the Company has classified its
cash equivalents and short-term investments as held-to-maturity, and has
recorded them at amortized cost, which approximates market value.
Short-term investments mature within one year of the balance sheet date.
Cash equivalents have original maturities of less than three months. Cash
and cash equivalents and short-term investments at June 30, 1997 and
December 31, 1996 consisted of the following:

June 30,     December 31,
1997           1996

Cash and Cash Equivalents-
Cash and money market funds                         $ 3,621,326    $10,144,367
U.S. government securities                              974,701      2,489,375

Commercial paper and certificates of deposit          3,998,894             --
-----------    -----------

$ 8,594,921    $12,633,742
===========    ===========
Short-term Investments-
U.S. government securities                          $         -    $ 3,785,146

Commercial paper and certificates of deposit         20,052,761             --
-----------    -----------
$20,052,761    $ 3,785,146
===========    ===========

(4)   CONVERTIBLE SUBORDINATED NOTES PAYABLE

On April 2, 1997, the Company issued $50,000,000 of 9% convertible
subordinated notes (the Notes). Under the terms of the Notes, the Company
must make semi-annual interest payments on the outstanding principal
balance through the maturity date of April 1, 2004. If the Notes are
converted prior to April 1, 2000, the Noteholders are entitled to receive
accrued interest from the date of the most recent interest payment through
the conversion date. The Notes are subordinate to substantially all of the
Company's existing indebtedness. The Notes are convertible at any time
prior to the maturity date at a conversion price equal to $7.0125, subject
to adjustment under certain circumstances, as defined.

Beginning April 1, 2000, the Company may redeem the Notes at its option
for a 4.5% premium over the original issuance price, provided that from
April 1, 2000 to March 31, 2001, the Notes may not be redeemed unless the
closing price of the common stock equals or

9

HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

(Continued)

(4)   CONVERTIBLE SUBORDINATED NOTES PAYABLE (continued)

exceeds 150% of the conversion price for a period of at least 20 out of 30
consecutive trading days and the Notes redeemed within 60 days after such
trading period. The premium decreases by 1.5% each year through March 31,
2003. Upon a change of control of the Company, as defined, the Company
will be required to offer to repurchase the Notes at 150% of the original
issuance price.

(5)   NEW ACCOUNTING STANDARD

On March 31, 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings Per Share. SFAS No. 128 establishes standards for
computing and presenting earnings per share and applies to entities with
publicly held common stock or potential common stock. SFAS No. 128 is
effective for fiscal years ending after December 15, 1997 and early
adoption is not permitted. When adopted by the Company, SFAS No. 128 will
require restatement of prior years' earnings per share. The Company will
adopt SFAS No. 128 for its fiscal year ended December 31, 1997. The
Company believes that the adoption of SFAS No. 128 will not have a
material effect on its financial statements.

(6)   SUBSEQUENT EVENTS

In July 1997, the Company stopped the development of GEM 91, its first
generation antisense drug for the treateent of AIDS and HIV infection,
based on a review of new data from an open label Phase II clinical trial
of patients with advanced HIV infection. In the Phase II trial, three of
the nine subjects tested experienced decreases in platelet counts that
required dose interruption. In addition, a review of the data showed
inconsistent responses to the treatment and failed to confirm the
decrease in cellular viremia observed in an earlier clinical trial. As a
result, the Company now plans to focus its resources on core drug
development programs involving four second generation antisense compounds
based on the Company's proprietary mixed backbone chemistries.

The Company is implementing a restructuring plan to reduce expenditures
on a phased basis over the balance of 1997 in an effort to conserve its
cash resources. As part of this restructuring plan, in addition to
stopping the clinical development of GEM 91, the Company is reducing or
suspending selected programs unrelated to the four core programs. To
begin the implementation of these changes the Company terminated the
employment of 28 employees at its Cambridge and Milford, Massachusetts
facilities in July 1997 and plans to substantially reduce operations at
its Paris, France office and terminate 11 employees at that location in
August 1997. The Company is continuing to review its expenditure rate and
implement additional measures to conserve its cash resources.

Because of the significant costs involved in terminating employees and
substantially reducing operations at its Paris, France office, the Company
does not expect its expenditure rate to materially decrease until at least
October 1997. The Company estimates that restructuring charges from the
actions taken to date and the substantial reduction of operations at its
Paris, France office will total between approximately $2.0 million and
$3.0 million, and expects that it will recognize such charges in the third
quarter of 1997 and that it will make the associated cash payments over
the third and fourth quarters of 1997.

10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The Company is engaged in the discovery and development of genetic medicines
based primarily on antisense technology. The Company commenced operations in
February 1990 and since that time has been engaged primarily in research and
development efforts, development of its manufacturing capabilities and
organizational efforts, including recruitment of scientific and management
personnel and raising capital. To date, the Company has not received revenue
from the sale of biopharmaceutical products developed by it based on antisense
technology. In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with comprehensive
regulatory requirements. Accordingly, it is not possible to predict the amount
of funds that will be required or the length of time that will pass before the
Company receives revenues from sales of any of these products. All revenues
received by the Company to date have been derived from collaborative agreements,
interest on invested funds and revenues from the custom contract manufacturing
of synthetic DNA and reagent products by the Company's Hybridon Specialty
Products Division.

In July 1997, the Company stopped the development of GEM 91, its first
generation antisense drug for the treatment of AIDS and HIV infection, based on
a review of new data from an open label Phase II clinical trial of patients
with advanced HIV infection. In the Phase II trial, three of the nine subjects
tested experienced decreases in platelet counts that required dose
interruption. In addition, a review of the data showed inconsistent responses
to the treatment and failed to confirm the decrease in cellular viremia
observed in an earlier clinical trial. As a result, the Company now plans to
focus its resources on core drug development programs involving four second
generation antisense compounds based on the Company's proprietary mixed
backbone chemistries.

The Company is implementing a restructuring plan to reduce expenditures on a
phased basis over the balance of 1997 in an effort to conserve its cash
resources. As part of this restructuring plan, in addition to stopping the
clinical development of GEM 91, the Company is reducing or suspending selected
programs unrelated to the four core programs. To begin the implementation of
these changes the Company terminated the employment of 28 employees at its
Cambridge and Milford, Massachusetts facilities in July 1997 and plans to
substantially reduce operations at its Paris, France  office and terminate 11
employees at that location in August 1997. The Company is continuing to review
its expenditure rate and implement additional measures to conserve its cash
resources.

Because of the significant costs involved in terminating employees and
substantially reducing operations at its Paris, France office, the Company does
not expect its expenditure rate to materially decrease until at least October
1997. The Company estimates that restructuring charges from the actions taken to
date and the substantial reduction of operations at its Paris France office will
total between approximately $2.0 million and $3.0 million, and expects that it
will recognize such charges in the third quarter of 1997 and that it will make
the associated cash payments over the third and fourth quarters of 1997.

The Company has incurred losses since its inception and, despite its
restructuring plan, expects to incur significant operating losses in the future.
The Company expects that its research and development expenses will continue to
be significant during the balance of 1997 and in future years as it pursues its
four core development programs. The Company has incurred cumulative losses from
inception through June 30, 1997 of approximately $180.7 million.

This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans,"

11
"intends," "may," and other similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the Company's actual results to differ materially from those indicated by
such forward-looking statements. These factors include the matters set forth
under the heading "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Certain Factors that May Affect Future Results" in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
which is hereby incorporated herein by this reference. Any statement contained
in such matters shall be deemed to be modified or superseded for purposes of
this Quarterly Report on Form 10-Q to the extent that a statement contained
herein modifies or supersedes such statement. Moreover, there can be no
assurance that the Company will be able to successfully implement its
restructuring plan or as to the timing thereof.

RESULTS OF OPERATIONS

Three and Six Months Ended June 30, 1997 and 1996

Revenues

The Company had total revenues of $1,415,000 and $861,000 in the three months
ended June 30, 1997 and 1996, respectively, and $2,475,000 and $1,415,000 in the
six months ended June 30, 1997 and 1996, respectively.

Revenues from research and development collaborations were $186,000 and $458,000
for the three months ended June 30, 1997 and 1996, respectively, and $780,000
and $718,000 for the six months ended June 30, 1997 and 1996, respectively. 
Revenues for the three months ended June 30, 1997 decreased because the research
funding, which the Company received under the Company's collaboration with F.
Hoffmann-La Roche Ltd. ("Roche") during the three months ended June 30, 1996,
was terminated by Roche as of March 31, 1997 in connection with Roche's
termination of the research phase of the collaboration. Despite the decrease in
revenues for the three months ended June 30, 1997 as a result of the termination
of research funding by Roche, revenues for the six months ended June 30, 1997
were comparable to revenues for the six months ended June 30, 1996 because of
the inclusion of revenues earned under the Company's collaboration with G.D.
Searle & Co. ("Searle") during the full six months ended June 30, 1997. During
the six months ended June 30, 1996, the Company did not receive revenues under
the Searle collaboration until the second quarter of 1996.

Revenues from the custom contract manufacturing of synthetic DNA and reagent
products by the Hybridon Specialty Products Division were $727,000 and
$1,075,000, respectively, for the three and six months ended June 30, 1997.
The Hybridon Specialty Products Division commenced operations in June
1996. Accordingly, the Company did not receive any revenues from the custom
contract manufacturing of synthetic DNA and reagent products during the six
months ended June 30, 1996.

Interest income was $487,000 and $341,000 for the three months ended June 30,
1997 and 1996, respectively, and $604,000 and $635,000 for the six months ended
June 30, 1997 and 1996, respectively. The increase in interest income in the
three months ended June 30, 1997 was the result of more favorable interest
rates during such period then during the three months ended June 30, 1996.

12
Research and Development Expenses

The Company had research and development expenses of $14,969,000 and $9,701,000
in the three months ended June 30, 1997 and 1996, respectively, and $26,446,000
and $17,084,000 in the six months ended June 30, 1997 and 1996, respectively.
The increase in research and development expenses for the three and six months
ended June 30, 1997 primarily reflected increased expenses related to ongoing
clinical trials of the Company's product candidates, including trials of GEM 91
(which were terminated in July of 1997) and trials of two different formulations
of GEM 132 (an antisense compound for the treatment of systemic CMV and CMV
retinitis), which were first initiated with respect to GEM 132 intravenous in
Europe during the third quarter of 1996 and with respect to GEM 132 intravitreal
for the treatment of CMV retinitis in the United States during the first quarter
of 1997. The increase also reflected increased salaries and related costs,
facilities equipment costs related to additional laboratories, consulting and
professional expenses and expenses related to the production of GEM 91, GEM 132
and preclinical compounds. Research and development staffing and related costs
increased significantly as the number of employees engaged in research and
development activities increased from 157 employees as of March 31, 1997 to 161
employees as of June 30, 1997.

General and Administrative Expenses

The Company had general and administrative expenses of $2,524,000 and $2,805,000
in the three months ended June 30, 1997 and 1996, respectively, and $5,954,000
and $5,223,000 in the six months ended June 30, 1997 and 1996, respectively. The
decrease in general and administrative expenses for the three months ended June
30, 1997 was attributable primarily to a reduction in travel and consulting
expenses in such period. The increase in general and administrative expenses for
the six months ended June 30, 1997 was attributable primarily to increased
expenses in the three months ended March 31, 1997 related to certain financing
activities which were terminated during such period and a one-time charge
related to the Company's investment in MethylGene, Inc., a Canadian company in
which the Company owns a minority interest.

Interest Expense

The Company had interest expense of $1,447,000 and $30,000 in the three months
ended June 30, 1997 and 1996, respectively, and $1,618,000 and $70,000 in the
six months ended June 30, 1997 and 1996, respectively. The increase in interest
expense for the three and six months ended June 30, 1997 reflected an increase
in the debt outstanding during the three months ended June 30, 1997 associated
with the Company's issuance of $50,000,000 of 9% Convertible Subordinated Notes
(the "Notes") on April 2, 1997 and interest incurred on borrowing to finance the
purchase of property and equipment, and leasehold improvements.

Net Loss

As a result of the above factors, the Company incurred net losses of $17,525,000
and $11,675,000 for the three months ended June 30, 1997 and 1996, respectively,
and $31,543,000 and $20,962,000 for the six months ended June 30, 1997 and 1996,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30,1997, the Company used $29,558,000 of net
cash for operating activities, principally for ongoing research and development
programs, and $5,838,000 of net cash for investment in property and equipment,
consisting primarily of costs related to leasehold improvements, equipment and
furnishings of the Cambridge facility which the Company moved into on February
1, 1997.

On April 2, 1997, the Company sold $50.0 million of Notes to certain investors.
The Notes bear interest at a rate of 9% per annum and have a maturity date of
April 1, 2004. Under the Notes, the Company is required to make semi-annual
interest payments on the outstanding principal balance through the maturity date
of April 1, 2004. The Notes are unsecured and subordinate to substantially all
of the Company's existing indebtedness. The Notes are convertible at the option
of the holder into the Company's Common Stock at any time prior to maturity,
unless previously redeemed or repurchased by the Company under certain specified
circumstances, at a conversion price of $7.0125 per share (subject to
adjustment). Upon change of control of the Company (as defined), the Company is
required to offer to repurchase the Notes at 150% of the original issuance
price.

13

The Company had cash, cash equivalents and short term investments of $28,648,000
at June 30, 1997. Based on its current operating plan, including the expenditure
rate reduction initiatives being undertaken by the Company as part of its
restructuring plan, the Company believes that its existing capital resources,
together with the committed collaborative research and development payments from
Searle, and anticipated sales of the Hybridon Specialty Products Division and
margins on such sales, will be adequate to fund the Company's capital
requirements into the fourth quarter of 1997. The Company will require
substantial additional funds from external sources in the fourth quarter of 1997
to support the Company's operations through the end of the fourth quarter of
1997 and thereafter.

A significant factor affecting the Company's future capital requirements is the
level of sales of the Hybridon Specialty Products Division and the margins on
such sales. Revenues from the sale of custom contract manufacturing of synthetic
DNA and reagent products by the Hybridon Specialty Products Division were lower
than anticipated in the three months ended June 30, 1997. During such period,
the Company received repeat customer orders and expanded its customer base from
17 customers to 30 customers. The Company expects revenues from sale of custom
contract manufacturing of synthetic DNA and reagent products by the Hybridon
Specialty Products Division in the three months ending September 30, 1997 to
exceed revenues in the three months ended June 30, 1997. However, based on the
Hybridon Specialty Products Division's backlog of orders at June 30, 1997, the
Company believes that such revenues may be lower than initially anticipated for
the three months ending September 30, 1997 and for the balance of 1997. 

The Company intends to seek additional equity, debt and lease financing to fund
future operations. The Company also intends to seek additional collaborative 
development and commercialization relationships with potential corporate 
partners in order to fund certain of its programs. Except for research and 
development funding from Searle under Hybridon's collaborative agreement with 
Searle (which is subject to early termination in certain circumstances), 
Hybridon has no committed external sources of capital, and, as discussed above,
expects no product revenues for several years from sales of the products that 
it is developing (as opposed to sales of DNA products and reagents 
manufactured on a custom contract basis by the Hybridon Specialty Products 
Division). If the Company is unable to obtain necessary additional funds, it 
may be required to further scale back or eliminate certain of its core 
development programs, license to third parties certain technologies which the 
Company would otherwise pursue on its own, sell certain assets or business 
units to third parties, conduct a financing which could be dilutive to holders 
of the Company's existing securities and contain certain terms that would 
adversely affect the rights of holders of the Company's existing securities or 
cease operations.

14
HYBRIDON, INC.,

PART II

OTHER INFORMATION

Item 2 Changes in Securities

During the three months ended June 30, 1997, the Company issued and sold
the following securities that were not registered under the Securities
Act of 1933, as amended (the "Securities Act"):

1.    On April 2, 1997, the Company issued $50,000,000 of its 9%
Convertible Subordinated Notes Due 2004 to an investment bank (the
"Bank") pursuant to Rule 506 under the Securities Act.

2.    On April 2, 1997, the Company issued to the Bank warrants to
purchase 356,506 shares of Common Stock at an exercise price of
$7.0125 per share pursuant to Section 4(2) of the Securities Act.

Item 4 Submission of Matters to a Vote of Security Holders

At the Company's Annual Meeting of Stockholders held on May 19, 1997, the
following proposals were adopted by the vote specified below:

1. Election of Class II Directors

For         Withheld Authority
---         ------------------

Mohamed A. El-Khereiji      15,046,792            14,666
Jerry A. Weisbach           15,027,192            34,266
James B. Wyngaarden         15,046,892            14,566
Paul C. Zamecnik            15,047,092            14,366

2. Adoption of the 1997 Stock Incentive Plan

For            Against        Abstain        Broker Nonvotes
10,704,147        244,725        12,641            4,099,945

3. Ratification of the Selection of Independent Auditors

For            Against        Abstain        Broker Nonvotes
15,003,091         9,801         48,566                --

15
Item 5. Other Information

1.  Effective July 28, 1997, Jerry A. Weisbach, a Class II director of
the Company resigned from the Board of Directors of the Company.

2.  Effective August 11, 1997, J. Robert Buchanan, a Class I director
of the Company, resigned from the Board of Directors of the
Company.

3.  On August 8, 1997, the Company withdrew Post-effective Amendment
No. 1 to its Registration Statement on Form S-3 ( Registration No.
333-28409) ( the "Registration Statement"). The Company filed
Post-effective Amendment No. 1 to the Registration Statement on
July 25, 1997 to remove from registration the 5,000,000 shares of
Common Stock registered under the Registration Statement. Although
the Company is not offering shares of Common Stock pursuant to the
Registration Statement at this time, the Company may do so in the
future at such time as it considers, in its sole discretion, to 
be appropriate.

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits

The Exhibits listed in the Exhibit Index immediately preceding such
Exhibits are filed as part of this Quarterly Report on Form 10-Q.

(b)   Reports on Form 8-K

On April 14, 1997, the Company filed a Current Report on Form 8-K
dated April 2, 1997 announcing the completion of the sale of
$50,000,000 of the Company's 9% Convertible Subordinated Notes Due
2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HYBRIDON, INC.

August 13, 1997                     /s/ E. Andrews Grinstead III
- - ---------------                     ----------------------------
Date                                E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer (Principal Executive Officer)

August 13, 1997                     /s/ Anthony J. Payne
- - ---------------                     --------------------
Date                                Anthony J. Payne
Senior Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)

17
HYBRIDON, INC.

EXHIBIT INDEX

Exhibit No.                      Description
- - ----------                       -----------
*10.1      Amendment No. 1 to License Agreement, dated as February 21, 1990 and
restated as of September 8, 1993, by and between the Worcester 
Foundation for Biomedical Research, Inc. and the Company, dated as
of November 26, 1996.

10.2       Letter Agreement dated May 12, 1997 between the Company and Pillar
S.A. amending the Consulting Agreement dated as of March 1, 1994
between the Company and Pillar S.A..

10.3       Amendment dated July 15, 1997 to the Series G Convertible Preferred
Stock and Warrant Purchase Agreement dated as of September 9, 1994
among the Company and certain purchasers, as amended.

10.4       Sixth Amendment to the lease dated April 1997 between the Company and
Charles River Building Limited Partnership for space located at 620
Memorial Drive, Cambridge, Massachusetts.

11         Computation of Net Loss Per Common Share.

27         Financial Data Schedule (EDGAR)

99         Pages 39-48 of the Company's Annual Report on Form 10-K for the 
period ended December 31, 1996 (which is not deemed to be filed
except to the extent that portions thereof are expressly incorporated
by reference herein).

*          Confidential treatment requested as to certain portions of exhibit,
which portions have been omitted and filed separately with the 
commission

ANNEX H-1
---------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1 TO FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 1997     Commission File Number 0-27352

Hybridon, Inc.
--------------
(Exact name of registrant as specified in its charter)

Delaware                                  04-3072298
--------                                  ----------
(State or other jurisdiction of       (I.R.S. Employer Identification Number)
organization or incorporation)

620 Memorial Drive
Cambridge, MA 02139
-------------------
(Address of principal executive offices, including zip code)

(617) 528-7000
-------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

YES  X      NO
------     ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.001 per share                      25,260,252
- - ---------------------------------------                      ----------
Class                             Outstanding as of July 31, 1997

2
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

HYBRIDON, INC.

August 15, 1997                     /s/ E. Andrews Grinstead III
- - ---------------                     ----------------------------
Date                                E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer (Principal Executive Officer)

August 15, 1997                     /s/ Anthony J. Payne
- - ---------------                     --------------------
Date                                Anthony J. Payne
Senior Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)

3
HYBRIDON, INC.

EXHIBIT INDEX

Exhibit No.                      Description
- - ----------                       -----------
*+10.1     Amendment No. 1 to License Agreement, dated as February 21, 1990 and
restated as of September 8, 1993, by and between the Worcester 
Foundation for Biomedical Research, Inc. and the Company, dated as
of November 26, 1996.

+10.2     Letter Agreement dated May 12, 1997 between the Company and Pillar
S.A. amending the Consulting Agreement dated as of March 1, 1994
between the Company and Pillar S.A..

+10.3     Amendment dated July 15, 1997 to the Series G Convertible Preferred
Stock and Warrant Purchase Agreement dated as of September 9, 1994
among the Company and certain purchasers, as amended.

10.4     Sixth Amendment to the lease dated April 1997 between the Company and
Charles River Building Limited Partnership for space located at 620
Memorial Drive, Cambridge, Massachusetts.

+11       Computation of Net Loss Per Common Share.

+27       Financial Data Schedule (EDGAR)

+99       Pages 39-48 of the Company's Annual Report on Form 10-K for the 
period ended December 31, 1996 (which is not deemed to be filed
except to the extent that portions thereof are expressly incorporated
by reference herein).

*          Confidential treatment requested as to certain portions of exhibit,
which portions have been omitted and filed separately with the 
commission

+          Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the three months ended June 30, 1997, filed 
with the Commission on August 14, 1997

ANNEX I
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report:  APRIL 2, 1997                      Commission File No. 0-27352
-------------                                          -------
(Date of earliest event reported)                                       

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

DELAWARE                                       04-3072298
--------                                       ----------
(State of other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

620 MEMORIAL DRIVE, CAMBRIDGE, MASSACHUSETTS                           02139
- - --------------------------------------------                           -----
(Address of principal executive offices)                             (Zip Code)

(617) 528-7000
-------------- 
(Registrant's telephone number, including area code)

ITEM 5.  OTHER EVENTS

On April 2, 1997, Hybridon, Inc. (the "Company") completed the sale of
$50,000,000 aggregate principal amount of 9% Convertible Subordinated Notes Due
2004 (the "Notes"). Interest on the Notes will be payable semi-annually in
arrears on April 1 and October 1 of each year, commencing October 1, 1997. The
Notes are convertible at the option of the holder at any time prior to maturity,
unless previously redeemed or repurchased, into shares of Common Stock, $.001
par value per share (the "Common Stock"), of the Company at a conversion price
of $7.0125 per share, subject to adjustment under certain circumstances (the
"Conversion Price").

The Notes are unsecured and subordinate to all Senior Indebtedness (as
defined). The indenture under which the Notes were issued does not restrict the
incurrence of additional indebtedness by the Company or any of its subsidiaries.
The Notes are not redeemable prior to April 1, 2000. Thereafter, the Notes are
redeemable at any time, in whole or in part, at the Company's option, at
specified redemption prices, in each case, plus accrued dividends to the date of
repurchase; provided that from April 1, 2000 to March 31, 2001, the Notes may
not be redeemed unless the closing market price of the Common Stock equals or
exceeds 150% of the Conversion Price for a period of at least 20 out of 30
consecutive trading days and the Notes are redeemed within 60 days after such
trading period.

Upon a Change of Control (as defined), the Company will offer to repurchase
each holder's Notes at a purchase price equal to 150% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase.

The Notes have been accepted for inclusion in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") Market. Pursuant to a
Registration Rights Agreement dated as of March 26, 1997, the Company has agreed
to file a Shelf Registration Statement (as defined) relating to the Notes and
the shares of Common Stock issuable upon conversion of the Notes.

ITEM 7.  EXHIBITS

1.   Purchase Agreement dated as of March 26, 1997 between Forum Capital
Markets L.P. ("Forum") and the Company.

4.   Indenture dated as of March 26, 1997 between State Street Bank and Trust
Company and the Company.

10.1 Registration Rights Agreement dated as of March 26, 1997 between Forum and
the Company.

-2-

3

10.2 Warrant Agreement dated as of March 26, 1997 between Forum and the Company.

99.1 Press release dated March 27, 1997.

99.2 Press release dated April 2, 1997.

-3-

4

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated:  April 9, 1997     HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive 
Officer

-4-

5

INDEX TO EXHIBITS

EXHIBIT
NO.        DESCRIPTION
-------      -----------

1          Purchase Agreement dated as of March 26, 1997 between Forum
Capital Markets L.P. ("Forum") and the Company.

4          Indenture dated as of March 26, 1997 between State Street Bank
and Trust Company and the Company.

10.1       Registration Rights Agreement dated as of March 26, 1997 between
Forum and the Company.

10.2       Warrant Agreement dated as of March 26, 1997 between Forum and
the Company.

99.1       Press release dated March 27, 1997.

99.2       Press release dated April 2, 1997.

ANNEX J
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: July 25, 1997           Commission File No. 0-27352
-------------                               -------
(Date of earliest event reported)

HYBRIDON, INC.
-------------
(Exact name of registrant as specified in its Charter)

Delaware                                  04-3072298
--------                                  ----------
(State or other jurisdiction of             (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts                    02139
- - --------------------------------------------                    -----
(Address of principal executive offices)                      (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

ITEM 5. OTHER EVENTS

On July 25, 1997, Hybridon, Inc. (the "Company") issued a press release
announcing that it had elected to stop further development of its lead
compound, GEM(R) 91, based on its preliminary review of the data from an open
label Phase II clinical trial. In the press release, the Company also announced
that it would be focusing its resources on its second generation chemistries,
that its goal for the second half of 1997 is to effect a reduction in its
expenditure rate on a phased basis over the balance of 1997, and that it had
withdrawn its shelf registration statement filed with the SEC relating to a
primary offering by the Company of up to 5,000,000 shares of its common stock.
A copy of the press release has been filed with this Report on Form 8-K as
Exhibit 99.1 and is incorporated herein by reference.

ITEM 7.  EXHIBITS

99.1 Press release dated July 25, 1997.

-2-

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated: July 24, 1997                 HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer

-3-

INDEX TO EXHIBITS

Exhibit 
No.                Description       
- - -------              -----------       
99.1                Press release dated July 25, 1997.

ANNEX K
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: September 3, 1997                   Commission File No. 0-27352
-----------------                                       -------
(Date of earliest event reported)

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

Delaware                                          04-3072298
--------                                          ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts                      02139
- - --------------------------------------------                      -----
(Address of principal executive offices)                       (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

ITEM 5. OTHER EVENTS

On September 3, 1997, Hybridon, Inc. (the "Company") issued a press release
announcing the termination of its research and development collaboration with F.
Hoffmann-LaRoche,  Ltd.  A copy of the press  release  has been  filed with this
Current  Report  on Form 8-K as  Exhibit  99.1  and is  incorporated  herein  by
reference.

ITEM 7. EXHIBITS

99.1 Press release dated September 3, 1997.

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

Dated: September 5, 1997                HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer

INDEX TO EXHIBITS

Exhibit
No.                      Description
- -------                    -----------

99.1       Press release dated September 3, 1997.

ANNEX L
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: September 19, 1997          Commission File No. 0-27352
------------------                              -------
(Date of earliest event reported)

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

Delaware                                    04-3072298
--------                                    ----------
(State or other jurisdiction of             (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts             02139
- - --------------------------------------------           ----------
(Address of principal executive offices)               (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

ITEM 5. OTHER EVENTS

On September 19, 1997, Hybridon,  Inc. issued a press release announcing
its scheduled  delisting from the Nasdaq  National  Market.  A copy of the press
release has been filed with this Current  Report on Form 8-K as Exhibit 99.1 and
is incorporated herein by reference.

ITEM 7. EXHIBITS

99.1 Press release dated September 19, 1997.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

Dated: September 19, 1997            HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer

INDEX TO EXHIBITS

EXHIBIT
NO.                   DESCRIPTION
- - -------                 -----------

99.1       Press release dated September 19, 1997.

ANNEX M
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: September 23, 1997          Commission File No. 0-27352
------------------                              -------
(Date of earliest event reported)

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

Delaware                                    04-3072298
--------                                    ----------
(State or other jurisdiction of             (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts             02139
- - --------------------------------------------           ----------
(Address of principal executive offices)               (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

ITEM 5. OTHER EVENTS

On September 23, 1997, Hybridon, Inc. (the "Company") issued a press
release announcing that (i) the Company is moving forward with the appeal
process with The Nasdaq Stock Market Inc., in response to the notification of
delisting that the Company announced last week; and (ii) the Company's common
stock, $.001 par value per share, will continue to trade on the Nasdaq National
Market until the appeal is resolved. A copy of the press release has been filed
with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein
by reference.

ITEM 7. EXHIBITS

99.1    Press release dated September 23, 1997.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated: September 24, 1997            HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer

INDEX TO EXHIBITS

EXHIBIT
NO.                   DESCRIPTION
- - -------                 -----------

99.1       Press release dated September 23, 1997.

ANNEX N
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: November 18, 1997          Commission File No. 0-27352
------------------                             -------
(Date of earliest event reported)

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

Delaware                                    04-3072298
--------                                    ----------
(State or other jurisdiction of             (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts             02139
- - --------------------------------------------           ----------
(Address of principal executive offices)               (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

2

ITEM 5. OTHER EVENTS

On November 18, 1997, Hybridon, Inc. (the "Company") issued a press
release announcing that the Company plans to commence a private offering of
shares of its common stock, $.001 par value per share (the "Common Stock"),
pursuant to which the Company intends to sell at one or more closings an
aggregate of up to $50.0 million of its Common Stock (with a minimum first
closing of at least $12.5 million). A copy of the release has been filed with
this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by
reference.

ITEM 7. EXHIBITS

99.1  Press release dated November 18, 1997.

3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated: November 19, 1997             HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer

4

INDEX TO EXHIBITS

EXHIBIT
NO.                   DESCRIPTION
- - -------                 -----------

99.1       Press release dated November 18, 1997.

ANNEX O
-------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: December 3, 1997                Commission File No. 0-27352
----------------                                    -------
(Date of earliest event reported)

HYBRIDON, INC.
--------------
(Exact name of registrant as specified in its Charter)

Delaware                                       04-3072298
--------                                       ----------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

620 Memorial Drive, Cambridge, Massachusetts               02139
- - --------------------------------------------               -----
(Address of principal executive offices)                 (Zip Code)

(617) 528-7000
--------------
(Registrant's telephone number, including area code)

ITEM 5. OTHER EVENTS

On December 3, 1997, Hybridon, Inc. (the "Company") issued a press release
announcing that, effective as of the close of business on December 2, 1997, the
Company's Common Stock was delisted from the Nasdaq National Market and that the
Company's Common Stock would be quoted on the OTC Bulletin Board under the
symbol "HYBN" commencing on December 3, 1997. A copy of the press release has
been filed with this Current Report on Form 8-K as Exhibit 99.1 and is
incorporated herein by reference.

ITEM 7. EXHIBITS

99.1 Press release dated December 3, 1997.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

Dated: December 3, 1997              HYBRIDON, INC.

/s/ E. Andrews Grinstead, III
---------------------------------------
E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer   

INDEX TO EXHIBITS

Exhibit
No.              Description
- - -------            -----------

99.1        Press release dated December 3, 1997.

ANNEX P
-------

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 11, 1998

0-27352
(Commission File Number)

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

HYBRIDON, INC.
(Exact name of registrant as specified in its charter)

Delaware                                            3072298
- --------------------------------------------------------------------------------
(State of Incorporation)                               (IRS Employer
Identification Number)

620 Memorial Drive, Cambridge, Massachusetts 02139
- --------------------------------------------------------------------------------
(Address of registrant's principal executive office)

(617) 528-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number)

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

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

ITEM 5. Other Events

Hybridon,  Inc. (the  "Company")  has commenced a consent  solicitation
(the "Consent  Solicitation") with respect to certain proposed amendments to the
Indenture,  dated as of March 26,  1997,  by and  between  the Company and State
Street Bank and Trust Company,  as trustee (the "Indenture"),  which governs the
Company's 9%  Convertible  Subordinated  Notes due 2004 (the  "Notes").  Such an
amendment  to the  Indenture  will affect the rights of the holders of the Notes
and subsequent transferees. Prior to making any investment decision with respect
to the  Notes,  all  offerors  and  offerees  of the  Notes  are urged to inform
themselves as to the  then-current  status of the Consent  Solicitation and such
Indenture amendment.

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

HYBRIDON, INC.

By:   /s/ E. ANDREWS GRINSTEAD, III
-----------------------------
Name:   E. Andrews Grinstead, III
Title:  Chairman of the Board, 
President and Chief
Executive Officer

Date:  January 12, 1998

ANNEX Q
-------

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 13, 1998

0-27352
(Commission File Number)

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

HYBRIDON, INC.
(Exact name of registrant as specified in its charter)

Delaware                                            3072298
- --------------------------------------------------------------------------------
(State of Incorporation)                               (IRS Employer
Identification Number)

620 Memorial Drive, Cambridge, Massachusetts 02139
- --------------------------------------------------------------------------------
(Address of registrant's principal executive office)

(617) 528-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number)

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

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

ITEM 5. Other Events

Hybridon, Inc. (the "Company") and State Street Bank and Trust Company,
as trustee (the "Trustee"),  have entered into a First  Supplemental  Indenture,
dated as of January 13, 1998 (the  "Supplemental  Indenture").  The Supplemental
Indenture amended the Indenture, dated as of March 26, 1997, between the Company
and  Trustee  (the  "Original  Indenture"),   which  governs  the  Company's  9%
Convertible   Subordinated   Notes  due  2004  (the   "Notes").   The  resulting
modifications to the Original  Indenture affect the rights of the holders of the
Notes and subsequent  transferees.  Prior to making any investment decision with
respect to the Notes, all offerors and offerees of the Notes are urged to review
carefully the Supplemental Indenture, the text of which is attached hereto as an
exhibit and is  incorporated  herein by  reference,  and to  ascertain  from the
Company or otherwise  whether such Notes are Consenting Notes (as defined in the
Supplemental Indenture).

ITEM 7.   Financial Statements, Pro Forma Financial Information and Exhibits

(c) Exhibits.

Exhibit Number                                       Title
- --------------                                       -----

99             First Supplemental Indenture,  dated as of January 13, 1998,
by and  between  Hybridon,  Inc.  and State  Street Bank and
Trust Company, as Trustee

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

HYBRIDON, INC.

By:   /s/ E. ANDREWS GRINSTEAD, III
-----------------------------
Name:   E. Andrews Grinstead, III
Title:  Chairman of the Board, 
President and Chief
Executive Officer

Date:  January 15, 1998

ANNEX R
-------

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 22, 1998

0-27352
(Commission File Number)

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

HYBRIDON, INC.
(Exact name of registrant as specified in its charter)

Delaware                                            3072298
- --------------------------------------------------------------------------------
(State of Incorporation)                               (IRS Employer
Identification Number)

620 Memorial Drive, Cambridge, Massachusetts 02139
- --------------------------------------------------------------------------------
(Address of registrant's principal executive office)

(617) 528-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number)

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

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

ITEM 5. Other Events

On January 22, 1998,  Hybridon,  Inc.  (the  "Company")  issued a press
release  announcing  that the Company  has  determined  not to proceed  with the
offering described in its press release dated November 18, 1997 and filed with a
Current  Report on Form 8-K on that  date.  In lieu  thereof,  the  Company  has
commenced a private offering,  on a best efforts basis, to overseas investors in
accordance  with  Regulation  S  under  the  Securities  Act of  1933  of  units
("Units"),  each Unit consisting of $100,000  principal amount of Notes due 2007
and certain  warrants to purchase  Common  Stock,  pursuant to which the Company
intends to offer (together with a private offering,  on a best efforts basis, on
substantially  the same  terms  which the  Company  may  commence  in the United
States) a maximum  of 400  Units  (with an  over-allotment  option  covering  an
additional  150 Units),  at a purchase  price of $100,00 per Unit. A copy of the
release has been filed with this Current  Report on Form 8-K as Exhibit 99.1 and
is incorporated herein by reference.

ITEM 7.   Financial Statements, Pro Forma Financial Information and Exhibits

(c) Exhibits.

Exhibit Number                           Title
- - --------------                           -----

99.1                   Press Release dated January 22, 1998

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

HYBRIDON, INC.

By:   /s/ E. ANDREWS GRINSTEAD, III
-----------------------------
Name:   E. Andrews Grinstead, III
Title:  Chairman of the Board,
President and Chief
Executive Officer

Date:  January 22, 1998

ANNEX S
-------

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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 16, 1998

0-27352
(Commission File Number)

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

HYBRIDON, INC.
(Exact name of registrant as specified in its charter)

Delaware                                            3072298
- --------------------------------------------------------------------------------
(State of Incorporation)                               (IRS Employer
Identification Number)

620 Memorial Drive, Cambridge, Massachusetts 02139
- --------------------------------------------------------------------------------
(Address of registrant's principal executive office)

(617) 528-7000
- --------------------------------------------------------------------------------
(Registrant's telephone number)

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

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

ITEM 5. Other Events

On January 23, 1998,  Hybridon,  Inc.  (the  "Company")  issued a press
release  announcing that the Company has satisfied the 20 Unit minimum  offering
threshold for the private  placement,  the  commencement of which was previously
announced by the Company. A copy of the release has been filed with this Current
Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits

(c) Exhibits.

Exhibit Number                                     Title
- --------------                                     -----

99.1                           Press Release dated January 23, 1998

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

HYBRIDON, INC.

By:   /s/ E. ANDREWS GRINSTEAD, III
-----------------------------
Name:   E. Andrews Grinstead, III
Title:  Chairman of the Board,
President and Chief
Executive Officer

Date: February 2, 1998

ANNEX T
-------

FORM OF UNIT PURCHASE AGREEMENT

UNIT  PURCHASE  AGREEMENT  (this  "Agreement"),  dated  as  of
________,  1998, by and among  HYBRIDON,  INC., a Delaware  corporation
(the  "Company") and the Persons  listed on the signature  pages hereof
(the  "Current  Purchasers")  and such other  Persons that from time to
time hereafter may become party hereto pursuant to Section 13.10,  (the
"Additional  Purchasers" and collectively with the Current  Purchasers,
the "Purchasers").

The Company  desires to issue and sell to  Purchasers,  and  Purchasers
desire to purchase from the Company,  units  consisting of an aggregate of up to
$55,000,000  aggregate  principal  amount  of Notes due 2007  (the  "Notes")  in
substantially  the form  attached  hereto as Exhibit A,  together  with  certain
warrants to purchase common stock of the Company,  upon and subject to the terms
and conditions  hereinafter set forth. As used herein, the terms "Unit Offering"
and  "Offering"  shall  mean the  offering  of Units by the  Company  during the
Offering  Period  hereinafter   referred  to  pursuant  to  this  Agreement  and
substantially similar agreements.

Accordingly, in consideration of the premises and the mutual agreements
contained herein, Purchasers and the Company hereby agree as follows:

1. Purchase and Sale of the Units.

1.1.  Purchase  and  Sale  of  the  Units.  Subject  to the  terms  and
conditions  set forth  herein,  the Company  hereby  agrees to issue and sell to
Purchasers, and Purchasers,  severally and not jointly, hereby agree to purchase
from the Company,  units  ("Units"),  each consisting of (i) $100,000  principal
amount of Notes and (ii) Equity  Warrants in accordance with Section 2.2 hereof,
at a Closing (as such term is defined in Section 2.1 hereof),  provided however,
that upon the  occurrence of the Mandatory  Conversion  Event (as defined in the
Note),  Units will consist of the Series B Preferred  Stock that would otherwise
underlie such Notes and such Equity Warrants.  The aggregate  purchase price for
the respective Units sold to each Purchaser  pursuant to this Agreement shall be
the product of (x) the aggregate number of Units purchased by such Purchaser set
forth on the signature page hereto  executed by such Purchaser and (y) $100,000.
"Operative  Documents" as used herein shall mean this Agreement,  the Notes, the
Certificate  of Designation  for the Series B Preferred  Stock of the Company in
substantially  the form  attached  hereto  as  Exhibit  B (the  "Certificate  of
Designation") (such Preferred Stock, the "Conversion  Securities"),  the Warrant
Agreement  in  substantially  the form  attached  hereto  as  Exhibit  C and the
Negative Pledge Agreement in  substantially  the form attached hereto as Exhibit
D.

1.2. Regulation D Offering. The Company intends to use its best efforts
to retain a placement  agent to conduct,  on a "best  efforts"  basis, a private
placement offering of

the Units in the United  States in reliance on  Regulation D (the  "Regulation D
Offering") to commence no sooner than February 1, 1998.

1.3.  Regulation S Offering.  The Company has retained  [__________] as
placement  agent (the "Placement  Agent" and,  together with any placement agent
for the Regulation D Offering,  the "Placement Agents"),  to conduct, on a "best
efforts"  basis,  a  private  placement  offering  of the Units in  reliance  on
Regulation  S (the  "Regulation  S  Offering")  for sale  outside of the "United
States" (as defined in Section 11.26 hereof).

2. Delivery of Units.

2.1.  Delivery of Units. (a) The Company shall offer for sale a minimum
of 20 Units (the "Minimum  Offering  Amount") and an aggregate  maximum of up to
400 Units  (the  "Maximum  Offering  Amount")  (with an option  (the  "Placement
Agents'  Option") in favor of the Placement  Agents for an additional  150 Units
(plus warrants to be sold to the Placement Agents or their designees,  for $0.01
per warrant, to purchase Units equal, in the aggregate, to 25% of the Units sold
in the Unit Offering). The offering period (the "Offering Period") for the Units
in the  Regulation S Offering  shall begin on January __, 1998.  Upon receipt of
the Minimum  Offering  Amount,  the Company may conduct an initial  closing (any
closing  hereunder,  a "Closing") (the date of which being the "Initial  Closing
Date") and may conduct subsequent Closings on an interim basis until the Maximum
Offering Amount (and any additional  amount,  pursuant to the Placement  Agents'
Option) has been reached (the "Final Closing  Date").  The Offering Period shall
terminate  at 12:00  noon  (New York  Time) on  October  __,  1998,  subject  to
extension at the sole option of the Placement Agents,  for an additional 60 days
(the "Termination Date").

(b) Contemporaneously with the execution and delivery of this Agreement
by a Purchaser and pending the sale of Units at a Closing,  such  Purchaser will
be required to deposit the  Purchase  Price in escrow with the Escrow  Agent (as
defined in the Escrow  Agreement  hereinafter  referred to) by wire  transfer of
immediately  available funds for the account of the Escrow Agent made payable to
"MeesPierson (Cayman) Limited,  Escrow Agent, F/B/O Hybridon,  Inc," pursuant to
the terms of an escrow  agreement in  substantially  the form attached hereto as
Exhibit E (the "Escrow Agreement").

(c) At a Closing,  the funds  required for the purchase of the Units by
respective  Purchasers  will be  released  by the  Escrow  Agent from the escrow
account in accordance with the terms of the Escrow  Agreement.  The Company will
promptly deliver to Purchasers the Notes underlying the Units to be purchased on
the date of a Closing as set forth in Article 1 hereof  against  the  receipt by
the  Company of the  Purchase  Price from escrow in  accordance  with the Escrow
Agreement.  Each  Purchaser  hereby  authorizes  the  Placement  Agent to accept
delivery  of Notes on such  Purchaser's  behalf  in  Paris,  France  unless  the
Purchaser is in attendance at such Closing. The Notes shall be registered in the
Purchasers' respective names or the name of the nominee(s) of such Purchasers in
denominations of $1,000 and integral  multiples thereof pursuant to instructions
delivered to the Company not less than two days prior to a Closing.  Interest on
each Note sold in the Unit Offering  shall accrue only from the date of issuance
of such  Note.  Each  Purchaser  understands  that  the  purchase  of the  Units
hereunder

2

is  contingent  upon the Company  making  sales of Units of at least the Minimum
Offering Amount on or before the Termination Date.

(d)  Each  Closing  of  the  purchase  and  sale  of the  Units  in the
Regulation S Offering will take place at the offices of the  Placement  Agent at
[__________].  Any Unit to be sold by the Company under this  Agreement  must be
sold outside of the United States.

2.2. Equity  Warrants.  Promptly  following the Termination  Date or at
such earlier time as shall be determined by the Placement Agent,  each Purchaser
shall be entitled to be issued Unit Warrants (as defined below) as follows.  All
Units sold in the  Offering  will contain  Unit  Warrants (as defined  below) to
purchase up to the number of shares of Common Stock equal to 15% (rounded to the
nearest  whole  share) of the number of shares of Common  Stock  underlying  the
Conversion  Securities  (as defined below)  underlying  the principal  amount of
Notes  included  in the  number  of Units  purchased  by such  Purchaser  in the
Offering (or underlying the Conversion Securities sold directly) (such number of
shares of Common Stock,  the "Common  Equivalent  Shares").  In addition,  Units
purchased prior to the date on which the Mandatory  Conversion Event (as defined
in the Note) occurs will contain Unit Warrants  permitting the purchase of up to
an additional 5% of the Common  Equivalent  Shares (rounded to the nearest whole
share).  "Unit Warrants"  shall mean warrants  exercisable for a period of seven
years from the Final  Closing  Date (as  defined  below) at an initial  exercise
price equal to the conversion  price per share of Common Stock of the Conversion
Securities  as in  effect  on the  Final  Closing  Date.  The  terms of the Unit
Warrants shall be as more fully described in the Warrant  Agreement  between the
Company and ChaseMellon Shareholder Services LLC, as Warrant Agent (the "Warrant
Agreement"),  a form of which is attached hereto as Exhibit C.  Furthermore,  in
the event that the  Mandatory  Conversion  Event does not occur on or before the
Termination  Date,  each  Purchaser  shall be  entitled  to  receive  additional
warrants (the "Additional  Warrants") to purchase, at an exercise price of $.001
per share of Common  Stock,  a number  of shares of Common  Stock  equal to 100%
(rounded to the nearest whole share) of the Common  Equivalent Shares underlying
the Units purchased by such Purchaser in the Offering, which Additional Warrants
will be exercisable immediately;  provided,  however, that if by the Termination
Date the  Company  has  received  proceeds,  net of cash fees,  commissions  and
expenses, of at least $20,000,000 but the Exchange Offer has not been open until
the  expiration  of 20 (or, if required by law,  30)  business  days (i.e.,  the
minimum  period  required by Federal  law),  such  Additional  Warrants  will be
exercisable  beginning  on the first  day  following  the end of such  statutory
period  unless  the  Mandatory  Conversion  Event (as  defined  in the Note) has
occurred.  After the  occurrence of any  Mandatory  Conversion  Event,  upon the
occurrence of a Reset Event (as defined in the Certificate of Designation), each
Purchaser  shall be issued  additional  Unit  Warrants to purchase the number of
shares  of  Common  Stock  equal  to 50% of the  product  of (x) the  number  of
Conversion  Securities held of record by such Purchaser at such time, multiplied
by (y) the  difference  between  (1) the  Conversion  Rate  (as  defined  in the
Certificate of Designation)  immediately following the Reset Event minus (2) the
Conversion Rate immediately  preceding the Reset Event. The Company shall not be
required to issue any  fractional  shares upon  exercise of the Unit Warrants or
the Additional Warrants (collectively, the "Equity Warrants") or pay any cash in
lieu thereof.  Notwithstanding  the foregoing,  so long as any 9% Notes due 2004
("9% Notes") of the Company remain outstanding,  warrantholders may not exercise
Equity Warrants to the extent that such exercise

3

could,  in the Company's  judgment,  either alone or in  conjunction  with other
issuances or holdings of capital stock, other warrants or convertible securities
of the  Company,  result in a Change of Control  (as  defined  in the  Indenture
referred to in the Note).

3.  Conditions  to the  Obligations  of  Purchasers  at a Closing.  The
obligation  of  Purchasers  to purchase and pay for the Units to be purchased by
Purchasers  at a  Closing  is  subject  to the  satisfaction  on or prior to the
relevant Closing Date of the following  conditions,  which may only be waived by
written consent of the Placement Agent.

3.1. Representations and Warranties. The representations and warranties
of the  Company  contained  in this  Agreement  shall be true and correct in all
material  respects  when made,  and shall be true and  correct  in all  material
respects  at and as of the date of such  Closing as if they had been made on and
as of such Closing.

3.2.  Performance of Covenants.  All of the covenants and agreements of
the Company contained in this Agreement and required to be performed on or prior
to the relevant  Closing Date shall have been  performed in a manner  reasonably
satisfactory to the Secured Party.

3.3.  Closing  Documents.  The  Company  shall  have  delivered  to the
Placement Agent the following:

(a) a certificate  executed by the President or Chief Executive Officer
of the Company dated the relevant  Closing Date stating that the  conditions set
forth in Sections 3.1 and 3.2 have been satisfied; and

(b) a  certificate  of the  Secretary  or  Assistant  Secretary  of the
Company,  dated the relevant  Closing Date,  certifying the attached copy of the
By-laws  of the  Company,  the  authorization  of the  execution,  delivery  and
performance of this Agreement, and the resolutions authorizing the actions to be
taken by the Company under this Agreement.

3.4. Negative Pledge.  The Company shall have entered into the Negative
Pledge   Agreement  with  the  Secured  Party  on  behalf  of   Purchasers,   in
substantially the form of Exhibit D hereto,  covering the intellectual  property
of the Company.

3.5.  No Legal  Order  Pending.  There  shall not then be in effect any
legal or other order enjoining or restraining the  transactions  contemplated by
this Agreement.

3.6. No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law,  rule or  regulation  prohibiting  or  restricting  such sale or
requiring  any  consent  or  approval  of any person  which  shall not have been
obtained to issue the Units (except as otherwise provided in this Agreement).

3.7.  Minimum  Offering  Amount.  The  Company  shall  have  previously
received  (or shall  receive  at such  Closing)  at least the  Minimum  Offering
Amount.

4

3.8. Legal Opinion.  If requested by the Placement  Agent at a Closing,
counsel to the  Company  shall have  delivered  to the  Placement  Agent for the
benefit of such  Placement  Agent and the  Purchasers at such  Closing,  a legal
opinion  concerning  legal matters relating to this Agreement and the Term Sheet
as the Placement Agent may require.

3.9. Comfort Letter.  If requested by the Placement Agent at a Closing,
the  Company's  auditors,  Arthur  Andersen  LLP,  shall have  delivered  to the
Placement  Agent for the benefit of the  Placement  Agent and the  Purchasers at
such  Closing,  a comfort  letter  to such  effect  as the  Placement  Agent may
require.

3.10.  Proceedings.  All corporate and other proceedings taken or to be
taken in connection with the transactions  contemplated hereby to be consummated
at  each  Closing  and  all  documents  incident  thereto  shall  be  reasonably
satisfactory  in form and  substance  to the Secured  Party,  including  but not
limited to the  authorization  of the  issuance  of the  Conversion  Securities,
Equity Warrants,  Placement and Advisory  Warrants (as defined in Section 11.11)
and the Unit-Underlying Common Stock (as defined in Section 11.24).

4.  Conditions  to the  Obligations  of the  Company at a Closing.  The
obligation  of the Company to issue and sell Units to Purchasers at a Closing is
subject to the  satisfaction of the following  conditions,  each of which may be
waived by the Company:

4.1. Representations and Warranties. The representations and warranties
of each  Purchaser  contained in this  Agreement  shall be true and correct when
made,  and shall be true and correct at and as of the date of such Closing as if
they had been made on and as of such Closing.

4.2. No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law,  rule or  regulation  prohibiting  or  restricting  such sale or
requiring  any  consent  or  approval  of any person  which  shall not have been
obtained to issue the Notes (except as otherwise provided in this Agreement).

5. Creation of Security Interest.

5.1. Grant of Security Interest.

(a) The  Company  hereby  grants and  pledges to  [__________]  (or his
designee) (the "Secured  Party"),  solely as agent for Purchasers and not in his
individual  capacity,  a continuing  security interest in all presently existing
and hereafter  acquired or arising assets and property of the Company  described
on Exhibit F hereto (the  "Collateral") in order to secure prompt payment of the
principal sum and interest  evidenced by the Notes,  and the  performance by the
Company of each of its  obligations  under this  Agreement  and the Notes.  Such
security  interest  shall  automatically  terminate  upon the earlier of (i) the
payment of  principal  and interest on the Notes and (ii) such time as the Notes
are no longer outstanding (the "Security Interest Termination Date"). Purchasers
hereby  acknowledge  and agree that the security  interests  granted  hereby are
subordinate and subject to any prior security interest in the Collateral granted
by the Company and are subordinate and subject to any lien granted in the future
to secure

5

Senior  Indebtedness  of the Company.  Purchasers  and the Secured  Party hereby
agree not to exercise any of their rights with respect to the  Collateral  under
this  Agreement,  at law,  in equity or  otherwise  until the  holders of Senior
Indebtedness have been paid in full.

(b) Purchasers,  by their  acceptance of the benefits of this Agreement
and the Notes, hereby irrevocably  designate the Secured Party to act as Secured
Party with respect to this  Agreement  and as  specified in the other  Operative
Documents. Each Purchaser hereby irrevocably authorizes,  and each holder of any
Note, by such holder's  acceptance of such Note, shall be deemed  irrevocably to
authorize,  the  Secured  Party to take  such  action  on its  behalf  under the
provisions  of this  Agreement and the other  Operative  Documents and any other
instruments  and  agreements  referred to herein or therein and to exercise such
powers and to perform such duties  hereunder and thereunder as are  specifically
delegated  to, or required of, the Secured  Party by the terms hereof or thereof
and such other powers as are reasonably incidental thereto.  Each Purchaser,  on
behalf of itself  and  future  holders  of the Notes  issued to such  Purchaser,
hereby  authorizes  and  directs  the  Secured  Party,  from time to time in the
Secured  Party's  discretion  to take any action  and  promptly  to execute  and
deliver on its behalf any document or instrument that the Company may reasonably
request to  effect,  confirm  or  evidence  the  provisions  of this  Article 5,
including,   without  limitation,   the  occurrence  of  the  Security  Interest
Termination  Date,  any  subordination  agreement,  or  otherwise.  In addition,
Purchasers  and Secured Party hereby  covenant and agree promptly to execute and
deliver any such document or instrument in respect of such subordination, and in
respect of the  occurrence  of the Security  Interest  Termination  Date, as the
Company may reasonably request.

5.2. Delivery of Additional  Documentation  Required. The Company shall
from time to time  execute  and  deliver to  Secured  Party,  at the  request of
Secured Party,  all financing  statements and other documents that Secured Party
may  reasonably  request to  perfect  and  continue  perfected  Secured  Party's
security interests in the Collateral and in order fully to consummate all of the
transactions  contemplated under this Agreement,  it being understood and agreed
by the  Purchasers  and the  Secured  Party that the  Company  need not  deliver
possession of any  Collateral to the Secured  Party,  take any action to perfect
the  security  interest  granted  hereby  other  than the  filing  of  financing
statements  under the  Uniform  Commercial  Code or take any other  action  that
would,  in its sole  judgment,  conflict  with the terms of or pertaining to any
Senior Indebtedness.

6.  Representations  and  Warranties of Purchasers.  Purchasers  hereby
severally represent and warrant to the Company as follows:

6.1. Investment Intent. Each Purchaser  recognizes that the purchase of
the Units  involves a high  degree of risk  including,  but not  limited to, the
following:  (i) the Company  remains a development  stage  business with limited
operating history and requires  substantial funds in addition to the proceeds of
the Unit Offering; (ii) an investment in the Company is highly speculative,  and
only  investors  who can  afford  the loss of  their  entire  investment  should
consider investing in the Company, the Units, the Notes, the Equity Warrants, or
the shares of Conversion  Securities of the Company  issued on conversion of, or
in lieu of, the Notes or the Unit-Underlying  Common Stock, (iii) such Purchaser
may not be able to liquidate his investment;  (iv) transferability of the Notes,
the Equity Warrants, any shares of Conversion Securities

6

of the Company which may be issued upon  conversion of, or in lieu of, the Notes
and the Unit-Underlying Common Stock is extremely limited; (v) in the event of a
disposition of the Notes, the Equity Warrants,  the Conversion Securities or the
Unit-Underlying  Common  Stock,  such  Purchaser  could  sustain the loss of his
entire  investment  and  (vi) the  Company  has not  paid  any  dividends  since
inception and does not  anticipate  the payment of dividends on the Common Stock
or the  Conversion  Securities in the  foreseeable  future.  Such risks are more
fully set forth in the Term  Sheet (as  hereinafter  defined)  furnished  by the
Company to such Purchaser.

6.2. Lack of Liquidity.  Each Purchaser  confirms that he or it is able
(i) to bear the economic risk of this  investment,  (ii) to hold the Notes,  the
Equity Warrants,  any shares of Conversion Securities of the Company issued upon
conversion of, or in lieu of, the Notes and any shares of Unit-Underlying Common
Stock for an indefinite period of time, and (iii) presently to afford a complete
loss of his or its  investment;  and  represents  that  he or it has  sufficient
liquid assets so that the  illiquidity  associated with this investment will not
cause any undue  financial  difficulties or affect such  Purchaser's  ability to
provide for his or its current needs and possible financial  contingencies,  and
that his or its  commitment  to all  speculative  investments  is  reasonable in
relation to his or its net worth and annual income. Furthermore,  each Purchaser
acknowledges  that the Equity  Warrants and the  Conversion  Securities  contain
certain restrictions on exercise,  voting,  conversion and certain other rights,
as more  particularly set forth in the Warrant  Agreement and the Certificate of
Designation for the Conversion Securities,  attached hereto as Exhibits C and B,
respectively.

6.3. Knowledge and Experience.  Each Purchaser hereby  acknowledges and
represents  that such  Purchaser  has  prior  investment  experience,  including
investment in securities that are non-listed, unregistered and are not traded on
the Nasdaq  National or SmallCap  Market,  nor on the  National  Association  of
Securities  Dealers,  Inc.'s (the "NASD")  automated  quotation  system, or such
Purchaser has employed at its own expense the services of an investment advisor,
attorney  and/or  accountant to request  documents from the Company  pursuant to
Section 6.5 hereof and to read all of the documents  furnished or made available
by the Company to such Purchaser and to evaluate the  investment,  tax and legal
merits and the  consequences and risks of such a transaction on such Purchaser's
behalf, that such Purchaser or such professional  advisor has such knowledge and
experience  in financial  and business  matters and that such  Purchaser or such
professional  advisor  is  capable  of  evaluating  the  merits and risks of the
prospective  investment and, if applicable,  satisfies the conditions set out in
Rule 501(h) under the Securities Act.

6.4.  Purchaser  Capacity.  Each Purchaser hereby  represents that such
Purchaser either by reason of such Purchaser's business or financial experience,
or the  business  or  financial  experience  of  such  Purchaser's  professional
advisors (who are unaffiliated with, and who are not compensated by, the Company
or any affiliate or selling agent of the Company, including the Placement Agent,
directly or  indirectly),  has the  capacity  to protect  such  Purchaser's  own
interests in connection with the transaction contemplated hereby.

6.5. Term Sheet. Each Purchaser hereby acknowledges receipt and careful
review of (a) the  Confidential  Term Sheet of the  Company  attached  hereto as
Exhibit  G, as  supplemented  and  amended,  and the  attachments  and  exhibits
thereto, all of which constitute an

7

integral  part  thereof  (the  "Term  Sheet"),  and (b) this  Agreement  and all
attachments to it, and hereby  represents that such Purchaser has been furnished
by the  Company  during  the  course of this  transaction  with all  information
regarding the Company which such Purchaser or its  representative  has requested
or desired to know,  has been afforded the  opportunity to ask questions of, and
to receive answers from, duly authorized  officers or other  representatives  of
the Company concerning the terms and conditions of the Unit Offering, the Notes,
the Equity Warrants,  the Conversion  Securities and the Unit-Underlying  Common
Stock and the affairs of the Company and has received any additional information
which such Purchaser or its representative has requested.

6.6. Reliance on Information. Each Purchaser has relied solely upon the
information  provided by the Company in the Term Sheet and in this  Agreement in
making the  decision  to invest in the  Units.  To the  extent  necessary,  each
Purchaser has retained, at the sole expense of such Purchaser,  and relied upon,
appropriate  professional advice regarding the investment,  tax and legal merits
and consequences of this Agreement and its purchase of the Units, the Notes, the
Equity  Warrants,  the  conversion  of the Notes into,  or the  purchase of, the
Conversion  Securities and the conversion  into or exercise for  Unit-Underlying
Common Stock  hereunder.  Each  Purchaser  acknowledges  and agrees that (i) the
Company has prepared the Term Sheet and that no other Person, including, without
limitation,  any of the  Placement  Agents,  has  supplied any  information  for
inclusion in the Term Sheet other than  information  furnished in writing to the
Company by the  Placement  Agents  specifically  for inclusion in the Term Sheet
relating to such respective  placement agent,  (ii) the Placement Agents have no
responsibility for the accuracy or completeness of the Term Sheet and (iii) such
Purchaser has not relied upon the independent investigation or verification,  if
any, which may have been undertaken by the Placement Agents.

6.7. No Solicitation. Each Purchaser represents that (i) such Purchaser
was  contacted  regarding  the sale of the Units by the  Placement  Agent (or an
authorized agent or representative thereof) with whom such Purchaser had a prior
substantial pre-existing  relationship and (ii) no Units were offered or sold to
such  Purchaser  by  means  of any  form  of  general  solicitation  or  general
advertising,  and in connection  therewith no Purchaser (A) received or reviewed
any  advertisement,  article,  notice  or  other  communication  published  in a
newspaper or magazine or similar  media or broadcast  over  television  or radio
whether  closed  circuit,  or generally  available;  or (B) attended any seminar
meeting or industry  investor  conference  whose  attendees  were invited by any
general solicitation or general advertising.

6.8.  Registration.  Each Purchaser hereby  acknowledges  that the Unit
Offering has not been reviewed by the Securities and Exchange  Commission or any
state  regulatory  authority,  since the Unit  Offering is intended to be exempt
from the  registration  requirements of Section 5 of the Securities Act pursuant
to Regulation S. No Purchaser  shall sell or otherwise  transfer the Units,  the
Notes,  the Conversion  Securities,  the Equity Warrants or any  Unit-Underlying
Common Stock unless such  securities are registered  under the Securities Act or
unless an exemption from such registration is available.

6.9. Purchase for own Account.  Each Purchaser understands that neither
the Units nor the Notes nor the Equity  Warrants  nor any  shares of  Conversion
Securities issued or

8

issuable  upon  conversion  of,  or in lieu of,  the  Notes  nor any  shares  of
Unit-Underlying  Common Stock have been  registered  under the Securities Act by
reason of a claimed  exemption  under the provisions of the Securities Act which
depends,  in  part,  upon  such  Purchaser's   investment  intention.   In  this
connection,  each Purchaser hereby  represents that such Purchaser is purchasing
Units for such Purchaser's own account for investment and not with a view toward
the resale or  distribution  to others or for  resale in  connection  with,  any
distribution or public offering  (within the meaning of the Securities Act), nor
with  any  present  intention  of  distributing  or  selling  the  same and such
Purchaser has no present or contemplated  agreement,  undertaking,  arrangement,
obligation or commitment providing for the disposition thereof. No Purchaser, if
an entity, was formed for the purpose of purchasing the Units.

6.10.  Holding  Period.  Each  Purchaser  understands  that there is no
public market for the Notes, the Equity Warrants or any shares of the Conversion
Securities issued upon conversion of the Notes and that no market is expected to
develop for any such Notes, such Equity Warrants or such shares.  Each Purchaser
understands  that even if a public market  develops for such Notes,  such Equity
Warrants or such shares,  reliance  upon Rule 144 under the  Securities  Act for
resales requires, among other conditions, a one-year holding period prior to the
resale (in limited  amounts) of  securities  acquired in a  non-public  offering
without  having to satisfy the  registration  requirements  under the Securities
Act. Each  Purchaser  understands  and hereby  acknowledges  that the Company is
under no  obligation  to register any of the Notes,  any Equity  Warrants or any
shares of the Conversion  Securities  under the Securities Act or any applicable
non-United  States,  state  securities or "blue sky" laws.  Each Purchaser shall
hold the Company and its directors, officers, employees, controlling persons and
agents (including the Placement Agents and their respective officers, directors,
employees,  counsel, controlling persons and agents) and their respective heirs,
representatives,  successors and assigns harmless from, and shall indemnify them
against, all liabilities, costs and expenses incurred by them as a result of (i)
any  misrepresentation  made  by such  Purchaser  contained  in  this  Agreement
(including  in  Article  14  hereof),  (ii)  any  sale or  distribution  by such
Purchaser  in  violation  of the  Securities  Act or any  applicable  non-United
States,  state  securities or "blue sky" laws or (iii) any untrue statement made
by such Purchaser.

6.11.  Legends.  Each Purchaser consents to the placement of the legend
set forth below on any certificate or other document evidencing the Notes:

"THE  TERMS OF THIS NOTE ARE  SUBJECT  TO THE TERMS OF A UNIT  PURCHASE
AGREEMENT,  A COPY OF WHICH  IS  AVAILABLE  FROM  HYBRIDON,  INC.  (THE
"COMPANY").  THE  SECURITIES  REPRESENTED  BY THIS  NOTE  HAVE NOT BEEN
REGISTERED  UNDER THE UNITED STATES  SECURITIES ACT OF 1933, AS AMENDED
(THE  "SECURITIES  ACT"), OR ANY APPLICABLE  STATE SECURITIES LAWS, AND
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF A  REGISTRATION  STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER

9

THE SECURITIES  ACT OR AN EXEMPTION  FROM THE SECURITIES  ACT. ANY SUCH
TRANSFER  MAY ALSO BE  SUBJECT  TO  COMPLIANCE  WITH  APPLICABLE  STATE
SECURITIES LAWS AND THE LAWS OF OTHER APPLICABLE JURISDICTIONS."

Each  Purchaser  further  consents to the  placement of one or more  restrictive
legends on the shares of  Conversion  Securities,  the Equity  Warrants  and the
Unit-Underlying  Common Stock as required by applicable  securities  laws.  Each
Purchaser  is aware that the  Company  will make a notation  in its  appropriate
records with respect to the restrictions on the  transferability  of such Notes,
Equity Warrants, Conversion Securities and Unit-Underlying Common Stock.

6.12.  Financial  Review.  Each Purchaser  understands that the Company
will review this  Agreement and is hereby given  authority by each  Purchaser to
call such  Purchaser's  bank or place of  employment  or  otherwise  review  the
financial standing of such Purchaser;  and it is further agreed that the Company
(with the consent of the Placement  Agent) and the Placement  Agent, at its sole
discretion,  reserves the unrestricted right,  without further  documentation or
agreement on the part of such Purchaser, to reject or limit any purchase, and to
close the Unit Offering to such Purchaser at any time.

6.13. Residence of Purchaser. Each Purchaser hereby represents that the
address of such  Purchaser  furnished by such  Purchaser on the  signature  page
hereof  is  such  Purchaser's  principal  residence  if  such  Purchaser  is  an
individual or its  principal  business  address if it is a corporation  or other
entity.

6.14.  Power  and  Authority.   Each  Purchaser  represents  that  such
Purchaser has full power and authority  (corporate,  statutory and otherwise) to
execute  and  deliver  this  Agreement  and to  purchase  the Units,  the Equity
Warrants,   the  Notes,  the  shares  of  Conversion  Securities  issuable  upon
conversion of, or in lieu of, the Notes and any shares of Unit-Underlying Common
Stock.  This Agreement  constitutes the legal,  valid and binding  obligation of
each Purchaser, enforceable against such Purchaser in accordance with its terms.

6.15.  Plans.  If a Purchaser is a  corporation,  partnership,  limited
liability company,  trust,  employee benefit plan, individual retirement account
or other entity, then subject to the terms contained in this Agreement (a) it is
authorized  and  qualified  to become an  investor in the Company and the person
signing this Agreement on behalf of such entity has been duly authorized by such
entity to do so,  and (b) it is duly  organized,  validly  existing  and in good
standing under the laws of the jurisdiction of its organization.

6.16.  NASD.  Each  Purchaser  acknowledges  that  if  he or  she  is a
registered  representative of an NASD member firm, he or she must give such firm
the notice required by the NASD's Rules of Fair Practice,  receipt of which must
be acknowledged by such firm in Section 14.3 below.

6.17.  Securities Laws. Each Purchaser  acknowledges that at such time,
if  ever,  as  the  Notes,  the  Equity  Warrants,   Conversion   Securities  or
Unit-Underlying Common Stock

10

are  registered,  sales  of  the  Notes,  the  Equity  Warrants  the  Conversion
Securities  and  Unit-Underlying  Common  Stock will be  subject  to  applicable
non-United States and state securities laws, including those of the State of New
Jersey  which  require any  securities  sold in New Jersey to be sold  through a
registered broker-dealer or in reliance upon an exemption from registration.

6.18. Brokers.  Each Purchaser  represents and warrants that it has not
engaged,  consented to nor authorized any broker,  finder or intermediary to act
on its behalf,  directly or indirectly,  as a broker,  finder or intermediary in
connection with the transactions  contemplated by this Agreement. Each Purchaser
shall  indemnify  and hold  harmless  the  Company  from and  against  all fees,
commissions  or other payments owing to any such person or firm acting on behalf
of such Purchaser hereunder.

6.19. Placement Agent. Each Purchaser acknowledges that (a) the Company
has engaged,  consented to and authorized the Placement Agent in connection with
the transactions  contemplated by this Agreement,  (b) the Company shall pay the
Placement Agent (and the placement  agent in the Regulation D Offering)  certain
advisory and  restructuring  fees and a commission  and  reimburse the Placement
Agents'   expenses  in  accordance  with  their   respective   placement  agency
agreements,  and the Company shall  indemnify  and hold harmless such  Purchaser
from and against all fees, commissions or other payments owing by the Company to
the Placement Agents or any other person or firm acting on behalf of the Company
hereunder and (c)  registered  representatives  of the  Placement  Agents and/or
their  respective   designees   (including,   without   limitation,   registered
representatives  of the Placement Agents and/or their  respective  designees who
participate  in the Unit Offering or in the issuance of shares of the Conversion
Securities  upon  conversion  of  the  Notes)  will  be  paid a  portion  of the
commissions  paid to the  relevant  placement  agent  including a portion of the
Placement and Advisory Warrants (as defined in Section 11.11 hereof).

6.20.  Beneficial  Owner.  Each  Purchaser,  whose name  appears on the
signature  line  below,  will be the  beneficial  owner of the  Units  that such
Purchaser acquires.

6.21.  Accredited  Investor.  Each Purchaser  represents  that it is an
"accredited investor" as such term is defined in Rule 501 of Regulation D.

6.22.  Reliance  on  Representation  and  Warranties.   Each  Purchaser
understands  that the Units are being  offered  and sold to the  undersigned  in
reliance on specific  exemptions  from the  registration  requirements of United
States  Federal and state  securities  laws and that the Company is relying upon
the  truth  and  accuracy  of  the  representations,   warranties,   agreements,
acknowledgments  and understandings of the undersigned set forth herein in order
to determine the  applicability  of such  exemptions and the  suitability of the
undersigned to acquire the Notes, the Equity Warrants, the Conversion Securities
and the Unit-Underlying Common Stock.

6.23.  Lock-Up  Period.  Subject to the proviso  below,  and to Section
7.1(c),  from the date hereof and continuing for a period (the "Lock-Up Period")
of nine (9) months from the  effective  date of the  Registration  Statement (as
defined in Section 12.2 hereof) (the  "Effective  Date"),  each Purchaser  shall
not,  without the prior written consent of the Placement Agent,  offer,  pledge,
sell,  contract to sell, grant any option for the sale of, or otherwise  dispose
of,

11

directly or indirectly, 75% of the Registrable Securities (as defined in Section
12.1)  purchased  or  acquired  by  each  Purchaser,  provided,  however,  that,
following  each  three  month  period  after the  Effective  Date,  an amount of
Registrable  Securities  equal to 25% of the  number of  Registrable  Securities
purchased or acquired by each  Purchaser  shall  become  exempt from the lock-up
provisions  contained  in this  sentence.  For the sake of  clarity,  subject to
Section  7.1(c),  25% of the  Registrable  Securities will not be subject to any
lock-up. In addition, each Purchaser agrees that during the period from the date
that such Purchaser was first  contacted with respect to the potential  purchase
of  Transfer  Restricted  Securities  through  the last  date  upon  which  such
Purchaser holds any Transfer Restricted  Securities (as defined in Section 12.1)
or Registrable  Securities,  such Purchaser  shall not,  directly or indirectly,
through  related  parties,  affiliates or otherwise,  (i) sell "short" or "short
against the box" (as those terms are generally  understood)  any security of the
Company or (ii) otherwise engage in any transaction,  except for any transaction
contemplated  by this  Agreement,  that  involves  hedging  of such  Purchaser's
position in any security of the Company.

6.24.  Conversion Securities  Certificates.  Each Purchaser consents to
the  placement  of  a  statement  on  the  face  or  back  of  any  certificates
representing Conversion Securities, in substantially the following form:

"Hybridon, Inc. (the "Corporation") will furnish without charge to each
stockholder who so requests the powers,  designations,  preferences and
relative,  participating,  optional,  or other  special  rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights."

7. Additional Representations and Warranties Relating to Regulation S.

7.1. Each Purchaser hereby additionally  represents and warrants to the
Company as follows:

(a) such  Purchaser  is not a U.S.  Person  or a Person  in the  United
States,  is  purchasing  the Units for such  Purchaser's  own account and is not
acquiring the Notes or the Equity Warrants purchased hereunder or any Conversion
Securities  or  Unit-Underlying  Common  Stock for the account or benefit of any
U.S. Person;

(b) such Purchaser  understands and  acknowledges  that (i) neither the
Units, nor the Notes, nor the Equity Warrants nor the Conversion  Securities nor
the  Unit-Underlying  Common Stock have been registered under the Securities Act
and that the Units, the Notes, the Equity  Warrants,  the Conversion  Securities
and the  Unit-Underlying  Common  Stock may not be offered or sold in the United
States or to, or for the  account or  benefit  of,  any U.S.  Person  unless the
Units,  the Notes,  the Equity  Warrants or shares of  Conversion  Securities or
Unit-Underlying  Common Stock are  registered  under the  Securities Act or such
offer  or  sale  is  made  pursuant  to  an  exemption  from  the   registration
requirements  of the  Securities  Act and (ii) the Units  are being  distributed
pursuant to the terms of Regulation  S, which  permits  securities to be sold to
Persons outside the United States or to Persons that are not U.S.  Persons in an
"offshore

12

transaction" (as defined in the Securities Act Rule 902(i)),  subject to certain
terms and conditions;

(c) such Purchaser acknowledges that for a period of one year following
the Final Closing Date (the "Restricted  Period"),  such Purchaser shall not (i)
engage in any activity  undertaken for the purpose of, or that could  reasonably
be expected to have the effect of,  conditioning the market in the United States
for the Units, the Notes, the Equity Warrants,  the Conversion Securities or the
Company's  Common  Stock or (ii) unless such Units,  Notes,  Equity  Warrants or
shares of  Conversion  Securities  or  Common  Stock  are  registered  under the
Securities  Act  or an  exemption  from  the  registration  requirements  of the
Securities  Act is  available,  offer,  sell or transfer  any of the Units,  the
Notes,  the  Equity  Warrants,   or  any  shares  of  Conversion  Securities  or
Unit-Underlying  Common Stock in the United  States or to, or for the account or
benefit of, a U.S. Person. Such Purchaser understands that the Notes, the Equity
Warrants,  shares of Conversion  Securities and Unit-Underlying  Common Stock or
any  interest  therein  are only  transferable  on the books and  records of the
transfer agent and registrar of the Company.  Such Purchaser further understands
that such  transfer  agent and  registrar  will not register any transfer of the
Units,  the Notes,  the Equity  Warrants or shares of  Conversion  Securities or
Unit-Underlying  Common  Stock  which  the  Company  believes  may  violate  the
restrictions  set forth in this  paragraph  (c),  and that the Company may place
stop  transfer  orders  with its  transfer  agent with  respect to  certificates
representing Notes, Equity Warrants,  Conversion  Securities and Unit-Underlying
Common Stock.  The Company may require a  certification  satisfactory to it from
such Purchaser as a condition to such registration and transfer;

(d) such  person did not  receive  any offer to  purchase  Units in the
United States,  no directed  selling  efforts were made to such Purchaser in the
United States in  contravention  of the requirements of Regulation S and, at the
time of both the offer and sale of the Units to such  Purchaser,  such Purchaser
was outside the United States;

(e) to the best knowledge of the Purchaser,  each  distributor  (as the
term is defined in Regulation S) participating in the Regulation S Offering,  if
any,  has agreed that all offers and sales of the Units prior to the  expiration
of a period of one year  commencing on the Final Closing Date shall only be made
in compliance with the safe harbor provisions  contained in Regulation S and the
Restricted  Period,  or pursuant to  registration of the Units,  the Notes,  the
Equity Warrants,  the Conversion  Securities and/or the  Unit-Underlying  Common
Stock  under the  Securities  Act or pursuant to an  applicable  exemption  from
registration under the Securities Act;

(f) such  Purchaser  agrees  that for the  duration  of the  Restricted
Period  the Notes  shall  bear the  legend  set forth  below and the  Conversion
Securities,  Equity  Warrants  and  Unit-Underlying  Common  Stock  shall bear a
similar legend:

"THE  TERMS OF THIS NOTE ARE  SUBJECT  TO THE TERMS OF A UNIT  PURCHASE
AGREEMENT,  A COPY OF WHICH  IS  AVAILABLE  FROM  HYBRIDON,  INC.  (THE
"COMPANY"). THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN

13

REGISTERED  UNDER THE UNITED STATES  SECURITIES ACT OF 1933, AS AMENDED
(THE"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD,  OFFERED FOR SALE,  PLEDGED OR  HYPOTHECATED  OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF A  REGISTRATION  STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION FROM
THE SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO COMPLIANCE
WITH APPLICABLE  STATE SECURITIES LAWS AND THE LAWS OF OTHER APPLICABLE
JURISDICTIONS.

THIS NOTE MAY NOT BE OFFERED OR SOLD IN THE UNITED  STATES OR TO A U.S.
PERSON OR FOR THE  ACCOUNT  OR BENEFIT  OF A U.S.  PERSON  PRIOR TO THE
EXPIRATION  OF THE  RESTRICTED  PERIOD  (AS  DEFINED  IN  THE  PURCHASE
AGREEMENT),  AND NO TRANSFER OR EXCHANGE OF THIS NOTE MAY BE MADE UNTIL
AFTER THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED  PERIOD AND
THE DATE ON WHICH THE REQUIRED  CERTIFICATION RELATING TO SUCH INTEREST
HAS  BEEN  PROVIDED  IN  ACCORDANCE  WITH  THE  TERMS  OF THE  PURCHASE
AGREEMENT";

(g) Following the  expiration of the  Restricted  Period each Purchaser
requesting  removal  of any  legend  shall  provide  to the  Company  a  written
representation  that, during the Restricted Period,  neither Units nor any Notes
nor any Conversion  Securities nor any Equity  Warrants nor any  Unit-Underlying
Common Stock were sold or arranged to be sold in the United  States or to a U.S.
Person and that  neither the Units nor any Notes nor any  Conversion  Securities
nor any Equity  Warrants  nor any  Unit-Underlying  Common Stock will be used to
cover a short sale or other  borrowing of any  securities  of the Company in the
United States made during the Restricted Period; and

(h) Such  Purchaser is not  purchasing  the Units nor any Notes nor any
Conversion  Securities nor any Equity  Warrants nor any  Unit-Underlying  Common
Stock as part of any plan or scheme to evade the  registration  requirements  of
the Securities Act.

7.2.  Foreign  Status The  Purchaser  hereby  represents  that (a) such
Purchaser (1) is not a citizen or resident of the United  States,  a corporation
or  partnership  organized  under  the laws of the  United  States  or any state
thereof or a trust or estate  whose  income is  includable  in gross  income for
United States Federal  income tax purposes  regardless of its source and (2) has
accurately  completed  the Form W-8  attached  hereto as  Exhibit H, or (b) such
Purchaser  will promptly  provide the Company with an accurately  completed Form
W-9  or  substitute   Form  W-9  providing  such   Purchaser's   U.S.   taxpayer
identification  number.  The Purchaser  hereby consents to the withholding  from
payments  otherwise  due and  payable by the  Company of amounts  required to be
withheld under applicable tax law.

14

8. Representation,  Warranties and Covenants of the Company.  Except as
set forth on the  Schedule  of  Exceptions  attached  hereto as  Exhibit  I, the
Company hereby represents, warrants and covenants to each Purchaser that:

8.1.  Organization,  Good Standing and Qualification.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the  corporate  power and  authority to conduct
its business as described in the Term Sheet. The Company is duly qualified to do
business as a foreign  corporation and is in good standing in Massachusetts  and
in each  jurisdiction  in which the  nature  of the  business  conducted,  or as
proposed to be  conducted  in the Term  Sheet,  by it or the  properties  owned,
leased or operated by it, makes such  qualification  or licensing  necessary and
where the failure to be so qualified or licensed  would have a material  adverse
effect upon the business, operations or financial condition of the Company.

8.2.  Capitalization  and Voting  Rights.  The  authorized,  issued and
outstanding  capital stock of the Company,  as of the date of the Term Sheet, is
as set forth in the Term Sheet  under the  heading  "Equity  Capitalization  and
Indebtedness"; all issued and outstanding shares of capital stock of the Company
are validly  issued,  fully paid and  nonassessable.  Except as set forth in the
Term Sheet, as of the date of the Term Sheet, there are no outstanding  options,
warrants, agreements,  convertible securities, preemptive rights or other rights
to  subscribe  for or to purchase  any shares of capital  stock of the  Company.
Except  as set  forth in the Term  Sheet,  in this  Agreement  and as  otherwise
required by law,  there are no  restrictions  upon the voting or transfer of the
Transfer  Restricted  Securities  (as defined in Section  12.1)  pursuant to the
Company's  Certificate  of  Incorporation,   as  amended  (the  "Certificate  of
Incorporation"),  Bylaws or other governing  documents or any agreement or other
instruments to which the Company is a party or by which the Company is bound.

8.3. Authorization; Enforceability. The Company has the corporate power
and authority to enter into this  Agreement and to consummate  the  transactions
contemplated  hereby.  All  corporate  action  on the part of the  Company,  its
directors and stockholders necessary for the execution, delivery and performance
of this Agreement by the Company,  the sale,  issuance and delivery of the Units
contemplated hereby and the performance of the Company's  obligations  hereunder
has been taken.  This  Agreement  has been duly  executed  and  delivered by the
Company and  constitutes a legal,  valid and binding  obligation of the Company,
enforceable against the Company in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of debtors
and rules of law  governing  specific  performance,  injunctive  relief or other
equitable  remedies,  and to limitations of public policy. Upon the issuance and
delivery  of  the  Conversion   Securities  and   Registrable   Securities,   as
contemplated  by this  Agreement,  such  securities  will be  duly  and  validly
authorized and issued,  fully paid and  nonassessable.  The issuance and sale of
the securities  contemplated  hereby will not give rise to any preemptive rights
or rights of first refusal on behalf of any person.

8.4. No Conflict; Governmental Consents.

(a) The execution and delivery by the Company of this Agreement and the
consummation  by the Company of the  transactions  contemplated  hereby will not
result in the

15

violation  of any law,  statute,  rule,  regulation,  order,  writ,  injunction,
judgment  or decree of any court or  governmental  authority  to or by which the
Company is bound,  or of any provision of the  Certificate of  Incorporation  or
By-laws of the  Company,  and will not  conflict  with,  or result in a material
breach or violation of, any of the terms or provisions  of, or constitute  (with
due  notice or lapse of time or both) a material  default  under,  any  material
lease, loan agreement,  mortgage,  security agreement,  note, trust indenture or
other  agreement or instrument to which the Company is a party or by which it is
bound or to which any of its  properties  or assets is subject nor result in the
creation or imposition  of any lien upon any of the  properties or assets of the
Company other than in favor of the Secured Party.

(b)  No  consent,  approval,   authorization  or  other  order  of  any
governmental  authority or other  third-party  under any  material  agreement to
which the  Company  is a party is  required  to be  obtained  by the  Company in
connection with the  authorization,  execution and delivery of this Agreement or
with the  authorization,  issuance  and sale of the Units,  except  such as have
already  been  obtained  and such filings as may be required to be made with the
Securities  and Exchange  Commission and with any state or foreign "blue sky" or
securities regulatory authority.

8.5.  Governmental  Authorizations.  Except  as set  forth  in the Term
Sheet, the Company has, on the date hereof and on the relevant Closing Date, all
material  licenses,  permits  and other  governmental  authorizations  currently
required for the conduct of its business or  ownership of  properties  and is in
all material respects complying therewith.

8.6.  Litigation.  Except as set forth in the Term  Sheet,  on the date
hereof and on the relevant  Closing Date, the Company knows of no pending or, to
the  knowledge  of the Company,  threatened  legal or  governmental  proceedings
against  the Company  which  could  materially  adversely  affect the  business,
financial condition or operations of the Company.

8.7.  Accuracy  of  Reports.  All  reports  required to be filed by the
Company  since and  including  the most recent  filing of the  Company's  Annual
Report on Form 10-K, to and including the relevant  Closing Date, have been duly
filed with the  Securities  and  Exchange  Commission,  complied  at the time of
filing in all material  respects with the requirements of their respective forms
and were complete and correct in all material  respects as of the dates at which
the  information  was  furnished,  and  contained  (as of such  dates) no untrue
statement of a material  fact or omitted to state a material  fact  necessary in
order to make the statements  contained  therein,  in light of the circumstances
under which they were made, not misleading.

8.8.  Investment  Company.  The Company is not an "investment  company"
within the meaning of such term under the  Investment  Company  Act of 1940,  as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.

8.9.  Payment of Notes.  The  Company  shall pay the  principal  of and
interest  on the Notes on the dates and in the manner  provided in the Notes and
this Agreement.  To the extent lawful, the Company shall pay interest (including
post-petition  interest  in any  proceeding  under  any  Bankruptcy  Law) on (i)
overdue  principal  of the Notes at the rate borne by the Notes and (ii) overdue
installments of interest at the same rate.

16

8.10.  Stay,  Extension and Usury Laws.  The Company  covenants (to the
extent that it may  lawfully  do so) that it will not at any time  insist  upon,
plead,  or in any manner  whatsoever  claim or take the benefit or advantage of,
any  stay,  extension  or  usury  law  wherever  enacted,  now  or at  any  time
hereinafter in force,  which may affect the covenants or the  performance of the
transactions  contemplated by this Agreement;  and the Company (to the extent it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law.

8.11.  Insurance.  The  Company  will at all times so long as Notes are
outstanding  maintain  valid  policies of worker's  compensation  and such other
insurance  with  respect  to its  properties  and  business  of the kinds and in
amounts not less than is customarily  maintained by corporations  engaged in the
same or similar business and similarly situated.

8.12. Corporate Existence;  Maintenance of Properties. The Company will
at all  times,  so long as Notes are  outstanding,  cause to be done all  things
necessary to maintain,  preserve and renew its  existence  and will preserve and
keep in force and effect, all licenses,  permits and authorizations necessary to
the conduct of its  business,  the loss of which  would have a material  adverse
effect on the business  and  operations  of the  Company.  The Company will also
maintain and keep its  properties in good repair,  working order and  condition,
ordinary wear and tear excepted, so long as Notes are outstanding.

8.13.  Taxes and Liens. So long as Notes are  outstanding,  the Company
will  duly  pay  and  discharge  when  payable,   all  taxes,   assessments  and
governmental  charges imposed upon or against the Company or its properties,  or
any part  thereof or upon the income or profits  therefrom,  in each case before
the same become  delinquent and before penalties accrue thereon,  as well as all
claims for labor,  materials  or supplies  which if unpaid might by law become a
lien upon any of its property,  unless and to the extent that the same are being
contested in good faith and by appropriate  proceedings  and the Company has set
aside on its books adequate reserves with respect thereto.

8.14.  Merger;  Sale of Assets.  So long as Notes are outstanding,  the
Company  shall not  consolidate  with or merge into, or sell,  lease,  convey or
otherwise  dispose of all or substantially all of its assets to, any Person in a
single transaction or series of related transactions, without the consent of the
Secured Party, unless:

(a) the Company is the  continuing  corporation or the Person formed by
or surviving any such consolidation or merger (if other than the Company), or to
which such sale,  lease,  conveyance or other  disposition  of assets shall have
been made, is organized and existing  under the laws of the United  States,  any
state  thereof or the  District of  Columbia  and such Person (if other than the
Company)  expressly assumes by supplemental  agreement executed and delivered to
the Secured  Party,  all the  obligations of the Company under the Notes and, in
respect of the Notes, this Agreement;

(b)  immediately  before and  immediately  after  giving  effect to the
transaction  no Event of Default (as such term is defined in the Notes),  and no
event which,  after notice or lapse of time,  or both,  would become an Event of
Default (a "Default"), shall have occurred and be continuing; and

17

(c) immediately after giving effect to such transaction,  the Notes and
this Agreement (as  supplemented  by any such  supplemental  agreement)  will be
valid and enforceable obligations of the Company or such successor.

8.15. Term Sheet Disclosure. No information set forth in the Term Sheet
contains,  as of the date  hereof  or the  relevant  Closing  Date,  any  untrue
statement  of a material  fact or omits to state a material  fact  necessary  in
order to make the statements  contained  therein,  in light of the circumstances
under which they were made, not misleading.

8.16. Reservation of Shares;  Transfer Taxes, Etc. The Company shall at
all times reserve and keep available,  out of its authorized and unissued shares
of Conversion Securities,  solely for the purpose of effecting the conversion of
the Notes and the exercise of the Placement and Advisory  Warrants,  such number
of shares of its  Conversion  Securities  free of preemptive  rights as shall be
sufficient to effect the  conversion of all Notes from time to time  outstanding
and the  exercise  of all  Placement  and  Advisory  Warrants  from time to time
outstanding.  The  Company  shall use its best  efforts  from  time to time,  in
accordance  with the laws of the State of Delaware to  increase  the  authorized
number of shares of Conversion Securities if at any time the number of shares of
authorized, unissued and unreserved shares of Conversion Securities shall not be
sufficient to permit the  conversion of all the  then-outstanding  Notes and the
exercise  of all the  then-outstanding  Placement  and  Advisory  Warrants.  The
Company  shall not issue any  Conversion  Securities  other  than to effect  the
conversion of the Notes or accrued interest thereon,  Conversion Securities sold
in lieu of  Notes  in the  Offering  and  Conversion  Securities  issuable  upon
exercise of Placement and Advisory Warrants.

The Company shall pay any and all issue or other taxes (but in no event
income  taxes) that may be payable in respect of any issue or delivery of shares
of  Conversion  Securities  on  conversion  of the Notes or the  exercise of the
Placement and Advisory Warrants.  The Company shall not, however, be required to
pay any tax which may be  payable in respect  of any  transfer  involved  in the
issue or delivery of Conversion  Securities (or other securities or assets) in a
name  other  than that in which the Notes so  converted,  or the  Placement  and
Advisory Warrants so exercised,  were registered,  and no such issue or delivery
shall be made unless and until the person  requesting such issue has paid to the
Company the amount of such tax or has  established,  to the  satisfaction of the
Company, that such tax has been paid.

8.17  Listing.  If the  Company's  Common Stock  becomes  traded on the
Nasdaq National Market (the "Nasdaq"),  the Company shall take such action as is
necessary in accordance  with the rules of the Nasdaq to enable the  Registrable
Securities (as defined in Section 12.1) to trade on the Nasdaq.

8.18 Proprietary Rights. Except as has been or will be reflected in the
Term Sheet prior to the relevant Closing, the Company owns or possesses adequate
and  enforceable  rights to use all patents,  patent  applications,  trademarks,
service  marks,  trade  names,  corporate  names,  copyrights,   trade  secrets,
processes,  mask  works,  licenses,  inventions,  formulations,  technology  and
know-how  and  other  intangible  property  used or  proposed  to be used in the
conduct of its business as described in, or contemplated by, the Term Sheet (the
"Proprietary Rights"). Except as has been or will be reflected in the Term Sheet
prior to the relevant

18

Closing,  the Company or the entities from whom the Company has acquired  rights
has taken all  necessary  action to  protect  all of the  Company's  Proprietary
Rights.  Except as set forth in the Term Sheet, as of the relevant Closing:  the
Company has not received any notice of, and there are not any facts known to the
Company that indicate the existence of (i) any infringement or  misappropriation
by any third party of any of the Proprietary Rights or (ii) any claim by a third
party contesting the validity of any of the Proprietary  Rights; the Company has
not received any notice of any  infringement,  misappropriation  or violation by
the Company or any of its employees of any Proprietary  Rights of third parties,
and, to the best of the Company's knowledge,  neither the Company nor any of its
employees has infringed,  misappropriated  or otherwise violated any Proprietary
Rights of any third  parties;  and, to the best of the Company's  knowledge,  no
infringement, illicit copying, misappropriation or violation of any intellectual
property  rights of any third party by the  Company  has  occurred or will occur
with respect to any products currently being sold by the Company or with respect
to any products  currently  under  development by the Company or with respect to
the conduct of the  Company's  business  as  currently  contemplated.  Except as
described  in the Term Sheet,  as of the  relevant  Closing,  the Company is not
aware that any of its  employees  are  obligated  under any contract  (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment,  decree or order of any court or administrative  agency,  which
would  interfere  with the use of the  employee's  best  efforts to promote  the
interests of the Company or that would  conflict with the Company's  business as
currently conducted or as proposed to be conducted. To the best of the Company's
knowledge,  as of the relevant  Closing,  neither the  execution nor delivery of
this Agreement,  nor the carrying on of the Company's  business by the employees
of the  Company,  nor  the  conduct  of the  Company's  business,  as  currently
conducted or as proposed to be conducted,  will  conflict  with, or result in, a
breach of the terms, conditions or provisions of, or constitute a default under,
any  contract,  covenant  or  instrument  under  which any such  employee is now
obligated. In addition, as of each Closing, all employees are required to assign
intellectual property rights to the Company.

9. Subordination.

9.1.  Agreement to Subordinate.  The Company covenants and agrees,  and
each Purchaser and any subsequent  holder of a Note (each, a "Holder"),  by such
Holder's  acceptance  of a Note,  likewise  covenants  and agrees,  that, to the
extent  and in  the  manner  hereinafter  set  forth  in  this  Article  9,  the
indebtedness  represented  by the Notes and the payment of the  principal of and
interest  on each  and all of the  Notes  and the  security  interest  given  as
security  for the Notes are hereby  expressly  made  subordinate  and subject in
right of payment to the prior payment in full of all Senior Indebtedness.

No  provision  of this Article 9 shall  prevent the  occurrence  of any
default or event of default hereunder.

9.2.  Payment Over of Proceeds Upon  Dissolution.  Etc. In the event of
(a) any  insolvency  or  bankruptcy  case or  proceeding,  or any  receivership,
liquidation,  reorganization  or other  similar case or proceeding in connection
therewith,  relative  to the  Company or to its  creditors,  as such,  or to its
assets, or (b) any liquidation,  dissolution or other winding-up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or

19

bankruptcy,  (c) any  assignment  for the  benefit  of  creditors  or any  other
marshalling of assets and liabilities of the Company, then and in any such event
the holders of Senior  Indebtedness shall be entitled to receive payment in full
of  all  amounts  due  or to  become  due  on or  with  respect  to  all  Senior
Indebtedness,  or  provision  shall be made for such payment in money or money's
worth,  before the  Holders  are  entitled  to receive any payment on account of
principal  of, or interest on, the Notes,  and to that end the holders of Senior
Indebtedness  shall be  entitled  to  receive,  for  application  to the payment
thereof, any payment or distribution of any kind or character,  whether in cash,
property or securities,  which may be payable or deliverable with respect to the
Notes in any such case, proceeding, liquidation, dissolution or other winding up
or event.

In the event that,  notwithstanding  the  foregoing  provisions of this
Section  9.2,  any Holder shall have  received  any payment or  distribution  of
assets of the  Company of any kind or  character,  whether in cash,  property or
securities,  before all Senior  Indebtedness  is paid in full or payment thereof
provided for, then and in such event such payment or distribution  shall be held
in trust by such recipient and shall be paid over or delivered  forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent
or other  Person  making  payment or  distribution  of assets of the Company for
application  in the form  received  to the  payment of all  Senior  Indebtedness
remaining  unpaid,  to the extent  necessary to pay all Senior  Indebtedness  in
full,  after giving effect to any concurrent  payment or  distribution to or for
the holders of Senior Indebtedness.

The  consolidation  of the Company  with,  or the merger of the Company
into,  another Person or the liquidation or dissolution of the Company following
the  conveyance or transfer of its  properties  and assets  substantially  as an
entirety to another  Person upon the terms and  conditions  set forth in Section
8.14 shall not be deemed a dissolution, winding-up, liquidation, reorganization,
assignment for the benefit of creditors or marshalling of assets and liabilities
of the Company for the purposes of this Section 9.2 if the Person formed by such
consolidation  or into which the Company is merged or the Person which  acquires
by  conveyance  or  transfer  such  properties  and assets  substantially  as an
entirety,  as the case may be, shall, as a part of such  consolidation,  merger,
conveyance or transfer, comply with the conditions set forth in Section 8.14.

9.3. Prior Payment to Senior  Indebtedness  Upon Acceleration of Notes.
In the event that any Notes are  declared  due and payable  before  their stated
maturity,  then in such event the holders of Senior Indebtedness  outstanding at
the time such  Notes so become  due and  payable  shall be  entitled  to receive
payment in full of all amounts  due or to become due on or with  respect to such
Senior  Indebtedness,  or  provision  shall be made for such payment in money or
money's  worth,  before the Holders  are  entitled to receive any payment by the
Company on account of the principal of or interest on the Notes or on account of
the purchase or other  acquisition of Notes. The Holders shall provide notice to
the holders of the Senior Indebtedness of the occurrence of any default or Event
of  Default  under the Notes at the time that  such  notice is  provided  to the
Company.

In the event that,  notwithstanding  the  foregoing,  the Company shall
make any payment to any Holder  prohibited  by the  foregoing  provision of this
Section 9.3, then and in

20

such event such payment  shall be held in trust by such  recipient  and shall be
paid over and delivered forthwith to the Company in the form received.

The  provisions of this Section 9.3 shall not apply to any payment with
respect to which Section 9.2 would be applicable.

9.4. No Payment When Senior Indebtedness in Default.

(a) In the event and  during  the  continuation  of any  default in the
payment  of  principal  of or  interest  on any Senior  Indebtedness  beyond any
applicable grace period with respect thereto,  or in the event that any event of
default  with  respect to any Senior  Indebtedness  shall have  occurred  and be
continuing  (or would  arise by reason of a payment  required  hereunder  by the
Company  with respect to the  principal of or interest on the Notes)  permitting
the holders of such Senior  Indebtedness  (or a trustee on behalf of the holders
thereof) to declare such Senior  Indebtedness  due and payable prior to the date
on which it would  otherwise have become due and payable,  unless and until such
event of default  shall have been cured or waived or shall have  ceased to exist
or  the  Company  shall  have  received   written   notice  from  an  authorized
representative  of the Senior  Indebtedness  with respect to which such event of
default relates approving payment on the Notes, then no payment shall be made by
the  Company  with  respect to the  principal  of or interest on the Notes or to
acquire any of the Notes; provided that no such default will prevent any payment
on, or with respect to, the Notes for more than 120 days after written notice of
such default or Event of Default has been given to the Secured  Party unless the
maturity of such Senior  Indebtedness  has been  accelerated.  Not more than one
such 120 day delay may be made in any consecutive 360 day period with respect to
a covenant  default,  irrespective  of the number of  defaults  with  respect to
Senior Indebtedness during such period.

In the event that,  notwithstanding  the  foregoing,  the Company shall
make any payment to any Holder  prohibited  by the  foregoing  provision of this
Section 9.4,  then and in such event such payment shall be held in trust by such
recipient and shall be paid over and  delivered  forthwith to the Company in the
form received.

The  provisions of this Section 9.4 shall not apply to any payment with
respect to which Section 9.2 would be applicable.

9.5. Payment Permitted If No Default. Nothing contained in this Article
9 or  elsewhere  in this  Agreement  or in any of the Notes  shall  prevent  the
Company, at any time except when any of the conditions described in Section 9.2,
9.3 or 9.4 exist,  from making  payments at any time of principal of or interest
on the Notes.

9.6. Subrogation to Rights of Holders of Senior  Indebtedness.  Subject
to the payment in full of all Senior  Indebtedness,  Holders shall be subrogated
to the  extent of the  payments  or  distributions  made to the  holders of such
Senior  Indebtedness  pursuant to the  provisions of this Article 9 (equally and
ratably with the holders of all  indebtedness of the Company which is not Senior
Indebtedness  and which is entitled to like rights of subrogation) to the rights
of the holders of such Senior Indebtedness to receive payments and distributions
of

21

cash,  property and securities  applicable to the Senior  Indebtedness until the
principal  of and  interest on the Notes shall be paid in full.  For purposes of
such  subrogation,  no  payments  or  distributions  to the  holders  of  Senior
Indebtedness  of any cash,  property or  securities  to which  Holders  would be
entitled  except for the  provisions  of this  Article 9, and no  payments  over
pursuant  to  the  provisions  of  this  Article  9 to  the  holders  of  Senior
Indebtedness by Holders,  shall, as among the Company,  its creditors other than
holders  of Senior  Indebtedness  and  Holders  be  deemed  to be a  payment  or
distribution by the Company to or on account of Senior Indebtedness.

9.7.  Provisions  Solely to Define Relative  Rights.  The provisions of
this  Article 9 are and are  intended  solely for the  purpose of  defining  the
relative  rights  of the  Holders  on the one hand  and the  holders  of  Senior
Indebtedness on the other hand. Nothing contained in this Article 9 or elsewhere
in this Agreement or in the Notes is intended to or shall: (a) impair,  as among
the Company,  its creditors  other than holders of Senior  Indebtedness  and the
Holders,  the  obligation of the Company,  its  creditors  other than holders of
Senior  Indebtedness  and the Holders,  the obligation of the Company,  which is
absolute and unconditional (and which,  subject to the rights under this Article
9 of the holders of Senior  Indebtedness,  is intended to rank  equally with all
other general  obligations of the Company),  to pay to the Holders the principal
of and  interest on the Notes as and when the same shall  become due and payable
in accordance  with their terms;  or (b) affect the relative  rights against the
Company of the Holders and  creditors  of the Company  other than the holders of
Senior  Indebtedness;  or (c)  prevent  the  Secured  Party or any  Holder  from
exercising all remedies otherwise permitted by applicable law upon default under
this  Agreement,  subject to the  rights,  if any,  under this  Article 9 of the
holders  of  Senior  Indebtedness  to  receive  cash,  property  and  securities
otherwise payable or deliverable to the Secured Party or such Holder.

9.8. Secured Party to Effectuate  Subordination.  Each Holder of a Note
by acceptance  thereof authorizes and directs the Secured Party on such Holder's
behalf to take such action as may be necessary or  appropriate to effectuate the
subordination  provided in this Article 9 and appoints the Secured Party as such
Holder's attorney-in-fact for any and all such purposes.

9.9. No Waiver of Subordination  Provisions. No right of any present or
future  holder of any Senior  Indebtedness  to enforce  subordination  as herein
provided  shall at any time in any way be  prejudiced  or impaired by any act or
failure to act by the Company or by any act or failure to act, in good faith, by
any such  holder,  or by any  non-compliance  by the  Company  with  the  terms,
provisions and covenants of this Agreement,  regardless of any knowledge thereof
any such  holder  may have or be  otherwise  charged  with.  Without  in any way
limiting  the  generality  of the  foregoing  paragraph,  the  holders of Senior
Indebtedness  may, at any time and from time to time,  without the consent of or
notice to  Holders,  without  incurring  responsibility  to Holders  and without
impairing  or  releasing  the  subordination  provided in this  Article 9 or the
obligations  hereunder of Holders to the holders of Senior Indebtedness,  do any
one or more of the following:  (i) change the manner,  place or terms of payment
or extend the time of payment  of, or renew or alter,  Senior  Indebtedness,  or
otherwise  amend  or  supplement  in  any  manner  Senior  Indebtedness  or  any
instrument  evidencing the same or any agreement under which Senior Indebtedness
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;  (iii) release any
Person liable

22

in any manner for the  collection of Senior  Indebtedness;  and (iv) exercise or
refrain from exercising any rights against the Company and any other Person.

9.10.  Reliance on Judicial Order or Certificate of Liquidating  Agent.
Upon any payment or  distribution  of assets of the Company  referred to in this
Article 9, the Secured  Party and the Holders shall be entitled to rely upon any
order or decree  entered by any court of  competent  jurisdiction  in which such
insolvency, bankruptcy, receivership, liquidation, reorganization,  dissolution,
winding-up  or similar case or proceeding  is pending,  or a certificate  of the
trustee in bankruptcy,  receiver,  liquidating trustee, custodian,  assignee for
the  benefit  of  creditors,  agent or  other  Person  making  such  payment  or
distribution,  delivered to the Secured Party or to the Holders, for the purpose
of  ascertaining  the  Persons  entitled  to  participate  in  such  payment  or
distribution,  the holders of the Senior  Indebtedness and other indebtedness of
the Company,  the amount thereof or payable thereon,  the amount or amounts paid
or distributed  thereon and all other facts pertinent thereto or to this Article
9.

9.11.  Certain  Conversions  Deemed  Payment.  For the purposes of this
Article  9 only,  (a) the  issuance  and  delivery  of  Junior  Securities  upon
conversion of Notes in accordance with Section 3 of the Notes or in lieu of cash
interest  in  accordance  with  Section  1 of the  Notes  shall not be deemed to
constitute a payment or distribution on account of the principal, of or interest
on Notes or on account of the purchase or other acquisition of Notes and (b) the
payment, issuance or delivery of cash, property or securities (other than Junior
Securities)  upon conversion of a Note shall be deemed to constitute  payment on
account of the  principal of such Note.  Nothing  contained in this Article 9 or
elsewhere in this  Agreement or in the Notes is intended to or shall impair,  as
among the Company,  its creditors other than holders of Senior  Indebtedness and
the  Holders,  the right,  which is absolute and  unconditional,  of a Holder to
convert any Note in accordance with Section 3 of the Notes.

10. Secured Party's Rights and Remedies

10.1.  Rights  and  Remedies.   Upon  the  occurrence  and  during  the
continuance  of an Event of Default (as defined in the Note),  the Secured Party
may,  in  addition to the  remedies  pursuant to Section 6 of the Notes,  at its
election,  without  notice of its election and without  demand,  take any action
permitted by law and not in contravention or inconsistent with Article 9.

11.  Certain  Definitions.  For  the  purposes  of this  Agreement  the
following terms have the respective meanings set forth below:

11.1.  "Business  Day" means a Monday through Friday on which banks are
generally open for business in New York, Massachusetts and California.

11.2.  "Certificate of Designation"  shall have the meaning ascribed to
such term in Section 1.1.

11.3. "Common Stock" means the Company's common stock.

23

11.4.  "Conversion  Securities" shall have the meaning ascribed to such
term in Section 1.1.

11.5.  "Exchange Offer" means the Company's offer to the holders of its
9%  Convertible  Subordinated  Notes  due 2004 to  exchange  such  notes and all
accrued interest thereon for preferred stock and warrants of the Company.

11.6.  "Junior  Securities"  means (a) shares of any and all classes of
capital  stock of the  Company  and (b)  securities  of the  Company  which  are
subordinated in right of payment to Senior  Indebtedness at the time of issuance
or  delivery of such  securities  to  substantially  the same extent as, or to a
greater extent than, the Notes are so subordinated as provided in Article 9.

11.7. "Lien" means any mortgage,  lien, deed of trust, charge,  pledge,
security interest or other encumbrance.

11.8. "Minimum Offering Amount" shall have the meaning ascribed to such
term in Section 2.1.

11.9. "Person" means any individual, sole proprietorship,  partnership,
limited liability company, joint venture,  trust,  unincorporated  organization,
association,  corporation,  institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

11.10.  "Placement  Agent" shall have the meaning ascribed to such term
in Section 1.3 and  "Placement  Agents" shall mean the placement  agents for the
Regulation D Offering and the Regulation S Offering, referred to in Sections 1.2
and 1.3, respectively.

11.11.  "Placement and Advisory  Warrants" shall mean the placement and
advisory  warrants to be granted to the Placement Agents and/or their respective
designees  pursuant  to  separate  placement  agency  agreements  and  financial
advisory agreements between the Company and the Placement Agents.

11.12.   "Regulation  D"  means  Regulation  D  promulgated  under  the
Securities Act.

11.13.  "Regulation D Offering" shall have the meaning ascribed to such
term in Section 1.2.

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

11.15.  "Regulation S Offering" shall have the meaning ascribed to such
term in Section 1.3.

24

11.16.  "Secured Party" shall have the meaning ascribed to such term in
Section 5.1.

11.17. "Securities Act" means, as of any given time, the Securities Act
of 1933, as amended, or any similar federal law then in force.

11.18.  "Securities and Exchange  Commission" includes any governmental
body or agency succeeding to the functions thereof.

11.19.  "Senior  Indebtedness"  means the principal of (and premium, if
any) and accrued interest on (including all interest accruing  subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition  interest  is  allowable  as a claim in any such  proceeding)  (a)
obligations of the Company under the Loan and Security Agreement, dated December
31, 1996,  between  Silicon  Valley Bank and the Company,  including any related
notes, guarantees,  collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified,  renewed, replaced,
restated, supplemented,  refunded or refinanced from time to time (provided that
the  principal  amount does not exceed  $7,500,000  and the maturity date is not
advanced),  (b) obligations of the Company,  whether  outstanding on the date of
this Agreement or hereafter created, incurred or assumed, as lessee under leases
required to be  capitalized  on the balance sheet of the lessee under  generally
accepted accounting  principles and leases of property or assets made as part of
any sale and  leaseback  transaction  to which the  Company is a party,  (c) all
reimbursement  obligations and other liabilities  (contingent or otherwise) with
respect to letters of credit, bank guarantees or bankers'  acceptances,  and (d)
any amendments,  renewals, extensions,  modifications and refundings of any such
indebtedness or obligation under clauses (a) (provided that the principal amount
does not exceed  $7,500,000 and the maturity date is not advanced),  (b) or (c),
above.

11.20.  "Subsidiary" means any person,  corporation,  firm or entity at
least the majority of the equity  securities (or  equivalent  interest) of which
are, at the time as of which any determination is being made, owned of record or
beneficially by the Company,  directly or indirectly,  through any Subsidiary or
otherwise.

11.21.  "Term  Sheet"  shall have the meaning  ascribed to such term in
Section 6.5.

11.22.  "Trading Day" means (i) if the applicable security is listed or
admitted  for  trading  on a  national  security  exchange,  a day on which such
exchange is open for business,  (ii) if the applicable security is quoted on the
Nasdaq Stock  Market,  a day on which trades may be made thereon or (iii) if the
applicable  security  is not so listed,  admitted  for  trading  or quoted,  any
Business Day.

11.23.  "Unit Offering" and "Offering"  shall have the meaning ascribed
to such terms in the first paragraph of this Agreement.

11.24.  "Unit-Underlying  Common  Stock"  shall mean the  Common  Stock
issuable upon conversion of any Conversion  Securities  issuable upon conversion
of, or in lieu

25

of, Notes or upon exercise of any Equity  Warrants,  in each case  including any
such  Conversion  Securities  or Equity  Warrants  issuable upon exercise of any
Placement  and  Advisory  Warrants or upon  conversion  of Notes  issuable  upon
exercise of any Placement and Advisory Warrants.

11.25. (1) "U.S. Person" means:

(i)      Any natural person resident in the United States;

(ii)     Any partnership or corporation organized or incorporated under
the laws of the United States;

(iii)    Any estate of which any  executor or  administrator  is a U.S.
Person;

(iv)     Any trust of which any trustee is a U.S. Person;

(v)      Any agency or branch of a foreign entity located in the United
States.

(vi)     Any  non-discretionary  account or similar account (other than
an estate or trust)  held by a dealer or other  fiduciary  for
the benefit or account of a U.S. Person;

(vii)    Any  discretionary  account or similar  account (other than an
estate  or  trust)  held  by  a  dealer  or  other   fiduciary
organized, incorporated, or (if an individual) resident in the
United States; and

(viii)   Any   partnership   or   corporation   if:  (A)  organized  or
incorporated under the laws of any foreign  jurisdiction;  and
(B) formed by a U.S.  Person  principally  for the  purpose of
investing in securities  not  registered  under the Securities
Act,  unless it is organized or  incorporated,  and owned,  by
accredited  investors  (as  defined  in  Rule  501(a)  of  the
Securities  Act)  who  are not  natural  persons,  estates  or
trusts.

(2) Notwithstanding clause (1) of this Section 11.25, any discretionary
account or similar  account (other than an estate or trust) held for the benefit
or  account  of a non-U.S.  Person by a dealer or other  professional  fiduciary
organized,  incorporated,  or (if an  individual)  resident in the United States
shall not be deemed a "U.S. Person."

(3)  Notwithstanding  clause (1) of this Section  11.25,  any estate of
which any  professional  fiduciary acting as executor or administrator is a U.S.
Person shall not be deemed a U.S. Person if:

(i)      An executor or  administrator  of the estate who is not a U.S.
Person has sole or shared  investment  discretion with respect
to the assets of the estate; and

(ii)     The estate is governed by foreign law.

26

(4)  Notwithstanding  clause (1) of this  Section  11.25,  any trust of
which any professional fiduciary acting as trustee is a U.S. Person shall not be
deemed a U.S.  Person if a trustee  who is not a U.S.  Person has sole or shared
investment  discretion  with respect to the trust assets,  and no beneficiary of
the trust (and no settlor if the trust is revocable) is a U.S. Person.

(5)  Notwithstanding  clause (1) of this  Section  11.25,  an  employee
benefit  plan  established  and  administered  in  accordance  with the law of a
country other than the United States and customary  practices and  documentation
of such country shall not be deemed a U.S. Person.

(6)  Notwithstanding  clause (1) of this Section  11.25,  any agency or
branch of a U.S.  Person located outside the United States shall not be deemed a
"U.S. Person" if:

(i)      The agency or branch operates for valid business reasons; and

(ii)     The agency or branch is engaged in the  business of  insurance
or banking and is subject to substantive  insurance or banking
regulation, respectively, in the jurisdiction where located.

(7)  The  International  Monetary  Fund,  the  International  Bank  for
Reconstruction and Development,  the Inter-American  Development Bank, the Asian
Development Bank, the African  Development  Bank, the United Nations,  and their
agencies,  affiliates  and pension  plans,  and any other similar  international
organizations,  their agencies, affiliates and pension plans shall not be deemed
"U.S. Persons."

11.26.  "United  States"  means  the  United  States  of  America,  its
territories and possessions, any state of the United States, and the District of
Columbia.

12. Registration Rights.

12.1 As used in this  Article  12, the  following  terms shall have the
following meanings:

(a)  "Affiliate"  shall  mean,  with  respect to any Person (as defined
below), any other Person controlling, controlled by, or under direct or indirect
common control with, such Person (for the purposes of this definition "control,"
when used with respect to any specified  Person,  shall mean the power to direct
the  management  and policies of such person,  directly or  indirectly,  whether
through ownership of voting securities,  by contract or otherwise; and the terms
"controlling"   and  "controlled"   shall  have  meanings   correlative  to  the
foregoing).

(b)  "Business  Day" shall mean a day  Monday  through  Friday on which
banks are generally open for business in New York.

27

(c)  "Holders"  shall  mean  the  Purchasers  and  any  person  holding
Registrable  Securities  or any person to whom the rights under  Article 12 have
been transferred in accordance with Section 12.10 hereof.

(d) "Person" shall mean any person,  individual,  corporation,  limited
liability company,  partnership,  trust or other non-governmental  entity or any
governmental agency, court, authority or other body.

(e) The terms "register,"  "registered" and "registration" refer to the
registration  effected  by  preparing  and filing a  registration  statement  in
compliance  with the  Securities  Act,  and the  declaration  or ordering of the
effectiveness of such registration statement.

(f)   "Registrable   Securities"   shall   mean  (i)  the   shares   of
Unit-Underlying  Common  Stock and (ii) any shares of Common Stock issued as (or
issuable upon the  conversion of any warrant,  right or other  security which is
issued as) a dividend or other distribution with respect to or in replacement of
the Transfer Restricted Securities (as defined below);  provided,  however, that
securities  shall only be treated as  Registrable  Securities if and only for so
long as they (A) have not been disposed of pursuant to a registration  statement
declared effective by the Securities and Exchange Commission,  (B) have not been
sold in a  transaction  exempt from the  registration  and  prospectus  delivery
requirements  of the  Securities  Act so  that  all  transfer  restrictions  and
restrictive  legends with respect  thereto are removed upon the  consummation of
such  sale,  (C) are held by a Holder  or a  permitted  transferee  pursuant  to
Section  12.10  or  (D)  are  not  freely  tradeable  under  applicable  federal
securities laws.

(g)  "Registration  Expenses"  shall mean all expenses  incurred by the
Company in complying with Section 12.2 hereof,  including,  without  limitation,
all registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to, or required by, any such registration
(but excluding the fees of legal counsel for any Holder).

(h)  "Registration  Statement"  shall have the meaning ascribed to such
term in Section 12.2.

(i) "Registration  Period" shall have the meaning ascribed to such term
in Section 12.4.

(j)  "Selling  Expenses"  shall  mean all  underwriting  discounts  and
selling  commissions  applicable to the sale of  Registrable  Securities and all
fees and expenses of legal counsel for any Holder.

(k) "Transfer  Restricted  Securities" means each Equity Warrant,  each
Note, each share of Conversion Securities and, if such Equity Warrants have been
exercised or such Conversion  Securities  have been  converted,  the Registrable
Securities,  until  the  earlier  of (a) the date on  which  such  Note,  Equity
Warrants,  Conversion Securities or Registrable Securities,  as applicable,  has
been  effectively  registered  under the Securities Act and disposed of pursuant
to, and in accordance with, an effective Registration Statement, (b) the date on
which such Note,

28

Equity Warrants, Conversion Securities or Registrable Securities, as applicable,
is  distributed  to the  public  pursuant  to Rule 144 or any  other  applicable
exemption under the Securities Act without  additional  restriction  upon public
resale or (c) at such time as such Note, Equity Warrants,  Conversion Securities
or Registrable  Securities,  as  applicable,  may be sold by a Holder under Rule
144(k).

12.2.  The  Company  shall  use its  best  efforts  to  file a  "shelf"
registration  statement on the appropriate form (the  "Registration  Statement")
with the Securities and Exchange Commission,  by the later of (A) the earlier to
occur of (i) the  expiration  of thirty (30) days after the Final  Closing Date,
(ii) the later of (x) the  expiration  of sixty (60) days from the date on which
the Company has received proceeds in the Offering, net of cash fees, commissions
and  expenses,  equal to or  exceeding  $20,000,000  in the  aggregate,  and (y)
November  __,  1998,  and  (iii)  the  date of the  filing  of any  registration
statement  with the Securities  and Exchange  Commission in connection  with the
Exchange Offer, and (B) the date on which shares of Series B Preferred Stock are
first  issued,  with respect to the resale of the  Registrable  Securities,  and
shall  use its best  efforts  to  effect  the  registration,  qualifications  or
compliances  (including,  without  limitation,  the  execution  of any  required
undertaking to file  post-effective  amendments,  appropriate  qualifications or
exemptions  under  applicable  blue  sky or  other  state  securities  laws  and
appropriate   compliance  with  applicable  securities  laws,   requirements  or
regulations)  prior to the date which is 75 days after the Final  Closing  Date.
Notwithstanding the foregoing,  the Company shall not be obligated to enter into
any underwriting agreement for the sale of any of the Registrable Securities.

12.3.  All  Registration  Expenses  incurred  in  connection  with  any
registration,  qualification  or  compliance  pursuant to Section  12.2 shall be
borne by the Company.  All Selling  Expenses  relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders pro rata on
the basis of the number of securities so  registered;  provided that if a Holder
uses its own legal  counsel in addition to one counsel for all of the Holders of
securities  registered on behalf of the Holders, such Holder shall bear the cost
of such counsel.

12.4.  In the case of the  registration,  qualification  or  compliance
effected by the Company  pursuant to this  Agreement,  the Company  shall,  upon
reasonable  request,  inform each Holder as to the status of such  registration,
qualification and compliance. At its expense the Company shall:

(a)  use  its  best  efforts  to  keep  such   registration,   and  any
qualification,  exemption or compliance  under state  securities  laws which the
Company  determines  to obtain,  continuously  effective  until the Holders have
completed the  distribution  described in the  registration  statement  relating
thereto.  The period of time during  which the Company is required  hereunder to
keep  the  Registration  Statement  effective  is  referred  to  herein  as  the
"Registration Period." Notwithstanding the foregoing, at the Company's election,
the Company may cease to keep such  registration,  qualification  or  compliance
effective  with  respect to any  Registrable  Securities,  and the  registration
rights of a Holder shall expire,  at such time as the Holder may sell under Rule
144(k) under the Securities Act (or other exemption from registration acceptable
to the Company) in a three-month period all Registrable  Securities then held by
such Holder; and

29

(b) advise the Holders:

(i) when the Registration  Statement or any amendment  thereto has been
filed with the  Securities  and Exchange  Commission  and when the  Registration
Statement or any post-effective amendment thereto has become effective;

(ii) of any  request by the  Securities  and  Exchange  Commission  for
amendments  or  supplements  to the  Registration  Statement  or the  prospectus
included therein or for additional information;

(iii) of the issuance by the Securities and Exchange  Commission of any
stop order suspending the  effectiveness  of the  Registration  Statement or the
initiation of any proceedings for such purpose;

(iv) of the receipt by the Company of any notification  with respect to
the  suspension of the  qualification  of the  Registrable  Securities  included
therein for sale in any  jurisdiction  or the  initiation or  threatening of any
proceeding for such purpose; and

(v) of the  happening  of any event  that  requires  the  making of any
changes in the  Registration  Statement or the  prospectus  included  therein so
that, as of such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated  therein or necessary to make the
statements  therein  (in  the  case  of  the  prospectus,  in the  light  of the
circumstances under which they were made) not misleading;

(vi) make every reasonable effort to obtain the withdrawal of any order
suspending  the  effectiveness  of any  Registration  Statement  at the earliest
possible time;

(vii) furnish to each Holder, without charge, at least one copy of such
Registration  Statement  and any  post-effective  amendment  thereto,  including
financial  statements and schedules,  and, if the Holder so requests in writing,
all exhibits  (including those incorporated by reference) in the form filed with
the Securities and Exchange Commission;

(viii) during the Registration Period,  deliver to each Holder, without
charge, as many copies of the prospectus included in such Registration Statement
and any amendment or supplement  thereto as such Holder may reasonably  request;
and the Company consents to the use,  consistent with the provisions  hereof, of
the  prospectus or any  amendment or  supplement  thereto by each of the selling
Holders of  Registrable  Securities in connection  with the offering and sale of
the  Registrable  Securities  covered by the  prospectus  and any  amendment  or
supplement thereto.  In addition,  upon the reasonable request of the Holder and
subject in all cases to confidentiality protections reasonably acceptable to the
Company, the Company will meet with a Holder or a representative  thereof at the
Company's headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable  Securities,  and will otherwise
cooperate  with any  Holder  conducting  an  investigation  for the  purpose  of
reducing or eliminating such Holder's exposure to liability under the Securities
Act,  including  the  reasonable  production  of  information  at the  Company's
headquarters;

30

(ix) during the Registration  Period,  deliver to each Holder,  without
charge,  (i) as soon as practicable (but in the case of the annual report of the
Company to its  stockholders,  within 120 days after the end of each fiscal year
of the Company) one copy of: (A) its annual report to its  stockholders,  if any
(which annual report shall contain  financial  statements  audited in accordance
with generally accepted accounting principles in the United States of America by
a firm of certified  public  accountants  of  recognized  standing);  (B) if not
included in substance in its annual report to stockholders, its annual report on
Form  10-K  (or  similar  form);  (C)  each  of  its  quarterly  reports  to its
stockholders,  and, if not  included in substance  in its  quarterly  reports to
stockholders,  its quarterly  report on Form 10-Q (or similar  form),  and (D) a
copy of the full Registration Statement (the foregoing,  in each case, excluding
exhibits);  and (ii) upon  reasonable  request,  all  exhibits  excluded  by the
parenthetical to the immediately preceding clause (D), and all other information
that is generally available to the public;

(x) prior to any public offering of Registrable  Securities pursuant to
any  Registration  Statement,  register  or qualify for offer and sale under the
securities or blue sky laws of such jurisdictions as any such Holders reasonably
request in writing,  provided that the Company shall not for any such purpose be
required to qualify generally to transact  business as a foreign  corporation in
any  jurisdiction  where it is not so qualified or to consent to general service
of  process  in any such  jurisdiction,  and do any and all other acts or things
reasonably  necessary  or  advisable  to  enable  the  offer  and  sale  in such
jurisdictions  of  the  Registrable  Securities  covered  by  such  Registration
Statement;

(xi) cooperate  with the Holders to facilitate  the timely  preparation
and delivery of  certificates  representing  Registrable  Securities  to be sold
pursuant to any  Registration  Statement free of any restrictive  legends to the
extent not required at such time and in such  denominations  and  registered  in
such names as Holders  may  request at least  three (3)  business  days prior to
sales of Registrable Securities pursuant to such Registration Statement;

(xii)  upon  the  occurrence  of  any  event  contemplated  by  Section
12.4(b)(v) above, the Company shall promptly prepare a post-effective  amendment
to the Registration Statement or a supplement to the related prospectus, or file
any other  required  document so that, as thereafter  delivered to purchasers of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements  therein,  in the light of the circumstances  under which
they were made, not misleading; and

(xiii) use its best  efforts to comply  with all  applicable  rules and
regulations of the Securities and Exchange  Commission,  and will make generally
available  to the  Holders  not  later  than 45 days  (or 90 days if the  fiscal
quarter is the fourth  fiscal  quarter)  after the end of its fiscal  quarter in
which the  first  anniversary  date of the  effective  date of the  Registration
Statement  occurs,  an earnings  statement  satisfying the provisions of Section
11(a) of the Securities Act.

31

12.5.  Delay Periods;  Suspension of Sales.  Each Holder shall suspend,
upon request of the Company, any disposition of Registrable  Securities pursuant
to the Registration Statement and prospectus contemplated by Section 12.2 during
(i) any period not to exceed two 30-day periods  within any one 12-month  period
the  Company  requires in  connection  with a primary  underwritten  offering of
equity  securities  and (ii) any  period,  not to exceed one  45-day  period per
circumstance  or  development,  when the Company  determines  in good faith that
offers and sales  pursuant  thereto should not be made by reason of the presence
of material undisclosed  circumstances or developments with respect to which the
disclosure that would be required in such a prospectus is premature,  would have
an adverse effect on the Company or is otherwise inadvisable.

12.6.  The Holders  shall have no right to take any action to restrain,
enjoin or otherwise delay any registration  pursuant to Section 12.2 hereof as a
result of any controversy that may arise with respect to the  interpretation  or
implementation of this Agreement.

12.7. (a) To the extent  permitted by law, the Company shall  indemnify
each Holder,  each  underwriter  of the  Registrable  Securities and each person
controlling  such Holder within the meaning of Section 15 of the Securities Act,
with respect to which any  registration,  qualification  or compliance  has been
effected  pursuant to this Agreement,  against all claims,  losses,  damages and
liabilities  (or  action in respect  thereof),  including  any of the  foregoing
incurred in settlement of any  litigation,  commenced or threatened  (subject to
Subsection  12.7(c) below),  arising out of or based on any untrue statement (or
alleged  untrue  statement)  of a material  fact  contained in any  registration
statement,  prospectus  or offering  circular,  or any  amendment or  supplement
thereof,  incident to any such  registration,  qualification  or compliance,  or
based on any omission (or alleged  omission)  to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  in light of the  circumstances  in which they were made,  and shall
reimburse each Holder,  each underwriter of the Registrable  Securities and each
person controlling such Holder, for legal and other expenses reasonably incurred
in connection  with  investigating  or defending any such claim,  loss,  damage,
liability or action as incurred;  provided  that the Company shall not be liable
in any such  case to the  extent  that  any  untrue  statement  or  omission  or
allegation  thereof is made in reliance upon and in conformity with  information
furnished  to the  Company  by or on  behalf  of such  Holder  and  stated to be
specifically for use in preparation of such registration  statement,  prospectus
or offering circular;  provided that the Company shall not be liable in any such
case where the claim,  loss,  damage or liability arises out of or is related to
the failure of the Holder to comply with the covenants and agreements  contained
in this Agreement  respecting sales of Registrable  Securities,  and except that
the foregoing  indemnity  agreement is subject to the condition that, insofar as
it relates to any such untrue  statement or alleged untrue statement or omission
or  alleged  omission  made in the  preliminary  prospectus  but  eliminated  or
remedied in the amended  prospectus  on file with the  Securities  and  Exchange
Commission at the time the registration  statement  becomes  effective or in the
amended prospectus filed with the Securities and Exchange Commission pursuant to
Rule 424(b) of the Securities Act or in the prospectus subject to completion and
term  sheet  under  Rule 434 of the  Securities  Act,  which  together  meet the
requirements  of Section 10(a) of the Securities  Act (the "Final  Prospectus"),
such indemnity  agreement shall not inure to the benefit of any such Holder, any
such  underwriter  or  any  such  controlling  person,  if a copy  of the  Final
Prospectus furnished by the Company to the Holder

32

for  delivery  was not  furnished  to the person or entity  asserting  the loss,
liability,  claim or damage at or prior to the time such  furnishing is required
by the  Securities  Act and the Final  Prospectus  would  have  cured the defect
giving rise to such loss, liability, claim or damage.

(b) Each Holder will severally,  if Registrable Securities held by such
Holder  are  included  in  the   securities  as  to  which  such   registration,
qualification  or compliance is being effected,  indemnify the Company,  each of
its directors and officers,  each underwriter of the Registrable  Securities and
each person who  controls  the  Company  within the meaning of Section 15 of the
Securities Act, against all claims,  losses, damages and liabilities (or actions
in respect  thereof),  including any of the foregoing  incurred in settlement of
any litigation,  commenced or threatened  (subject to Subsection 12.7(c) below),
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement,  prospectus or offering
circular,  or  any  amendment  or  supplement  thereof,  incident  to  any  such
registration,  qualification or compliance, or based on any omission (or alleged
omission)  to state  therein a material  fact  required to be stated  therein or
necessary  to make  the  statements  therein  not  misleading,  in  light of the
circumstances  in which they were made,  and will  reimburse  the Company,  such
directors and officers,  each underwriter of the Registrable Securities and each
person  controlling  the Company  for  reasonable  legal and any other  expenses
reasonably  incurred in  connection  with  investigating  or defending  any such
claim,  loss,  damage,  liability  or  action as  incurred,  in each case to the
extent,  but only to the  extent,  that such  untrue  statement  or  omission or
allegation  thereof is made in  reliance  upon and in  conformity  with  written
information furnished to the Company by or on behalf of the Holder and stated to
be  specifically  for  use  in  preparation  of  such  registration   statement,
prospectus or offering circular;  provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the  prospectus  was not made available to the Holder and such
current copy of the  prospectus  would have cured the defect giving rise to such
loss, claim,  damage or liability.  Notwithstanding  the foregoing,  in no event
shall a Holder be liable for any such claims,  losses, damages or liabilities in
excess of the proceeds  received by such Holder in the  offering,  except in the
event of fraud by such Holder.

(c) Each party entitled to indemnification under this Section 12.7 (the
"Indemnified  Party")  shall  give  notice  to the  party  required  to  provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the  Indemnifying  Party to assume  the  defense of any such claim or any
litigation  resulting  therefrom,  provided  that  counsel for the  Indemnifying
Party,  who shall  conduct  the  defense of such claim or  litigation,  shall be
approved by the  Indemnified  Party (whose  approval shall not  unreasonably  be
withheld),  and the  Indemnified  Party may  participate in such defense at such
Indemnified  Party's  expense,  and  provided  further  that the  failure of any
Indemnified  Party to give  notice as  provided  herein  shall not  relieve  the
Indemnifying Party of its obligations under this Agreement,  unless such failure
is materially  prejudicial to the Indemnifying  Party in defending such claim or
litigation.  An Indemnifying  Party shall not be liable for any settlement of an
action or claim effected  without its written consent (which consent will not be
unreasonably withheld).

(d) If the indemnification provided for in this Section 12.7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss,

33

liability,  claim, damage or expense referred to therein,  then the Indemnifying
Party,  in  lieu  of  indemnifying  such  Indemnified  Party  thereunder,  shall
contribute to the amount paid or payable by such  Indemnified  Party as a result
of such loss,  liability,  claim,  damage or expense  in such  proportion  as is
appropriate to reflect the relative fault of the  Indemnifying  Party on the one
hand and of the Indemnified Party on the other in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable  considerations.  The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to,  among other  things,  whether the untrue or alleged  untrue  statement of a
material  fact or the omission to state a material  fact relates to  information
supplied by the Indemnifying  Party or by the Indemnified Party and the parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.

12.8. (a) Each Holder agrees that,  upon receipt of any notice from the
Company of the happening of any event  requiring the preparation of a supplement
or amendment to a prospectus  relating to  Registrable  Securities  so that,  as
thereafter delivered to the Holders,  such prospectus will not contain an untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements therein not misleading,  each
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration  statement contemplated by Section 12.2 until its receipt of
copies of the  supplemented  or amended  prospectus  from the Company and, if so
directed by the Company,  each Holder  shall  deliver to the Company all copies,
other than  permanent  file  copies  then in such  Holder's  possession,  of the
prospectus  covering such Registrable  Securities current at the time of receipt
of such notice.

(b) As a condition to the inclusion of its Registrable Securities, each
Holder shall furnish to the Company such  information  regarding such Holder and
the  distribution  proposed by such Holder as the Company may request in writing
or as shall be required in connection with any  registration,  qualification  or
compliance referred to in this Article 12.

(c) Each Holder hereby  covenants  with the Company (i) not to make any
sale of the Registrable  Securities without  effectively  causing the prospectus
delivery requirements under the Securities Act to be satisfied, and (ii) if such
Registrable  Securities are to be sold by any method or in any transaction other
than on a national  securities  exchange,  the Nasdaq  National  Market,  Nasdaq
SmallCap  Market or in the  over-the-counter  market,  in  privately  negotiated
transactions,  or in a  combination  of such  methods,  to notify the Company at
least five (5) business  days prior to the date on which the Holder first offers
to sell any such Registrable Securities.

(d) Each Holder acknowledges and agrees that the Registrable Securities
sold pursuant to the Registration Statement described in this Article 12 are not
transferable on the books of the Company unless the stock certificate  submitted
to the transfer agent evidencing such Registrable Securities is accompanied by a
certificate  reasonably  satisfactory  to the Company to the effect that (i) the
Registrable  Securities  have been  sold in  accordance  with such  Registration
Statement and (ii) the  requirement of delivering a current  prospectus has been
satisfied.

34

(e)  Each  Holder  shall  not  take  any  action  with  respect  to any
distribution  deemed to be made pursuant to such registration  statement,  which
would  constitute a violation of Regulation M under the Securities  Exchange Act
of  1934,  as  amended  (the  "Exchange  Act")  or any  other  applicable  rule,
regulation or law.

(f) At the end of the period  during  which the Company is obligated to
keep the  Registration  Statement  current and effective as described above, the
Holders of Registrable  Securities included in the Registration  Statement shall
discontinue sales of shares pursuant to such Registration Statement upon receipt
of notice from the Company of its  intention  to remove  from  registration  the
shares covered by such  Registration  Statement  which remain  unsold,  and such
Holders shall notify the Company of the number of shares registered which remain
unsold immediately upon receipt of such notice from the Company.

12.9.  With a view to making  available  to the Holders the benefits of
certain rules and regulations of the Securities and Exchange Commission which at
any time permit the sale of the  Registrable  Securities  to the public  without
registration, the Company shall use its reasonable best efforts:

(a) to make and keep public information  available,  as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;

(b) to file with the  Securities  and Exchange  Commission  in a timely
manner  all  reports  and other  documents  required  of the  Company  under the
Exchange Act; and

(c) so long as a Holder owns any unregistered  Registrable  Securities,
to furnish to such Holder upon any reasonable request a written statement by the
Company as to its compliance  with Rule 144 under the Securities Act, and of the
Exchange  Act,  a copy of the most  recent  annual  or  quarterly  report of the
Company,  and such other reports and documents of the Company as such Holder may
reasonably  request  in  availing  itself  of  any  rule  or  regulation  of the
Securities and Exchange Commission allowing a Holder to sell any such securities
without registration.

12.10.  The  rights  to  cause  the  Company  to  register  Registrable
Securities  granted to the  Holders by the  Company  under  Section  12.2 may be
assigned in full by a Holder in connection with a transfer by such Holder of its
Registrable  Securities,  provided  that  (i) such  transfer  may  otherwise  be
effected in  accordance  with  applicable  securities  laws;  (ii) such transfer
involves  not less  than the  lesser  of all or 5,000  shares  of such  Holder's
Registrable  Securities,  (iii) such Holder  gives prior  written  notice to the
Company; and (iv) such transferee agrees to comply with the terms and provisions
of this  Agreement,  and such  transfer is  otherwise  in  compliance  with this
Agreement. Except as specifically permitted by this Section 12.10, the rights of
a Holder with respect to  Registrable  Securities as set out herein shall not be
transferable  to any other Person,  and any attempted  transfer  shall cause all
rights of such Holder therein to be forfeited.

12.11.  With the written consent of the Company and the Holders holding
at least a majority of the Registrable Securities that are then outstanding, any
provision of this

35

Article 12 may be waived (either generally or in a particular  instance,  either
retroactively  or  prospectively  and either for a  specified  period of time or
indefinitely)  or  amended.  Upon  the  effectuation  of  each  such  waiver  or
amendment,  the  Company  shall  promptly  give  written  notice  thereof to the
Holders,  if any, who have not previously  received  notice thereof or consented
thereto in writing.  Notwithstanding  the foregoing or Section 13.1, a waiver or
consent to depart  from the  provisions  hereof  with  respect to a matter  that
relates  exclusively  to the rights of the  Holders of Common  Stock  being sold
pursuant to the Registration  Statement and that does not directly or indirectly
affect the rights of other  Holders may be given by Holders of a majority of the
shares of Common Stock included among such shares being sold.

13. Miscellaneous.

13.1.  Amendments and Waivers.  (a) This Agreement and all exhibits and
schedules  hereto set forth the entire  agreement  and  understanding  among the
parties as to the  subject  matter  hereof and merges and  supersedes  all prior
discussions,  agreements and  understandings of any and every nature among them.
This  Agreement may be amended only by mutual  written  agreement of the Company
and either by the holders of at least fifty  percent  (50%) or more in principal
amount of outstanding  Notes or by the Secured  Party,  and the Company may take
any action herein  prohibited  or omit to take any action herein  required to be
performed  by it,  and  any  breach  of any  covenant,  agreement,  warranty  or
representation  may be waived,  only if the  Company  has  obtained  the written
consent or waiver of the holders of at least fifty  percent  (50%) in  principal
amount of outstanding Notes or of the Secured Party; provided, however, that the
holders  of at least 50% in  principal  amount of Notes  sold at any  particular
Closing  (or of at least 50% of the voting  power of any  securities  underlying
such  Notes) may amend  this  Agreement  or  consent  to or waive any  covenant,
agreement,  warranty  or  representation  on  behalf of all  Purchasers  at such
Closing that do not adversely  affect the  securities  sold to Purchasers at any
other Closing or such other  Purchasers.  No course of dealing  between or among
any persons having any interest in this  Agreement  will be deemed  effective to
modify,  amend  or  discharge  any  part  of this  Agreement  or any  rights  or
obligations  of any  person  under or by reason of this  Agreement.  To secure a
consent of the Holders  under this Section  13.1,  it shall not be necessary for
the holders to approve the particular form of any proposed  amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.

(b) Until an amendment or waiver becomes effective,  a consent to it by
a holder of a Note is a continuing  consent by such holder and every  subsequent
holder  of a Note or  portion  of a Note  that  evidences  the same debt as such
consenting  holder's  Note,  even if  notation of the consent is not made on any
Note. However, prior to becoming effective, any such holder or subsequent holder
may revoke  the  consent  as to its Notes or a portion  thereof  it the  Company
receives  written  notice of  revocation  before  the  consent of holders of the
requisite aggregate principal amount of Notes then outstanding has been obtained
and not revoked.

The  Company  may,  but shall not be  obligated  to, fix a record  date
pursuant to paragraph (c) for the purpose of determining the holders entitled to
consent  to  any  amendment  or  waiver.   If  a  record  date  is  fixed,  then
notwithstanding  the provisions of the immediately  preceding  paragraph,  those
Persons who were holders at such record date (or their duly

36

designated  proxies),  and only those  Persons,  shall be entitled to consent to
such amendment or waiver or to revoke any consent  previously given,  whether or
not such  Persons  continue  to be holders  after  such  record  date.  After an
amendment or waiver  becomes  effective it shall bind every holder of a Note. In
such case,  the  amendment  or waiver  shall bind each  holder of a Note who has
consented to it and every  subsequent  holder of a Note that  evidences the same
debt as the consenting holder's Note.

(c)  Whenever in this  Agreement  it is provided  that the holders of a
specified  percentage  in aggregate  principal  amount of the Notes may take any
action (including the making of any demand or request, the giving of any notice,
consent or waiver or the taking of any other action),  the fact that at the time
of taking any such action, the holders of such specified  percentage have joined
therein may be evidenced (i) by any  instrument or any number of  instruments of
similar tenor executed by holders in person or by proxy  appointed in writing or
(ii) by the record of the  holders  voting in favor  thereof  at any  meeting of
holders.  Whenever the Company solicits the taking of action by the holders, the
Company  may fix in advance of such  solicitation  a date as the record date for
determining  holders  entitled to take such  action.  If a record date is fixed,
those and only those  Persons who are  holders at the record  date so fixed,  or
their proxies,  shall be entitled to take action  regardless of whether they are
holders at the time of such action.

13.2.  Successors and Assigns.  Except as contemplated by Section 8.14,
this  Agreement may not be assigned by the Company except with the prior written
consent of the  holders of a majority  of  outstanding  principal  amount of the
Notes.  This  Agreement  shall be binding  upon and inure to the  benefit of the
Company  and its  permitted  successors  and assigns  and  Purchasers  and their
successors  and  registered  assigns.   The  provisions  hereof  which  are  for
Purchasers'  benefit  as  purchasers  or  holders  of the Notes are also for the
benefit of, and enforceable by, any subsequent registered holder of such Notes.

13.3.  Notices.  All notices,  demands and other  communications  to be
given or delivered  under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given  personally  or when mailed
by certified or registered mail,  return receipt  requested and postage prepaid,
and addressed to the addresses of the  respective  parties set forth below or to
such  changed  addresses  as such  parties  may have fixed by notice;  provided,
however,  that any  notice of change of  address  shall be  effective  only upon
receipt:

If to the Company:

Hybridon, Inc.
620 Memorial Drive
Cambridge, MA  02139
Attn: E. Andrews Grinstead, III

If to Purchasers:

37

[__________], as Secured Party
[-----------------]
[-------------]

13.4. Governing Law. The validity, performance, construction and effect
of this  Agreement  shall be governed by the  internal  laws of the State of New
York without giving effect to such State's principles of conflict of laws.

13.5.  Counterparts.  This  Agreement  may be executed in any number of
counterparts  and,  notwithstanding  that any of the parties did not execute the
same counterpart,  each of such  counterparts (and facsimile copies thereof,  if
electronically  delivered to the Placement  Agent) shall,  for all purposes,  be
deemed an original,  and all such counterparts shall constitute one and the same
instrument  binding  on all of  the  parties  hereto.  Delivery  of an  executed
counterpart  of a signature  page to this  Agreement by  telecopier  shall be as
effective as delivery of a manually executed  counterpart of a signature page of
this Agreement.

13.6.  Headings.  The headings of the Sections hereof are inserted as a
matter of  convenience  and for  reference  only and in no way define,  limit or
describe the scope of this Agreement or the meaning of any provision hereof.

13.7.  Severability.  In the event that any provision of this Agreement
or the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent  jurisdiction,  the remainder of
this Agreement  shall not be affected  except to the extent  necessary to delete
such illegal,  invalid or  unenforceable  provision  unless the  provision  held
invalid shall substantially  impair the benefit of the remaining portion of this
Agreement.

13.8.  Exculpation  Among Purchasers.  Each Purchaser  acknowledges and
agrees  that  it is not  relying  upon  any  other  Purchaser,  or any  officer,
director,  employee partner or affiliate of any such other Purchaser,  in making
its  investment  or  decision  to invest in the  Company or in  monitoring  such
investment.  Each Purchaser agrees that no Purchaser nor any controlling person,
officer,  director,  stockholder,  partner,  agent or employee of any  Purchaser
shall be liable for any action  heretofore  or hereafter  taken or omitted to be
taken  by any of them  relating  to or in  connection  with the  Company  or the
securities, or both.

13.9.  Actions by  Purchasers.  Any  actions  permitted  to be taken by
holders or Purchasers of Notes (or subgroups thereof, as contemplated by Section
13.1 ("Consenting Subgroups")) and any consents required to be obtained from the
same  under  this  Agreement,  may be taken or given only by holders of at least
fifty percent (50%) in principal  amount of  outstanding  Notes (or as otherwise
provided  in Section  13.1 with  respect to  Consenting  Subgroups)  and if such
holders or Purchasers  constituting  at least fifty percent (50%) (the "Majority
Purchasers") take any action or grant any consent,  such action or consent shall
be deemed given or taken by all holders or Purchasers' who shall be bound by the
decision or action taken by the Majority Purchasers without any liability on the
part of the Majority  Purchasers to any other holder or Purchasers of securities
hereunder.

38

13.10.  Additional  Purchasers.  Upon the execution and delivery by any
Person of this Agreement  after the date hereof with the written  consent of the
Company,  such Person shall be referred to as an Additional  Purchaser and shall
become a Purchaser,  and each reference in this  Agreement to "Purchaser"  shall
also mean and be a reference to such Additional Purchaser.

14. Confidential Investor Questionnaire.

14.1.  Each Purchaser  represents and warrants that he, she or it comes
within one of category A through H below.  ALL  INFORMATION  IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY  CONFIDENTIAL.  The undersigned  agrees to furnish
any additional  information which the Company deems necessary in order to verify
the answers set forth below.

Category A:       The   undersigned   is  an  individual   (not  a  partnership,
corporation,  etc.) whose  individual net worth,  or joint net
worth with his or her spouse, presently exceeds $1,000,000.

Explanation.  In  calculating  net worth you
may include equity in personal  property and
real  estate,   including   your   principal
residence,   cash,  short-term  investments,
stock and  securities.  Equity  in  personal
property and real estate  should be based on
the fair market value of such  property less
debt secured by such property.

Category B:       The   undersigned   is  an  individual   (not  a  partnership,
corporation,  etc.) who had an individual  income in excess of
$200,000 in each of the two most recent years, or joint income
with his or her spouse in excess of  $300,000 in each of those
years (in each  case  including  foreign  income,  tax  exempt
income  and full  amount  of  capital  gains  and  losses  but
excluding  any  in-  come  of  other  family  members  and any
unrealized   capital   appreciation)   and  has  a  reasonable
expectation  of reaching  the same income level in the current
year.

Category C:       The  undersigned  is a director  or  executive  officer of the
Company which is issuing and selling the Units.

Category D:       The  undersigned  is a bank;  a savings and loan  association;
insurance company;  registered investment company;  registered
business   development   company;   licensed   small  business
investment  company ("SBIC");  or employee benefit plan within
the  meaning  of  Title 1 of  ERISA  and  (a)  the  investment
decision is made by a plan  fiduciary  which is either a bank,
savings and loan association,  insurance company or registered
investment advisor, or (b) the plan has total assets in excess
of $5,000,000 or is a self

39

directed plan with investment decisions made solely by persons
that are accredited investors.

Category E:       The undersigned is a private business  development  company as
defined in section  202(a)(22) of the Investment  Advisors Act
of 1940.

Category F:       The   undersigned  is  either  a   corporation,   partnership,
Massachusetts  business  trust,  or  non-profit   organization
within  the  meaning  of  Section  501(c)(3)  of the  Internal
Revenue Code, in each case not formed for the specific purpose
of  acquiring  the  Units and with  total  assets in excess of
$5,000,000.

Category G:       The  undersigned  is a trust  with  total  assets in excess of
$5,000,000,  not formed for the specific  purpose of acquiring
the Units,  where the purchase is directed by a "sophisticated
person" as defined in  Regulation  506(b)(2-  )(ii)  under the
Securities Act.

Category H:       The  undersigned  is an entity  (other  than a trust)  all the
equity owners of which are "accredited  investors"  within one
or more of the above categories. If relying upon this Category
alone, each equity owner must complete a separate copy of this
Agreement.

The undersigned  agrees that the undersigned will notify the Company at any time
on or prior to the Final Closing Date in the event that the  representations and
warranties in this Agreement shall cease to be true, accurate and complete.

14.2.    Manner in Which Title Is To Be Held. (circle one)

(a)      Individual Ownership
(b)      Community Property
(c)      Joint Tenant with Right of
Survivorship (both parties
must sign)
(d)      Partnership*
(e)      Tenants in Common
(f)      Company*
(g)      Trust*
(h)      Other

*If  Units  are  being  subscribed  for  by  an  entity,  the  attached
Certificate of Signatory must also be completed.

14.3. NASD Affiliation.

40

Are you affiliated or associated with an NASD member firm (please check one):

Yes _________                               No __________

If Yes, please describe:

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

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

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

*If Purchaser is a Registered  Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges  receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

- ---------------------------------
Name of NASD Member Firm

By: ______________________________
Authorized Officer

Date: ____________________________

14.4. Reliance on Confidential Investor Questionnaire.  The undersigned
is informed of the significance to the Company of the foregoing  representations
and answers contained in the Confidential  Investor  Questionnaire  contained in
this Article 14 and such answers have been provided  under the  assumption  that
the Company will rely on them.

41

IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year indicated. [Signature Page for each Purchaser]

_____________  Units at $ 100,000 per Unit, or an aggregate of $___________ (the
"Purchase Price")

By its execution and delivery of this signature page, the undersigned  Purchaser
hereby joins in and agrees to be bound by the terms and  conditions  of the Unit
Purchase Agreement (the "Purchase  Agreement") by and among Hybridon,  Inc. (the
"Company") and the Purchasers (as defined  therein),  as to the aggregate number
of Units set forth above and  authorizes  this  signature page to be attached to
the Purchase Agreement or counterparts thereof.

- --------------------------------             ---------------------------------
Signature                                    Signature (if purchasing jointly)

- --------------------------------             ---------------------------------
Name Typed or Printed                        Name Typed or Printed

- --------------------------------             ---------------------------------
Entity Name                                  Entity Name

- --------------------------------             ---------------------------------
Address                                      Address

- --------------------------------             ---------------------------------
City, State and Zip Code                     City, State and Zip Code

- --------------------------------             ---------------------------------
Telephone-Business                           Telephone--Business

- --------------------------------             ---------------------------------
Telephone-Residence                          Telephone--Residence

- --------------------------------             ---------------------------------
Facsimile-Business                           Facsimile--Business

- --------------------------------             ---------------------------------
Facsimile-Residence                          Facsimile--Residence

- --------------------------------             ---------------------------------
Tax ID # or Social Security #                Tax ID # or Social Security #

Dated: ___________ _____, 199_

42

This  Agreement  is agreed to and  accepted as of  ___________________,
1998.

HYBRIDON, INC.

By:  __________________________
Name:
Title:

43

CERTIFICATE OF SIGNATORY

(To be completed if Units are
being subscribed for by an entity)

I, _____________________________, am the _________________________ (the
"Entity").  I certify that I am empowered  and duly  authorized by the Entity to
execute and carry out the terms of the Unit  Purchase  Agreement,  dated as of ,
and to purchase and hold the Units,  and certify  further that the Unit Purchase
Agreement  has been  duly and  validly  executed  on behalf  of the  Entity  and
constitutes a legal and binding obligation of the Entity.

IN   WITNESS   WHEREOF,   I  have  set  my  hand   this   ____  day  of
_________________, 199_.

------------------------------
(Signature)

44

ANNEX U
-------

THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A UNIT PURCHASE AGREEMENT,  A
COPY OF WHICH IS AVAILABLE FROM HYBRIDON,  INC. (THE "COMPANY").  THE SECURITIES
REPRESENTED  BY THIS  NOTE HAVE NOT BEEN  REGISTERED  UNDER  THE  UNITED  STATES
SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  OR ANY APPLICABLE
STATE  SECURITIES  LAWS,  AND MAY NOT BE SOLD,  OFFERED  FOR  SALE,  PLEDGED  OR
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN  EFFECT  WITH  RESPECT  TO THE  SECURITIES  UNDER  THE  SECURITIES  ACT OR AN
EXEMPTION  FROM THE  SECURITIES  ACT.  ANY SUCH  TRANSFER MAY ALSO BE SUBJECT TO
COMPLIANCE  WITH  APPLICABLE  STATE  SECURITIES  LAWS  AND  THE  LAWS  OF  OTHER
APPLICABLE JURISDICTIONS.

THIS NOTE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON OR
FOR THE  ACCOUNT OR  BENEFIT OF A U.S.  PERSON  PRIOR TO THE  EXPIRATION  OF THE
RESTRICTED  PERIOD (AS DEFINED IN THE  PURCHASE  AGREEMENT),  AND NO TRANSFER OR
EXCHANGE  OF  THIS  NOTE  MAY BE MADE  UNTIL  AFTER  THE  LATER  OF THE  DATE OF
EXPIRATION  OF THE  RESTRICTED  PERIOD  AND  THE  DATE  ON  WHICH  THE  REQUIRED
CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE
TERMS OF THE PURCHASE AGREEMENT.

HYBRIDON, INC.

No.___
Note due 2007

$---------
[DATE OF ISSUANCE]

Hybridon,  Inc., a Delaware  corporation,  (the  "Company"),  for value
received, hereby promises to pay to ___________________________  (the "Holder"),
or  registered  assigns,  the  principal  sum set forth above,  with accrued but
unpaid interest  thereon at a rate equal to fourteen percent (14%) per annum, on
December 31, 2007 (the "Maturity Date"); provided, however, that if the offering
(the "Unit Offering") of units ("Units")  consisting of Notes (as defined below)
and Warrants is  terminated  before the Mandatory  Conversion  Event (as defined
below) has occurred,  then the interest  rate will increase to eighteen  percent
(18%)  per  annum,  effective  as of the date  the  Additional  Warrants  become
exercisable.  Payment  shall be made at such place as  designated by the Company
upon surrender of this Note, and shall be in such coin

or currency of the United  States of America as at the time of payment  shall be
legal tender for the payment of public and private debts.  This Note is one of a
duly authorized  issue of Hybridon,  Inc. Notes due 2007  (individually a "Note"
and collectively the "Notes") in an aggregate original principal amount of up to
$68,750,000  plus any Notes  issued in lieu of cash  interest  on Notes,  issued
pursuant to a Unit Purchase  Agreement  which is available from the Company (the
"Purchase Agreement") and similar agreements. The Notes shall be senior in right
of payment to the Company's 9% Convertible  Subordinated Notes Due 2004 (the "9%
Notes") to the extent provided in a First  Supplemental  Indenture,  dated as of
January 13, 1998, to an Indenture, dated as of March 26, 1997, pursuant to which
such 9% Notes were issued.  The Notes shall be  subordinated in right of payment
to all existing and future  Senior  Indebtedness  of the Company.  The Notes are
secured by certain assets of the Company pursuant to the Purchase Agreement on a
subordinated  basis.  Capitalized terms used herein without  definition have the
respective meanings specified therefor in the Purchase Agreement.

SECTION 1. Interest.

The Company will pay interest  semi-annually  in arrears on April 1 and
October 1 of each year (each an "Interest  Payment Date"), or if any such day is
not a Business Day, on the next succeeding Business Day to the registered Holder
hereof as of the  preceding  March 15 or September 15 (each,  a "Record  Date").
Interest on this Note will accrue from the most recent Interest  Payment Date to
which interest has been paid or, if no interest has been paid,  from the date of
its issuance set forth above;  provided that if there is no existing  Default in
the  payment of  interest,  and if this Note is  authenticated  between a Record
Date, and the next succeeding  Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date;  provided,  further,  that the first
Interest  Payment  Date shall be April 1, 1998 or, if  interest is paid in cash,
October 1, 1998. The Company may, with respect to each Interest Payment Date, at
its option and in its sole  discretion,  in lieu of payment of  interest  on the
Notes in  cash,  issue  additional  Notes  ("Interest  Notes")  in an  aggregate
principal  amount  equal  to the  amount  of  interest  not paid in cash on such
Interest Payment Date. Each issuance of Interest Notes in lieu of the payment of
cash  interest  on the  Notes  shall  be  made  pro  rata  with  respect  to the
outstanding  Notes;  provided,  however,  that the Company may at its option pay
cash in lieu of issuing  Interest Notes in any denomination of less than $1,000.
Interest  will be computed on the basis of a 360-day  year  comprised  of twelve
30-day months.

SECTION 2. Prepayment.

This Note (including  interest accrued on the principal  hereof) may be
prepaid by the Company, at any time without penalty or premium.

SECTION 3. Mandatory Conversion

(a) Mandatory Conversion. Upon the occurrence of a Mandatory Conversion
Event  (as  hereinafter  defined),  and not  before  such  occurrence  under any
circumstances,  the Notes and all accrued interest  thereon shall  automatically
convert into the number of shares of Series B Preferred  Stock of the Company in
substantially  the form  attached to the  Purchase  Agreement  as Exhibit C (the
"Conversion Securities") equal to the Conversion Amount (as

- 2 -

defined below) divided by the then current  Conversion Price (as defined below).
The "Conversion  Amount" shall be the Liquidation Amount (as defined below). The
"Liquidation  Amount"  shall be the  aggregate  principal  amount  of,  plus any
accrued but unpaid  interest on, the Notes held by such Holder.  The "Conversion
Price"  shall  initially  be $100,  subject to  adjustment  as  provided  below,
representing an initial  conversion rate (subject to adjustment) of 10 shares of
Conversion Securities per $1,000 of Conversion Amount (the "Conversion Rate").

A  "Mandatory  Conversion  Event"  shall be  deemed  to have  occurred,
effective immediately, when all of the following shall have occurred:

(i) the holders of $40,000,000 or more in aggregate principal amount of
the 9% Convertible Subordinated Notes due 2004 (the "Subordinated Notes") issued
pursuant to the  Indenture  between the Company and State  Street Bank and Trust
Company, as Trustee,  dated as of March 26, 1997 (the "Indenture"),  irrevocably
exchange such Subordinated Notes and all accrued but unpaid interest thereon for
Series A Preferred Stock of the Company and warrants to purchase Common Stock of
the Company; and

(ii) the Company has  received  proceeds in the Unit  Offering,  net of
cash fees,  commissions and expenses,  equal to or exceeding  $20,000,000 in the
aggregate.

(b) Conversion Procedures. Such conversion shall be deemed to have been
made  automatically,  irrevocably  and  immediately  upon  the  occurrence  of a
Mandatory  Conversion  Event and, upon such Mandatory  Conversion  Event,  Notes
shall no longer be deemed  outstanding  and all  rights  whatsoever  in  respect
thereof (including the right to receive interest thereon) shall terminate except
as provided in the following sentence.  The Company shall deliver to each Holder
certificates  evidencing  the number of full shares of Conversion  Securities to
which such person shall be entitled as provided in Subsection  3(a),  subject to
Section 4 hereof. (c) [Reserved]

(d) Reservation of Shares;  Transfer  Taxes;  Etc. The Company shall at
all times reserve and keep available,  out of its authorized and unissued shares
of Conversion Securities,  solely for the purpose of effecting the conversion of
the Notes, such number of shares of its Conversion Securities free of preemptive
rights as shall be sufficient to effect the conversion of all Notes from time to
time  outstanding.  The Company shall use its best efforts from time to time, in
accordance  with the laws of the State of Delaware,  to increase the  authorized
number of shares of Conversion Securities if at any time the number of shares of
Conversion  Securities  not  outstanding  shall not be  sufficient to permit the
conversion of all the then-outstanding Notes.

The  Company  shall pay any and all issue or other  taxes  (other  than
income  taxes) that may be payable in respect of any issue or delivery of shares
of Conversion  Securities  on  conversion  of the Notes.  The Company shall not,
however,  be  required  to pay any tax which may be  payable  in  respect of any
transfer  involved in the issue or delivery of Conversion  Securities  (or other
securities  or assets) in a name other than that in which the Notes so converted
were  registered,  and no such issue or delivery  shall be made unless and until
the

- 3 -

person  requesting  such issue has paid to the Company the amount of such tax or
has  established,  to the  satisfaction  of the Company,  that such tax has been
paid.

(e) Other Changes in Conversion Rate. The Company from time to time may
increase the Conversion  Rate by any amount for any period of time if the period
is at  least 20 days and if the  increase  is  irrevocable  during  the  period.
Whenever the  Conversion  Rate is so  increased,  the Company  shall mail to the
holder of record of this Note a notice of the  increase  at least 15 days before
the date the increased Conversion Rate takes effect, and such notice shall state
the increased Conversion Rate and the period it will be in effect.

The Company may make such increases in the Conversion Rate, in addition
to those  required or allowed by this  paragraph  (e), as shall be determined by
it, as evidenced by a resolution of the Board of Directors of the Company, to be
advisable  in order to avoid or  diminish  any  income  tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.

SECTION 4. Fractional Shares.

The  Company  shall not be  required  to issue  fractions  of shares of
Conversion  Securities or other capital stock of the Company upon  conversion of
any Notes.  If any  fraction of a share would be issuable on  conversion  of any
Notes (aggregating,  for this purpose,  all Notes held by a record holder),  the
number of shares of  Conversion  Securities  issuable  shall be  rounded  to the
nearest whole share, with .5 of a share rounded upward.

SECTION 5. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of the Company to make any payment of (i)  principal of
this Note when due and payable and such failure  shall  continue for five (5) or
more days and (ii)  interest on this Note when due and payable and such  failure
shall  continue  for thirty  (30) or more days,  whether or not such  payment is
prohibited  by the  subordination  provisions  of  this  Note  or  the  Purchase
Agreement;

(b) the failure of the  Company to observe or perform  any  covenant in
this Note or in the Purchase  Agreement,  and such failure shall have  continued
unremedied  for a period of sixty (60) days after written  notice as provided in
the last paragraph of this Section 5;

(c) a default  occurs  (after  giving  effect to any  applicable  grace
periods  or any  extension  of any  maturity  date) in the  payment  when due of
principal of, or an acceleration  of, any indebtedness for money borrowed by the
Company or any of its  Subsidiaries  (other than an Unrestricted  Subsidiary (as
defined  below) which is not a Significant  Subsidiary  and provided there is no
recourse  against  the  Company  or any other  Subsidiary  with  respect  to the
obligations of such Unrestricted Subsidiary arising as a result of such default)
in excess of $2 million,  individually or in the aggregate, if such indebtedness
is not discharged, or such acceleration is

- 4 -

not  annulled,  within 30 days  after  written  notice as  provided  in the last
paragraph of this Section 5;

(d) the Company or any of its Significant Subsidiaries,  pursuant to or
within the meaning of any Bankruptcy Law:

(i) commences a voluntary case,

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

(iii) consents to the appointment of a Custodian of it or for all
or  substantially  all of its  property,  and  such  Custodian  is not
discharged within 30 days,

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

(v)  admits in  writing  that it is  generally  unable to pay its
debts as the same become due;

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

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

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

(iii) orders the  liquidation  of the Company or any  Significant
Subsidiary,  and, in each case, the order or decree  remains  unstayed
and in effect for 60 consecutive days.

The term  "Bankruptcy  Law"  means  Title  11 of the  U.S.  Code or any
similar  federal,  foreign  or state  law for the  relief of  debtors.  The term
"Custodian"  means any  receiver,  trustee,  assignee,  liquidator,  examiner or
similar official under any Bankruptcy Law. The term "Significant Subsidiary" has
the same meaning as significant  subsidiary  has under  Regulation S-X under the
Securities Act as in effect on the date hereof.  "Unrestricted Subsidiary" means
any Subsidiary of the Company which (i) is not wholly-owned by the Company, (ii)
is  designated  as an  Unrestricted  Subsidiary by the Board of Directors of the
Company  and  (iii)  at the  time  of any  investment  by the  Company  in  such
Subsidiary,  in the aggregate  holds or comprises less than 20% of the Company's
assets  as  shown  on the  Company's  consolidated  balance  sheet  prepared  in
accordance with generally accepted accounting principles consistently applied as
at the time of such investment.

A Default under  Subsection (b) of this Section 5 (other than a Default
under Section 8.14 of the Purchase Agreement, which Default shall be an Event of
Default with the

- 5 -

notice but without  the  passage of time  specified  in  Subsection  (b) of this
Section 5) or Subsection  (c) of this Section 5 shall not be an Event of Default
until (i) the holders of at least 25% in aggregate principal amount of the Notes
then  outstanding  shall have  notified  the Company of the Default and (ii) the
Company shall have failed to cure the Default under such  Subsection  (b) within
60 days after receipt of the notice or under such  Subsection (c) within 10 days
after  receipt of the notice,  respectively.  Any such  notice must  specify the
Default,  demand that it be  remedied  and state that the notice is a "Notice of
Default."

SECTION 6. Remedies upon Event of Default.

(a) If an Event of Default (other than an Event of Default specified in
Subsections  (d) and (e) of Section 5) occurs and is continuing,  the Holders of
at least 25% in aggregate  principal  amount of the Notes then  outstanding  (by
notice to the Company and the Secured Party),  may declare the unpaid  principal
of and accrued interest on all the Notes then outstanding to be due and payable.
Upon any such declaration,  such principal and accrued interest shall be due and
payable  immediately.  If an Event of Default specified in Subsection (d) or (e)
of Section 5 occurs,  such an amount shall ipso facto become and be  immediately
due and payable  without any declaration or other act on the part of any Holder.
The  Holders of at least  fifty  percent  (50%) or more in  aggregate  principal
amount of the  Notes  then  outstanding  may  rescind  an  acceleration  and its
consequences if (a) the Company has paid a sum sufficient to pay (i) all overdue
interest on all Notes then  outstanding and (ii) the principal of the Notes then
outstanding  which  have  become  due  otherwise  than  by such  declaration  of
acceleration  and accrued  interest thereon at a rate borne by the Notes and (b)
the  rescission  would not  conflict  with any  judgment  or  decree  and if all
existing  Events of  Default  have been  cured or waived  except  nonpayment  of
principal or interest  that has become due solely  because of  acceleration.  No
such  rescission  shall  effect  any  subsequent  Default  or  impair  any right
consequent thereto.

(b) The Holders of at least fifty  percent  (50%) or more in  aggregate
principal  amount of the Notes then outstanding may waive an existing Default or
Event of Default and its consequences.  Upon any such waiver, such Default shall
cease to exist and any Event of  Default  arising  therefrom  shall be deemed to
have been cured for every purpose of this Note and the Purchase  Agreement;  but
no such waiver shall  extend to any  subsequent  or other  Default or impair any
right consequent thereon.

(c) If the Company  defaults in a payment of interest on the Notes, the
Company shall pay defaulted interest (plus interest on such defaulted  interest,
to the extent lawful, at the rate borne by this Note) in any lawful manner.  The
Company  shall  pay the  defaulted  interest  to the  Holders  of the Notes on a
special record date. The Company shall fix or cause to be fixed any such special
record date and payment date, which specified record date shall not be less than
10 days  prior to the  payment  date  for such  defaulted  interest,  and  shall
promptly  mail or cause to be mailed to each  Holder a notice  that  states  the
special record date, the payment date and the amount of defaulted interest to be
paid.

(d) No remedy herein conferred upon the Holder of this Note is intended
to be  exclusive  of any other  remedy and each and every such  remedy  shall be
cumulative and shall

- 6 -

be in  addition  to every  other  remedy  given  hereunder  or now or  hereafter
existing at law or in equity or by statute or otherwise.

(e) In any suit for the  enforcement  of any right or remedy under this
Note or the Purchase Agreement, a court in its discretion may require the filing
by any  party  litigant  in the suit of an  undertaking  to pay the costs of the
suit,  and the court in its discretion may assess  reasonable  costs,  including
reasonable  attorneys' fees,  against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses  made by the party
litigant.  This Subsection 6(e) does not apply to a suit by Holders of more than
10% in aggregate  principal amount of the then outstanding Notes or any suit for
the enforcement of the mandatory conversion right set forth in Section 3.

SECTION 7. Note Register.

(a) The Company shall keep at its principal executive office a register
(herein sometimes referred to as the "Note Register"), in which, subject to such
reasonable  regulations  as it may  prescribe,  but at its  expense  (other than
transfer  taxes,  if any),  the Company shall provide for the  registration  and
transfer of this Note.

(b) Whenever this Note shall be surrendered at the principal  executive
office  of the  Company  for  transfer  or  exchange,  accompanied  by a written
instrument  of  transfer in form  reasonably  satisfactory  to the Company  duly
executed by the Holder hereof or his attorney duly  authorized in writing,  and,
subject to compliance with applicable securities laws, the Company shall execute
and deliver in exchange  therefor a new Note or Notes,  as may be  requested  by
such Holder,  in the same aggregate  unpaid  principal amount and payable on the
same date as the principal amount of the Note or Notes so surrendered; each such
new Note  shall be dated as of the date to which  interest  has been paid on the
unpaid principal amount of the Note or Notes so surrendered and shall be in such
principal  amount  and  registered  in such  name or  names as such  Holder  may
designate in writing.

(c) Upon receipt by the Company of evidence reasonably  satisfactory to
it of the loss,  theft,  destruction or mutilation of this Note and of indemnity
reasonably  satisfactory  to it, and upon  reimbursement  to the  Company of all
reasonable expenses  incidental thereto,  and upon surrender and cancellation of
this Note (in case of  mutilation)  the Company will make and deliver in lieu of
this Note a new Note of like tenor and unpaid  principal  amount and dated as of
the date to which interest has been paid on the unpaid  principal amount of this
Note in lieu of which such new Note is made and delivered.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of at least fifty percent (50%)
or more in principal amount of outstanding  Notes or the Secured Party on behalf
of the holders of the Notes may waive or otherwise  consent to the  amendment of
any of the  provisions  hereof,  provided  that no such waiver or amendment  may
reduce the  principal  amount of or  interest  on any of the Notes or change the
stated maturity of the principal or reduce the percentage of

- 7 -

holders  of Notes  necessary  to waive or amend  the  provisions  of this  Note,
without the consent of each holder of any Note affected thereby.

(b)  Restrictions on  Transferability.  In addition to the restrictions
set forth in the Purchase  Agreement,  the  securities  represented by this Note
have  been  acquired  for  investment  and have not been  registered  under  the
Securities Act of 1933, as amended, or the securities laws of any state or other
jurisdiction.  Without  such  registration,  such  securities  may not be  sold,
pledged,  hypothecated or otherwise  transferred,  except pursuant to exemptions
from the  Securities  Act of 1933, as amended,  and the  securities  laws of any
state or other jurisdiction.

(c) Forbearance  from Suit. No holder of Notes shall institute any suit
or proceeding for the enforcement of the payment of principal or interest unless
the holders of at least 25% in principal amount of all of the outstanding  Notes
join in such suit or proceeding.

(d) No  Recourse  Against  Others.  No  directors,  officer,  employee,
incorporator  or stockholder of the Company,  as such,  shall have any liability
for any  obligations of the Company under this Note,  the Purchase  Agreement or
for any claim  based on, in respect  of, or by reason of,  such  obligations  or
their  creation.  The  Holder of this Note by  accepting  this Note  waives  and
releases  all  such   liability.   The  waiver  and  release  are  part  of  the
consideration for the issuance of this Note.

(e)  Subordination.  The Holder by accepting  this Note agrees that the
payment (by set-off or  otherwise)  of principal of and interest on the Notes is
subordinated  in right of payment,  to the extent and in the manner  provided in
Section  9 of the  Purchase  Agreement,  to the  prior  payment  in  full of all
obligations  in  respect  of  Senior   Indebtedness  of  the  Company,   whether
outstanding on the date of the Purchase Agreement or thereafter incurred.

(f)  Denominations.  This Note is issuable in minimum  denominations of
$1,000 and integral  multiples of $1,000 in excess thereof,  except as otherwise
provided in Section 1 hereof.

(g)  Governing  Law.  This Note shall be governed by, and  construed in
accordance  with,  the laws of the State of New York,  excluding the body of law
relating to conflict of laws. Notwithstanding anything to the contrary contained
herein, in no event may the effective rate of interest  collected or received by
the Holder exceed that which may be charged, collected or received by the Holder
under applicable law.

(h) Interpretation. If any term or provision of this Note shall be held
invalid,  illegal  or  unenforceable,  the  validity  of  all  other  terms  and
provisions hereof shall in no way be affected thereby.

(i) Successors and Assigns. This Note shall be binding upon the Company
and its  successors and assigns and shall inure to the benefit of the Holder and
its successors and registered assigns.

- 8 -

(j) Notices. All notices, requests,  consents and demands shall be made
in writing and shall be mailed  postage  prepaid,  or delivered by hand,  to the
Company or to the Holder thereof at their  respective  addresses set forth below
or to such other  address  as may be  furnished  in  writing to the other  party
hereto:

If to the Holder:    At the address shown on Schedule A attached hereto

If to the Company:   Hybridon, Inc.
620 Memorial Drive
Cambridge, Massachusetts 02139
Attention: E. Andrews Grinstead, III

(k) Saturdays,  Sundays,  Holidays. If any date that may at any time be
specified  in this Note as a date for the making of any payment of  principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in New
York or Massachusetts or California shall be a legal holiday,  then the date for
the  making  of that  payment  shall be the next  subsequent  day which is not a
Saturday, Sunday or legal holiday.

(l) Purchase Agreement.  This Note is subject to the terms contained in
the Purchase Agreement and the registered Holder of this Note is entitled to the
benefits of such Purchase  Agreement to the extent provided  therein and may, in
addition  to any  rights  hereunder,  enforce  the  agreements  of  the  Company
contained  therein and exercise  the remedies  provided for thereby or otherwise
available in respect thereof.

(m) No Adverse  Interpretation of Other  Agreements.  This Note and the
Purchase Agreement may not be used to interpret another note, indenture, loan or
debt agreement of the Company or a Subsidiary. Any such note, indenture, loan or
debt agreement may not be used to interpret this Note or the Purchase Agreement.

- 9 -

IN WITNESS  WHEREOF,  this Note has been  executed and delivered on the
date first above written by the duly authorized representative of the Company.

HYBRIDON, INC.

By:________________________

Name:
Title:

- 10 -

SCHEDULE A

Name of Holder                                       Address of Holder
- --------------                                       -----------------

- 11 -

EXHIBIT 9(a)(2)

HYBRIDON, INC.
EXCHANGE AGREEMENT AND LETTER OF TRANSMITTAL
TO TENDER AND TO ENTER INTO CERTAIN AGREEMENTS
IN RESPECT OF ITS 9% CONVERTIBLE SUBORDINATED
NOTES DUE 2004 IN EXCHANGE FOR ITS SERIES A
PREFERRED STOCK AND EXCHANGE WARRANTS
PURSUANT TO ITS OFFER TO EXCHANGE DATED FEBRUARY 6, 1998

THE OFFER WILL EXPIRE AT 12:00  MIDNIGHT,  NEW YORK CITY TIME, ON MARCH 9, 1998,
UNLESS EXTENDED (THE "EXPIRATION  DATE"). THE OFFER MAY BE WITHDRAWN AT ANY TIME
PRIOR TO 12:00 MIDNIGHT, NEW YORK TIME, ON THE EXPIRATION DATE.

Hybridon, Inc., a Delaware corporation ("Hybridon"),  invites the holders of its
9% Convertible  Subordinated  Notes due 2004 (the "Notes") to tender any and all
of the  principal  amount of and accrued  interest on  (together,  the "Exchange
Value") their Notes in exchange (the  "Exchange")  for (i) 10 shares of Series A
Preferred  Stock,  par value $.01 per share,  of  Hybridon  ("Series A Preferred
Stock") and (ii)  warrants  ("Exchange  Warrants")  to  purchase  such number of
shares of common stock, par value $.001 per share, of Hybridon ("Hybridon Common
Stock") equal to 15% of the number of shares of Hybridon Common Stock into which
such Series A Preferred  Stock would be  convertible  at the Exercise  Price (as
defined in the Offer to Exchange (defined  below)),  for each $1,000 in Exchange
Value of the Notes  tendered,  upon the terms and subject to the  conditions set
forth in this  Exchange  Agreement  and Letter of  Transmittal  (this  "Exchange
Agreement  and  Letter of  Transmittal"  or  "Letter  of  Transmittal")  and the
accompanying Offer to Exchange (the "Offer to Exchange").

No  Noteholder  may  tender any or all of the  Exchange  Value  attributable  to
accrued but unpaid interest on the principal  amount of the Notes being tendered
without also tendering the Exchange Value attributable to such principal amount,
or vice versa.

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

TO: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
DEPOSITARY

TELEPHONE NUMBER: (201) 296-4860

By Hand:                     By Mail:             Overnight Delivery:
--------                     --------             -------------------

120 Broadway           P.O. Box 3301                 85 Challenger Road
13th Floor             South Hackensack, NJ  07606   Mail Drop-Reorg
New York, NY  10271                                  Ridgefield Park, NJ  07660
Attn:  Reorganization Dept.

Facsimile (for eligible institutions): (201) 329-8936
Confirm facsimile by telephone ONLY: (201) 296-4860

DELIVERY OF THIS  EXCHANGE  AGREEMENT  AND LETTER OF  TRANSMITTAL  TO AN ADDRESS
OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION  OF  INSTRUCTIONS  VIA A FACSIMILE
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

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ANY TENDER OF NOTES WHICH INVOLVES DENOMINATIONS OF LESS THAN $1,000 IN EXCHANGE
VALUE  THEREOF WILL BE EXCHANGED ON A PRO RATA BASIS,  EXCEPT TO THE EXTENT THAT
SUCH  PRORATION  WOULD RESULT IN THE ISSUANCE OF A FRACTIONAL  SHARE OF SERIES A
PREFERRED STOCK. IN THE EVENT THAT SUCH FRACTIONAL SHARE WOULD RESULT,  HYBRIDON
SHALL, AT ITS SOLE  DISCRETION,  EITHER (A) ROUND SUCH  FRACTIONAL  SHARE TO THE
NEAREST  WHOLE NUMBER OF SHARES (WITH 0.5 BEING  ROUNDED UP), OR (B) PAY IN CASH
AN AMOUNT  EQUAL TO SUCH  FRACTION  MULTIPLIED  BY $100  (WHICH IS THE PER SHARE
STATED  VALUE  OF  SERIES A  PREFERRED  STOCK).  HYBRIDON  WILL  NOT  ISSUE  ANY
FRACTIONAL  SHARES OF SERIES A PREFERRED STOCK IN THE OFFER. IN THE EVENT THAT A
TENDERING  NOTEHOLDER  WOULD  OTHERWISE  BE  ENTITLED  TO  RECEIVE A  FRACTIONAL
EXCHANGE  WARRANT,  HYBRIDON SHALL ROUND UP SUCH FRACTIONAL  EXCHANGE WARRANT TO
THE NEAREST WHOLE NUMBER OF EXCHANGE WARRANTS.

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

THE OFFER IS NOT  CONDITIONED  UPON ANY MINIMUM  AMOUNT OF EXCHANGE VALUE OF THE
NOTES BEING TENDERED. THE OFFER, HOWEVER, IS SUBJECT TO CERTAIN CONDITIONS.  SEE
"TERMS OF THE OFFER--CERTAIN CONDITIONS OF THE OFFER" IN THE OFFER TO EXCHANGE.

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AS SET FORTH IN MORE  DETAIL IN THIS  LETTER OF  TRANSMITTAL  UNDER THE  CAPTION
"EXCHANGE  AGREEMENT",  BY SIGNING AND SENDING SUCH LETTER OF  TRANSMITTAL,  THE
TENDERING NOTEHOLDERS ARE MAKING

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CERTAIN  REPRESENTATIONS AND AGREEING TO BE BOUND BY CERTAIN COVENANTS CONTAINED
HEREIN. IN ADDITION,  HYBRIDON WILL MAKE CERTAIN  REPRESENTATIONS AND AGREEMENTS
WITH RESPECT TO CERTAIN  MATTERS  PURSUANT TO THIS LETTER OF  TRANSMITTAL.  SUCH
COVENANTS OF THE TENDERING  NOTEHOLDERS  AND  REPRESENTATIONS  AND AGREEMENTS OF
HYBRIDON  WILL BECOME  EFFECTIVE AND BINDING ON SUCH  NOTEHOLDERS  AND HYBRIDON,
RESPECTIVELY,  AT SUCH  TIME  THAT  HYBRIDON  ACCEPTS  FOR  EXCHANGE  ANY OF THE
EXCHANGE  VALUE OF THE NOTES  TENDERED BY A TENDERING  NOTEHOLDER.  IN THE EVENT
THAT THE OFFER IS  TERMINATED  BY  HYBRIDON  OR  HYBRIDON  DOES NOT  ACCEPT  FOR
EXCHANGE  ANY  EXCHANGE  VALUE OF THE  NOTES  VALIDLY  TENDERED  BY A  TENDERING
NOTEHOLDER, NONE OF THE COVENANTS, AGREEMENTS AND REPRESENTATIONS MADE BY EITHER
SUCH  TENDERING  NOTEHOLDER  OR HYBRIDON IN THIS LETTER OF  TRANSMITTAL  WILL BE
VALID AGAINST OR BINDING UPON THE PARTY WHO MADE ANY SUCH COVENANTS,  AGREEMENTS
OF  REPRESENTATIONS.  ANY TENDER NOT  ACCOMPANIED  BY THIS LETTER OF TRANSMITTAL
WILL BE DEEMED  INVALID.  PLEASE  READ  CAREFULLY  THIS  LETTER OF  TRANSMITTAL.

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

NEITHER HYBRIDON, ITS BOARD OF DIRECTORS NOR ANY OF ITS EXECUTIVE OFFICERS MAKES
ANY  RECOMMENDATION  TO ANY NOTEHOLDER AS TO WHETHER TO TENDER ANY OR ALL OF THE
EXCHANGE VALUE OF THE NOTES OWNED BY SUCH NOTEHOLDER.  EACH NOTEHOLDER MUST MAKE
HIS, HER OR ITS OWN DECISIONS AS TO WHETHER TO TENDER NOTES AND, IF SO, HOW MUCH
IN EXCHANGE VALUE TO TENDER.

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

This Letter of  Transmittal is to be used (i) if  certificates  for the
Notes are to be physically delivered to ChaseMellon Shareholder Services, L.L.C.
(the  "Depositary")  herewith,  (ii) if  tenders  are to be  made by book  entry
transfer  to one of the  accounts to be  established  by the  Depositary  at The
Depository Trust Company (the "Book-Entry  Transfer  Facility")  pursuant to the
procedures set forth in the Offer to Exchange under the caption  "Procedures for
Tendering Notes," or (iii) if tenders are to be made according to the guaranteed
delivery  procedures  set forth in the Offer to Exchange under  "Procedures  for
Tendering  Notes--Guaranteed  Delivery  Procedure."  Delivery of the Notes, this
Letter of  Transmittal  and/or any other  required  documents to the  Book-Entry
Transfer  Facility does not constitute  delivery to the Depositary.  Capitalized
terms used herein and not otherwise  defined shall have the respective  meanings
ascribed to them in the Offer to Exchange.

PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL  CAREFULLY BEFORE CHECKING
ANY BOX BELOW. YOUR BANKER OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED IN THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.  QUESTIONS
AND REQUESTS FOR ASSISTANCE  SHOULD BE DIRECTED TO THE DEPOSITARY AT THE ADDRESS
AND

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TELEPHONE NUMBER SET FORTH ABOVE. REQUESTS FOR ADDITIONAL COPIES OF THE OFFER TO
EXCHANGE  AND THIS LETTER OF  TRANSMITTAL  SHOULD BE DIRECTED TO HYBRIDON AT 620
MEMORIAL DRIVE, CAMBRIDGE, MA 02139, TELEPHONE (617) 528-7000.

Noteholders  who wish to tender their Notes must  complete the table in
Box One and complete and sign in Box Three.  If only columns (1) through (3) are
completed  in Box One,  the  Noteholder  will be  deemed  to have  tendered  for
exchange all Exchange Value  attributable to the principal  amount listed in the
table in Box  One.  If a  Noteholder  wishes  to  tender  less  than all of such
Exchange  Value,  column  (4) in Box One  must be  completed  in full  and  such
Noteholder should refer to Instruction 3.

SIGNATURE(S) MUST BE PROVIDED BELOW

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Noteholders  who wish to tender  their Notes  pursuant to the Offer and
whose  certificates  representing such Notes are in their possession but are not
immediately available, or who will be unable to submit all required documents to
the  Depositary  on or before the  Expiration  Date or who cannot  complete  the
procedures  for book entry  transfer  on a timely  basis may tender  their Notes
according  to the  guaranteed  delivery  procedures  set  forth in the  Offer to
Exchange under "Procedures for Tendering Notes--Guaranteed Delivery Procedures."
See Instruction 1.

[_]      CHECK HERE IF TENDERED NOTES ARE ENCLOSED HEREWITH.

[_]      CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK ENTRY TRANSFER
MADE TO AN  ACCOUNT  MAINTAINED  BY THE  DEPOSITARY  WITH A BOOK  ENTRY
TRANSFER  FACILITY,  AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A
BOOK ENTRY  TRANSFER  FACILITY  SYSTEM MAY DELIVER  NOTES BY BOOK ENTRY
TRANSFER):

Name of Tendering Institution:
--------------------------------------------------

Book Entry Transfer Facility:
--------------------------------------------------

Account Number:
----------------------------------------------------------------

Transaction Code Number:--------------------------------------------------------

|_|      CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:

Name(s) of Registered Owner(s):
-------------------------------------------------

Date of Execution of Notice of Guaranteed Delivery:
-----------------------------

- 4 -

Name of Institution which Guaranteed Delivery:
----------------------------------

Account Number if delivered by book entry transfer:
-----------------------------

[_]      CHECK HERE IF NOTES HAVE BEEN PREVIOUSLY DELIVERED PURSUANT
TO AN EXCHANGE AGREEMENT AND LETTER OF TRANSMITTAL.

- --------------------------------------------------------------------------------
BOX ONE
- --------------------------------------------------------------------------------

LIST BELOW THE NOTES TO WHICH THIS EXCHANGE AGREEMENT AND LETTER
OF TRANSMITTAL RELATES.  IF THE SPACE PROVIDED BELOW IS INADEQUATE,
THE CERTIFICATE NUMBERS AND PRINCIPAL AMOUNTS SHOULD BE LISTED ON
A SEPARATE SIGNED SCHEDULE AFFIXED HERETO.

- -----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES
- -----------------------------------------------------------------------------------------------------------------------------
1                                     2                           3                         4
- -----------------------------------------------------------------------------------------------------------------------------

CERTIFICATE NUMBER(S)             AGGREGATE
NAME(S) AND ADDRESS(ES) OF                 (ATTACH LIST IF                PRINCIPAL             PRINCIPAL AMOUNT
REGISTERED HOLDER(S)                      NECESSARY)*                  AMOUNT(S)                TENDERED**
- -----------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

*    NEED NOT BE COMPLETED BY NOTEHOLDERS TENDERING BY BOOK ENTRY TRANSFER.

**   UNLESS OTHERWISE INDICATED,  THE NOTEHOLDER WILL BE DEEMED TO HAVE TENDERED
THE ENTIRE  PRINCIPAL AMOUNT (TOGETHER WITH ALL ACCRUED BUT UNPAID INTEREST
THEREON) OF NOTES REPRESENTED BY TENDERED CERTIFICATES. SEE INSTRUCTION 3.

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

- 5 -

EXCHANGE AGREEMENT

BY  SIGNING  AND  SENDING  THIS   EXCHANGE   AGREEMENT  AND  LETTER  OF
TRANSMITTAL TO THE DEPOSITARY, THE TENDERING NOTEHOLDERS SHALL THEREBY BE MAKING
CERTAIN  REPRESENTATIONS  AND AGREEING TO BE BOUND BY THE TERMS OF THIS EXCHANGE
AGREEMENT  AND LETTER OF  TRANSMITTAL.  BY ACCEPTING FOR EXCHANGE ANY PORTION OF
THE EXCHANGE VALUE OF THE NOTES  TENDERED,  HYBRIDON SHALL THEREBY BE MAKING THE
REPRESENTATIONS  AND AGREEMENTS  CONTAINED IN THIS EXCHANGE AGREEMENT AND LETTER
OF TRANSMITTAL.  SUCH RESPECTIVE  AGREEMENTS AND REPRESENTATIONS OF HYBRIDON AND
THE TENDERING  NOTEHOLDERS  WILL BECOME  EFFECTIVE AND BINDING ON THE RESPECTIVE
PARTIES UPON, AND ONLY UPON, ACCEPTANCE BY HYBRIDON FOR EXCHANGE OF ANY EXCHANGE
VALUE OF THE NOTES TENDERED BY EACH TENDERING NOTEHOLDER.  IN THE EVENT THAT THE
OFFER IS  TERMINATED  BY HYBRIDON OR HYBRIDON  DOES NOT ACCEPT FOR  EXCHANGE ANY
PORTION  OF THE  EXCHANGE  VALUE  OF THE  NOTES  VALIDLY  TENDERED,  NONE OF THE
REPRESENTATIONS AND AGREEMENTS MADE HEREBY BY EITHER PARTY WILL BE VALID AGAINST
OR BINDING UPON SUCH PARTY.

ARTICLE I.  MATTERS APPLICABLE TO TENDERING NOTEHOLDERS.

In accordance with the terms and subject to the conditions set forth in
the  Offer  to  Exchange,   the  undersigned  hereby  tenders  to  Hybridon  the
above-described  Exchange  Value of the Notes.  Subject to, and  effective  upon
acceptance for exchange of the Notes tendered  herewith,  the undersigned hereby
exchanges,  assigns and transfers to, or upon the order of,  Hybridon all right,
title and  interest in and to all the Notes that are being  tendered  hereby and
that are being  accepted for  exchange  pursuant to the Offer,  and  irrevocably
constitutes   and  appoints  the  Depositary  the  true  and  lawful  agent  and
attorney-in-fact  of the  undersigned  with  respect  to such  Notes  (with full
knowledge that the Depositary also acts as agent for Hybridon),  with full power
of substitution  (such power of attorney being deemed to be an irrevocable power
coupled  with an  interest),  to (a)  deliver  such Notes to  Hybridon  or cause
ownership of such Notes to be  transferred  to Hybridon on its books and deliver
all accompanying  evidences to transfer and authenticity to or upon the order of
Hybridon upon receipt by the  Depositary,  as the  undersigned's  agent,  of the
shares  of  Series  A  Preferred  Stock  and  Exchange  Warrants  to  which  the
undersigned  is entitled upon the acceptance by Hybridon of such Notes under the
Offer,  and (b)  receive  all  benefits  and  otherwise  exercise  all rights to
beneficial  ownership  of such Notes,  all in  accordance  with the terms of the
Offer. The undersigned  agrees and  acknowledges,  by the execution and delivery
hereof,  that the  undersigned  agrees to the matters  covered by this  Exchange
Agreement and Letter of Transmittal.

The undersigned hereby represents and warrants that the undersigned has
full and power and authority to tender, exchange,  assign and transfer the Notes
tendered  hereby,  and that when the same are accepted for exchange by Hybridon,
Hybridon will acquire good and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and such Notes

- 6 -

shall not be subject to any adverse claims.  The undersigned will, upon request,
execute  and  deliver  any  additional  documents  deemed by the  Depositary  or
Hybridon to be necessary or desirable to complete the exchange,  assignment  and
transfer of the Notes tendered hereby.  The undersigned  hereby  represents that
the Notes  tendered are valid and that the  undersigned  is duly  authorized  to
tender such Notes.

The  undersigned  understands  that, upon acceptance by Hybridon of the
Notes  tendered  hereby,  the  undersigned  will be deemed to have  accepted the
shares of Series A  Preferred  Stock and  Exchange  Warrants  issued in exchange
therefor and will be deemed to have otherwise  waived all rights with respect to
interest accrued on the Notes.

Notes  properly  tendered  and not  withdrawn  will be  accepted on the
Expiration Date as soon as practicable  after the  satisfaction or waiver of all
conditions to the Offer. The undersigned understands that the shares of Series A
Preferred  Stock  and  Exchange  Warrants  will  be  delivered  as  promptly  as
practicable  upon  acceptance  of the tendered  Notes by Hybridon.  The Offer is
subject to a number of conditions,  as more  particularly set forth in the Offer
to Exchange.  See "Terms of the  Offer--Certain  Conditions of the Offer" in the
Offer  to  Exchange.  The  undersigned  recognizes  that  as a  result  of  such
conditions  Hybridon  may not be required to exchange any or all of the Exchange
Value of the Notes tendered hereby.  In such event, the Notes not exchanged will
be returned to the  undersigned  at the  address  shown below the  undersigned's
signature(s).

The  undersigned  understands  that tenders of Notes pursuant to any of
the procedures described in the Offer to Exchange and in this Exchange Agreement
and Letter of  Transmittal  will  constitute  a binding  agreement  between  the
undersigned  and Hybridon  upon the terms and subject to the  conditions  of the
Offer.

Unless   otherwise   indicated   herein   under  "Book   Entry   Return
Instructions,"  please issue the  certificates  for the Series A Preferred Stock
and  Exchange  Warrants  and return any Notes not  tendered or not  accepted for
exchange, in the name(s) of the undersigned at the address set forth above under
"Description of Notes" in Box One.  Similarly,  please deliver the  certificates
for shares of Series A Preferred  Stock and Exchange  Warrants and any Notes not
tendered  or  not  accepted  for  exchange  (and  accompanying   documents,   as
appropriate)   to  the   undersigned  at  the  address  set  forth  above  under
"Description of Notes" in Box One. Noteholders  tendering by book entry transfer
may request that any Notes not tendered or not accepted for exchange be returned
by crediting such account maintained at the Book Entry Transfer Facility as such
Noteholders  may  designate  by making an  appropriate  entry  under "Book Entry
Return Instructions."

All  authority  conferred or agreed to be  conferred  in this  Exchange
Agreement and Letter of Transmittal shall survive the death or incapacity of the
undersigned,  and any obligation of the  undersigned  hereunder shall be binding
upon the heirs, executors,  administrators,  legal and personal representatives,
successors in interest and assigns of the undersigned.

- 7 -

ARTICLE II.  REGISTRATION RIGHTS.

1.       Definitions

As used in this Article II, the following terms shall have the
following meanings:

"Affiliate" shall mean, with respect to any Person (as defined
below), any other Person controlling, controlled by, or under direct or indirect
common  control  with,  such  Person  (for  the  purposes  of  this  definition,
"control," when used with respect to any specified Person,  shall mean the power
to direct the  management  and policies of such person,  directly or indirectly,
whether through ownership of voting  securities,  by contract or otherwise;  and
the terms "controlling" and "controlled" shall have meanings  correlative to the
foregoing).

"Business Day" shall mean a day Monday through Friday on which
banks are generally open for business in New York.

"Holders"  shall mean the  undersigned  and any Person to whom
the  undersigned's  rights  under  this  Article  II have  been  transferred  in
accordance with Section 10 hereof.

"Person"  shall  mean  any  person,  individual,  corporation,
limited liability company,  partnership,  trust or other non-governmental entity
or any governmental agency, court, authority or other body.

The terms "register," "registered" and "registration" refer to
the  registration  effected by preparing and filing a registration  statement in
compliance with the Securities Act of 1933, as amended (the  "Securities  Act"),
and the  declaration  or  ordering  of the  effectiveness  of such  registration
statement.

"Registrable  Securities"  shall  mean the  shares of Series A
Preferred  Stock  issued in  exchange  for the Notes in the Offer and  shares of
Hybridon  Common  Stock  issued  upon  conversion  or  exercise  of the Series A
Preferred Stock and the Exchange Warrants;  provided,  however,  that securities
shall only be treated as Registrable  Securities if and only for so long as they
(A) have not been  disposed  of pursuant to a  registration  statement  declared
effective by the Securities and Exchange Commission (the "Commission"), (B) have
not been sold in a  transaction  exempt  from the  registration  and  prospectus
delivery  requirements  of the Securities Act so that all transfer  restrictions
and restrictive  legends with respect thereto are removed upon the  consummation
of such sale,  (C) are held by a Holder or a  permitted  transferee  pursuant to
Section 10 of this Article II, or (D) are not freely  tradeable under applicable
federal securities laws (including, without limitation,  pursuant to Rule 144(k)
promulgated under the Securities Act).

"Registration  Expenses"  shall mean all expenses  incurred by
Hybridon in  complying  with Section 2 of this  Article II,  including,  without
limitation, all registration,  qualification and filing fees, printing expenses,
fees and  expenses of counsel for  Hybridon,  blue sky fees and expenses and the
expense of any special audits incident to, or required by, any such registration
(but excluding the fees of legal counsel for any Holder).

- 8 -

"Registration  Statement"  shall have the meaning  ascribed to
such term in Section 2 of this Article II.

"Registration  Period" shall have the meaning ascribed to such
term in Section 4 of this Article II.

"Selling  Expenses" shall mean all underwriting  discounts and
selling  commissions  applicable to the sale of  Registrable  Securities and all
fees and expenses of legal counsel for any Holder.

2.       Shelf Registration.

Hybridon   shall  use  its  best  efforts  to  file  with  the
Commission a registration  statement on the appropriate form (the  "Registration
Statement")  pursuant to Rule 415 under the Securities  Act, by the later of (A)
the earlier to occur of (i) the filing date of the registration  statement to be
filed pursuant to the Unit Purchase  Agreement  relating to the New Offering (as
defined in the Offer to Exchange), (ii) the expiration of thirty (30) days after
the Final  Closing  Date (as  defined in the Offer to  Exchange),  and (iii) the
later of (x) the  expiration of sixty (60) days from the date on which  Hybridon
has  received  proceeds  in the  Offering,  net of cash  fees,  commissions  and
expenses,  equal to or exceeding $20,000,000 in the aggregate,  and (y) November
16, 1998, and (B) the date on which shares of Series A Preferred Stock are first
issued, with respect to the resale of the Registrable Securities,  and shall use
its best  efforts  to effect the  registration,  qualifications  or  compliances
(including,  without  limitation,  the execution of any required  undertaking to
file post-effective  amendments,  appropriate qualifications or exemptions under
applicable Blue Sky or other state  securities  laws and appropriate  compliance
with  applicable  securities  laws,  requirements  or  regulations)  as  soon as
practicable  thereafter.  Notwithstanding  the foregoing,  Hybridon shall not be
obligated to enter into any  underwriting  agreement  for the sale of any of the
Registrable Securities.

3.       Expenses.

All  Registration  Expenses  incurred in  connection  with any
registration,  qualification or compliance pursuant to Section 2 of this Article
II shall be borne by  Hybridon.  All  Selling  Expenses  relating to the sale of
securities registered by or on behalf of Holders shall be borne by such Holders.

4.       Registration Procedures.

In the case of the  registration,  qualification or compliance
effected  by  Hybridon  pursuant  to  this  Article  II,  Hybridon  shall,  upon
reasonable  request,  inform each Holder as to the status of such  registration,
qualification and compliance. At its expense Hybridon shall:

(a)  Subject  to  Section 5 of this  Article  II, use its best
efforts  to  keep  such  registration,  and  any  qualification,   exemption  or
compliance  under state  securities  laws which  Hybridon  determines to obtain,
continuously  effective  until  the  Holders  have  completed  the  distribution
described  in the  Registration  Statement.  The  period  of time  during  which
Hybridon

- 9 -

is required hereunder to keep the Registration  Statement  effective is referred
to  herein as the  "Registration  Period."  Notwithstanding  the  foregoing,  at
Hybridon's election, Hybridon may cease to keep such registration, qualification
or compliance  effective  with respect to any  Registrable  Securities,  and the
registration  rights of a Holder  shall  expire,  at such time as the Holder may
sell under Rule 144(k)  under the  Securities  Act in a  three-month  period all
Registrable Securities then held by such Holder; and

(b)      advise the Holders:

(i) when the Registration  Statement or any amendment  thereto
has been filed with the  Commission and when the  Registration  Statement or any
post-effective amendment thereto has become effective;

(ii)  of any  request  by the  Commission  for  amendments  or
supplements to the Registration  Statement or the prospectus included therein or
for additional information;

(iii) of the  issuance  by the  Commission  of any stop  order
suspending the effectiveness of the Registration  Statement or the initiation of
any proceedings for such purpose;

(iv) of the  receipt  by  Hybridon  of any  notification  with
respect to the suspension of the  qualification  of the  Registrable  Securities
included  therein for sale in any  jurisdiction or the initiation or threatening
of any proceeding for such purpose; and

(v) of the occurrence of any event that requires the making of
any changes in the Registration  Statement or the prospectus included therein so
that, as of such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated  therein or necessary to make the
statements  therein  (in  the  case  of  the  prospectus,  in the  light  of the
circumstances under which they were made) not misleading;

(vi) make every reasonable  effort to obtain the withdrawal of
any order  suspending the  effectiveness  of the  Registration  Statement at the
earliest possible time;

(vii)  furnish to each Holder,  without  charge,  at least one
copy of such Registration  Statement and any  post-effective  amendment thereto,
including  financial  statements and schedules and, if the Holder so requests in
writing,  all exhibits  (including those  incorporated by reference) in the form
filed with the Commission;

(viii) during the Registration Period, deliver to each Holder,
without charge,  as many copies of the prospectus  included in such Registration
Statement and any amendment or supplement  thereto as such Holder may reasonably
request;  and  Hybridon  consents  to the use,  consistent  with the  provisions
hereof, of the prospectus or any amendment or supplement  thereto by each of the
selling  Holders of Registrable  Securities in connection  with the offering and
sale of the Registrable  Securities  covered by the prospectus and any amendment
or supplement  thereto.  In addition,  upon the reasonable request of the Holder
and subject in all cases to confidentiality protections reasonably acceptable to
Hybridon,  Hybridon  will  meet  with a Holder or a  representative  thereof  at
Hybridon's headquarters to discuss all information relevant for

- 10 -

disclosure in the Registration Statement,  and will otherwise cooperate with any
Holder  conducting an  investigation  for the purpose of reducing or eliminating
such Holder's  exposure to liability  under the  Securities  Act,  including the
reasonable production of information at Hybridon's headquarters;

(ix) during the Registration  Period,  deliver to each Holder,
without charge, (i) as soon as practicable (but in the case of the annual report
of  Hybridon  to its  stockholders,  contemporaneously  with the mailing of such
report  to  its  stockholders)  one  copy  of:  (A)  its  annual  report  to its
stockholders,  if any (which annual report shall  contain  financial  statements
audited in  accordance  with  generally  accepted  accounting  principles in the
United States of America by a firm of certified public accountants of recognized
standing);   (B)  if  not  included  in  substance  in  its  annual   report  to
stockholders,  its annual report on Form 10-K (or similar form); (C) each of its
quarterly reports to its stockholders,  and, if not included in substance in its
quarterly reports to stockholders, its quarterly report on Form 10-Q (or similar
form), and (D) a copy of the full Registration Statement (the foregoing, in each
case,  excluding  exhibits);  and (ii) upon  reasonable  request,  all  exhibits
excluded by the  parenthetical to the immediately  preceding clause (D), and all
other information that is generally available to the public;

(x) prior to any public  offering  of  Registrable  Securities
pursuant to the Registration  Statement,  register or qualify for offer and sale
under the securities or blue sky laws of such  jurisdictions as any such Holders
reasonably  request in writing,  provided that  Hybridon  shall not for any such
purpose be  required  to qualify  generally  to  transact  business as a foreign
corporation  in any  jurisdiction  where it is not so qualified or to consent to
general  service of process in any such  jurisdiction,  and do any and all other
acts or things reasonably necessary or advisable to enable the offer and sale in
such  jurisdictions of the Registrable  Securities  covered by such Registration
Statement;

(xi)  cooperate  with the  Holders  to  facilitate  the timely
preparation and delivery of certificates  representing Registrable Securities to
be sold pursuant to any Registration  Statement free of any restrictive  legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request  within three (3) business days of sales of
Registrable Securities pursuant to such Registration Statement;

(xii) upon the occurrence of any event contemplated by Section
4(b)(v) of this Article II,  Hybridon  shall promptly  prepare a  post-effective
amendment  to  the  Registration  Statement  or  a  supplement  to  the  related
prospectus, or file any other required document so that, as thereafter delivered
to purchasers of the Registrable  Securities  included  therein,  the prospectus
will not include any untrue  statement  of a material  fact or omit to state any
material  fact  necessary to make the  statements  therein,  in the light of the
circumstances under which they were made, not misleading; and

(xiii)  use its best  efforts  to comply  with all  applicable
rules and  regulations of the Commission,  and will make generally  available to
the  Holders  not later  than 45 days (or 90 days if the  fiscal  quarter is the
fourth fiscal  quarter)  after the end of its fiscal  quarter in which the first
anniversary date of the effective date of the Registration  Statement occurs, an
earnings statement  satisfying the provisions of Section 11(a) of the Securities
Act.

- 11 -

5. Delay  Periods;  Suspension  of Sales.  Each  Holder  shall
suspend,  upon request of Hybridon,  any  disposition of Registrable  Securities
pursuant to the Registration Statement and prospectus  contemplated by Section 2
of this Article II during (i) any period not to exceed two 30-day periods within
any  one  12-month  period  Hybridon  requires  in  connection  with  a  primary
underwritten  offering of equity securities,  and (ii) any period, not to exceed
one 45-day period per circumstance or development,  when Hybridon  determines in
good faith that offers and sales  pursuant  thereto should not be made by reason
of the  presence of material  undisclosed  circumstances  or  developments  with
respect to which the  disclosure  that would be required in such a prospectus is
premature,  would have an adverse effect on Hybridon or is otherwise inadvisable
(a "Material Development Condition"). In connection therewith, Hybridon may also
(x) cause the  Registration  Statement to be withdrawn and the  effectiveness of
the  Registration  Statement  terminated,  or (y) in the  event no  Registration
Statement has yet been filed, to delay filing any such  Registration  Statement,
until the earlier of (a) in the good faith  judgment of Hybridon,  such Material
Development  Condition no longer exists (notice of which Hybridon shall promptly
deliver to each Holder of  Registrable  Securities)  and (b) the  expiration  of
Hybridon's   right  to  cause  the  suspension  of  disposition  of  Registrable
Securities  pursuant  to the first  sentence  of this  Section 5 of Article  II,
provided,   however,  in  the  event  a  Registration  Statement  is  filed  and
subsequently  withdrawn  by  reason  of any  existing  or  anticipated  Material
Development  Condition  as  hereinbefore  provided,  Hybridon  shall cause a new
Registration  Statement covering the Registrable Securities to be filed with the
Commission as soon as such Material Development Condition expires or, if sooner,
as  soon  as  Hybridon's  right  to  cause  the  suspension  of  disposition  of
Registrable  Securities  pursuant  to the first  sentence  of this  Section 5 of
Article II expires.

6. No  Holder  shall  have any  right to take  any  action  to
restrain,  enjoin or otherwise delay any  registration  pursuant to Section 2 of
this  Article II as a result of any  controversy  that may arise with respect to
the interpretation or implementation of this Article II.

7. Indemnification;  Contribution. (a) To the extent permitted
by law,  Hybridon shall indemnify each Holder and each person  controlling  such
Holder within the meaning of Section 15 of the  Securities  Act, with respect to
which any  registration,  qualification or compliance has been effected pursuant
to this Article II,  against all claims,  losses,  damages and  liabilities  (or
action  in  respect  thereof),  including  any  of  the  foregoing  incurred  in
settlement of any  litigation,  commenced or  threatened  (subject to Subsection
7(c) below),  arising out of or based on any untrue statement (or alleged untrue
statement)  of  a  material  fact  contained  in  any  registration   statement,
prospectus  or  offering  circular,  or any  amendment  or  supplement  thereof,
incident to any such registration,  qualification or compliance, or based on any
omission (or alleged  omission) to state  therein a material fact required to be
stated therein or necessary to make the statements  therein not  misleading,  in
light of the  circumstances  in which they were made,  and shall  reimburse each
Holder and each  person  controlling  such  Holder for legal and other  expenses
reasonably  incurred in  connection  with  investigating  or defending  any such
claim,  loss,  damage,  liability or action as incurred;  provided that Hybridon
shall not be liable in any such case to the extent that any untrue  statement or
omission or allegation  thereof is made in reliance upon and in conformity  with
information  furnished  to Hybridon by or on behalf of such Holder and stated to
be specifically for use in preparation of such registration statement,

- 12 -

prospectus or offering circular;  provided,  further, that Hybridon shall not be
liable in any such case where the claim, loss, damage or liability arises out of
or is related to the  failure of the  Holder to comply  with the  covenants  and
agreements  contained  in  this  Article  II  respecting  sales  of  Registrable
Securities,  and except that the foregoing indemnity agreement is subject to the
condition  that,  insofar as it relates to any such untrue  statement or alleged
untrue  statement  or  omission  or  alleged  omission  made in the  preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration  statement  becomes  effective or in the
amended  prospectus  filed with the  Commission  pursuant  to Rule 424(b) of the
Securities Act or in the  prospectus  subject to completion and term sheet under
Rule 434 of the Securities Act, which together meet the  requirements of Section
10(a) of the Securities Act (the "Final  Prospectus"),  such indemnity agreement
shall  not  inure to the  benefit  of any such  Holder  or any such  controlling
person,  if a copy of the Final  Prospectus  furnished by Hybridon to the Holder
for  delivery  was not  furnished  to the person or entity  asserting  the loss,
liability,  claim or damage at or prior to the time such  furnishing is required
by the  Securities  Act and the Final  Prospectus  would  have  cured the defect
giving rise to such loss, liability, claim or damage.

(b) Each Holder will severally, if Registrable Securities held
by such Holder are  included in the  securities  as to which such  registration,
qualification or compliance is being effected,  indemnify Hybridon,  each of its
directors  and officers and each other person who controls  Hybridon  within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof),  including any of the foregoing
incurred in settlement of any  litigation,  commenced or threatened  (subject to
Subsection  7(c)  below),  arising out of or based on any untrue  statement  (or
alleged  untrue  statement)  of a material  fact  contained in any  registration
statement,  prospectus  or offering  circular,  or any  amendment or  supplement
thereof,  incident to any such  registration,  qualification  or compliance,  or
based on any omission (or alleged  omission)  to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  in light of the  circumstances  in which they were  made,  and will
reimburse   Hybridon,   such  directors  and  officers  and  each  other  person
controlling  Hybridon for  reasonable  legal and any other  expenses  reasonably
incurred in connection  with  investigating  or defending any such claim,  loss,
damage, liability or action as incurred, in each case to the extent, but only to
the extent, that such untrue statement or omission or allegation thereof is made
in  reliance  upon and in  conformity  with  written  information  furnished  to
Hybridon by or on behalf of the Holder and stated to be specifically  for use in
preparation of such  registration  statement,  prospectus or offering  circular;
provided that the indemnity shall not apply to the extent that such claim, loss,
damage or liability  results from the fact that a current copy of the prospectus
was not made  available to the Holder and such  current  copy of the  prospectus
would  have  cured  the  defect  giving  rise to such  loss,  claim,  damage  or
liability.  Notwithstanding the foregoing,  in no event shall a Holder be liable
for any such claims,  losses,  damages or  liabilities in excess of the proceeds
received  by such Holder in the  offering,  except in the event of fraud by such
Holder.

(c) Each party entitled to indemnification  under this Section
7 of this Article II (the  "Indemnified  Party")  shall give notice to the party
required to provide  indemnification  (the "Indemnifying  Party") promptly after
such  Indemnified  Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume

- 13 -

the defense of any such claim or any litigation  resulting  therefrom,  provided
that counsel for the  Indemnifying  Party, who shall conduct the defense of such
claim or litigation,  shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld),  and the Indemnified  Party may participate
in such defense at such Indemnified  Party's expense,  and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying  Party of its obligations under this Agreement,  unless
such failure is materially  prejudicial to the  Indemnifying  Party in defending
such claim or  litigation.  An  Indemnifying  Party  shall not be liable for any
settlement of an action or claim  effected  without its written  consent  (which
consent will not be unreasonably withheld).

(d) If the  indemnification  provided for in this Section 7 of
this Article II is held by a court of competent  jurisdiction  to be unavailable
to an Indemnified Party with respect to any loss,  liability,  claim,  damage or
expense  referred  to  therein,   then  the  Indemnifying   Party,  in  lieu  of
indemnifying such Indemnified  Party thereunder,  shall contribute to the amount
paid or payable by such Indemnified  Party as a result of such loss,  liability,
claim,  damage or expense in such  proportion as is  appropriate  to reflect the
relative fault of the Indemnifying  Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which resulted
in such loss, liability,  claim, damage or expense as well as any other relevant
equitable  considerations.  The relative fault of the Indemnifying  Party and of
the  Indemnified  Party shall be determined by reference to, among other things,
whether  the  untrue or  alleged  untrue  statement  of a  material  fact or the
omission  to state a  material  fact  relates  to  information  supplied  by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission.

8.  Discontinuance  of Sale;  Certain Other Matters.  (a) Each
Holder agrees that,  upon receipt of any notice from Hybridon of the  occurrence
of any event  requiring  the  preparation  of a  supplement  or  amendment  to a
prospectus relating to Registrable  Securities so that, as thereafter  delivered
to the  Holders,  such  prospectus  will not  contain an untrue  statement  of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the  statements  therein not  misleading,  each Holder will
forthwith  discontinue  disposition  of Registrable  Securities  pursuant to the
Registration  Statement  until its  receipt  of copies  of the  supplemented  or
amended  prospectus  from Hybridon and, if so directed by Hybridon,  each Holder
shall deliver to Hybridon all copies,  other than  permanent file copies then in
such Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.

(b)  As a  condition  to  the  inclusion  of  its  Registrable
Securities,  each Holder shall  furnish to Hybridon such  information  regarding
such Holder and the distribution proposed by such Holder as Hybridon may request
in  writing  or as shall  be  required  in  connection  with  any  registration,
qualification or compliance referred to in this Article II.

(c) Each Holder hereby covenants with Hybridon (i) not to make
any sale of the  Registrable  Securities  without  complying with the prospectus
delivery  requirements  under the Securities  Act, and (ii) if such  Registrable
Securities  are to be sold by any method or in any  transaction  other than on a
national securities exchange, the Nasdaq National Market, Nasdaq

- 14 -

SmallCap Market or in the  over-the-counter  market, to notify Hybridon at least
five (5)  business  days prior to the date on which the Holder  first  offers to
sell any such Registrable Securities.

(d) Each Holder  acknowledges  and agrees that the Registrable
Securities sold pursuant to the Registration Statement described in this Article
II are not  transferable on the books of Hybridon  unless the stock  certificate
submitted  to the transfer  agent  evidencing  such  Registrable  Securities  is
accompanied by a certificate  reasonably  satisfactory to Hybridon to the effect
that (i) the  Registrable  Securities  have  been sold in  accordance  with such
Registration  Statement  and  (ii)  the  requirement  of  delivering  a  current
prospectus has been satisfied.

(e) Each Holder  shall not take any action with respect to any
distribution  deemed to be made pursuant to the  Registration  Statement,  which
would  constitute a violation of Regulation M under the Securities  Exchange Act
of 1934,  as  amended  (the  "Exchange  Act"),  or any  other  applicable  rule,
regulation or law.

(f)  At the  end  of  the  period  during  which  Hybridon  is
obligated to keep the Registration  Statement current and effective as described
above,  the  Holders of  Registrable  Securities  included  in the  Registration
Statement  shall  discontinue  sales of  shares  pursuant  to such  Registration
Statement  upon receipt of notice from  Hybridon of its intention to remove from
registration  the shares  covered by such  Registration  Statement  which remain
unsold,  and  such  Holders  shall  notify  Hybridon  of the  number  of  shares
registered  which  remain  unsold  immediately  upon receipt of such notice from
Hybridon.

9. Rule 144.  With a view to making  available  to the Holders
the benefits of certain rules and  regulations  of the  Commission  which at any
time  permit  the  sale of the  Registrable  Securities  to the  public  without
registration, Hybridon shall use its reasonable best efforts:

(a) to make and keep public  information  available,  as those
terms are understood  and defined in Rule 144 under the  Securities  Act, at all
times;

(b) to file with the Commission in a timely manner all reports
and other documents required of Hybridon under the Exchange Act; and

(c) so long as a  Holder  owns  any  unregistered  Registrable
Securities,  to furnish to such  Holder  upon any  reasonable  request a written
statement by Hybridon as to its  compliance  with Rule 144 under the  Securities
Act,  and of the  Exchange  Act, a copy of the most recent  annual or  quarterly
report of  Hybridon,  and such other  reports and  documents of Hybridon as such
Holder may  reasonably  request in availing  itself of any rule or regulation of
the  Commission   allowing  a  Holder  to  sell  any  such  securities   without
registration.

10.  Assignment.  The  rights to cause  Hybridon  to  register
Registrable  Securities  granted to the Holders by Hybridon  under  Section 2 of
this  Article  II may be  assigned  in full by a  Holder  in  connection  with a
transfer by such Holder of its  Registrable  Securities,  provided that (i) such
transfer may  otherwise be effected in  accordance  with  applicable  securities
laws;  (ii) such  transfer  involves  not less  than the  lesser of all or 5,000
shares (with Series A

- 15 -

Preferred  Stock being counted as equivalent to the number of shares of Hybridon
Common  Stock into which the Series A Preferred  Stock is then  convertible)  of
such  Holder's  Registrable  Securities,  (iii) such Holder gives prior  written
notice to Hybridon; and (iv) such transferee agrees to comply with the terms and
provisions of this  Exchange  Agreement  and Letter of  Transmittal  (other than
those  contained in Article IV),  and such  transfer is otherwise in  compliance
with this Exchange  Agreement and Letter of Transmittal.  Except as specifically
permitted  by this  Section 10 of this  Article  II, the rights of a Holder with
respect to Registrable Securities as set out herein shall not be transferable to
any other  Person,  and any  attempted  transfer  shall cause all rights of such
Holder therein to be forfeited.

11. Waiver;  Amendment.  With the written  consent of Hybridon
and the Holders holding at least a majority of the  Registrable  Securities that
are then  outstanding,  any  provision of this Article II may be waived  (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified  period of time or  indefinitely)  or  amended.  Upon the
effectuation  of each such waiver or  amendment,  Hybridon  shall  promptly give
written notice thereof to the Holders,  if any, who have not previously received
notice thereof or consented thereto in writing. Notwithstanding the foregoing or
Section 1 of  Article  VI, a waiver or  consent  to depart  from the  provisions
hereof with  respect to a matter that relates  exclusively  to the rights of the
Holders of Hybridon  Common Stock or Series A Preferred  Stock,  as the case may
be, being sold pursuant to the Registration Statement and that does not directly
or  indirectly  affect the rights of other  Holders may be given by Holders of a
majority of the shares of Hybridon Common Stock or Series A Preferred  Stock, as
the case may be, included among such shares being sold.

ARTICLE III.  THE BOARD OF DIRECTORS.

Upon the  occurrence of the  Restructuring  Trigger,  for so long as at
least 50% of the Series A Preferred Stock initially  issued in the Offer remains
outstanding,  the  holders  of  Series A  Preferred  Stock  as a class  shall be
entitled to  designate  one member for  nomination  to the Board of Directors of
Hybridon  (the  "Designated  Director"),  provided  that such  nominee  shall be
reasonably acceptable to Hybridon.

ARTICLE IV.  CERTAIN SALE RESTRICTIONS.

The undersigned,  and each beneficial owner of Notes tendered  pursuant
to this  Exchange  Agreement  and Letter of  Transmittal,  in  consideration  of
Hybridon's  acceptance of the Notes tendered hereby,  agrees not to, directly or
indirectly,  through related parties,  affiliates or otherwise, (i) sell "short"
or  "short  against  the box" (as  those  terms are  generally  understood)  any
security of Hybridon or (ii) otherwise engage in any transaction, except for any
transaction  approved  by  Hybridon in  writing,  that  involves  hedging of the
undersigned's position in any security of Hybridon;  provided, however, that the
undersigned  or such a  beneficial  owner may have an aggregate  short  position
covering  any number of shares of Hybridon  Common Stock fewer than the quotient
of (a) the product of (x) the number of shares of Series A Preferred  Stock held
by the undersigned multiplied by (y) the Dividend Base Amount (as defined in the

- 16 -

Certificate of Designation for the Series A Preferred Stock which is attached as
Annex A to the Offer to Exchange),  divided by (b) the  conversion  price of the
Series A Preferred Stock as in effect from time to time.

ARTICLE V.  RESTRICTION ON INDEBTEDNESS AND SENIOR EQUITY
ISSUANCES; AFFILIATE TRANSACTIONS; THE BOARD OF DIRECTORS.

1.       Restriction on Indebtedness and Senior Equity Issuances.

Hybridon agrees that,  following the Restructuring  Trigger (as defined
in the Offer to Exchange),  it will not,  without the consent of the  Designated
Director, (i) for the first 12 months thereafter, incur, assume or guarantee any
additional  indebtedness  (A)  for  money  borrowed,  (B)  evidenced  by a note,
debenture or similar  instrument given in connection with the acquisition of any
business,  Property  (as  defined in the  Indenture  (as defined in the Offer to
Exchange)) or assets,  (C) consisting of obligations of Hybridon as lessee under
leases  required to be capitalized on the balance sheet of the lessee under GAAP
(as defined in the Indenture) or (D) consisting of reimbursement obligations and
other  liabilities  (contingent or otherwise) with respect to letters of credit,
bank guarantees or bankers' acceptances (collectively, "Indebtedness"), or issue
any equity  securities  senior in dividends  or  liquidation  preference  to the
Series A  Preferred  Stock  other  than with  respect  to:  (a) any  amendments,
renewals, extensions,  modifications,  refinanc- ings and refundings of the Loan
and Security  Agreement,  dated December 31, 1996, as amended,  between  Silicon
Valley Bank and Hybridon,  provided  that the  principal  amount does not exceed
$7,500,000 and the maturity date is not advanced;  (b) capitalized leases with a
capitalized amount not exceeding $3,000,000;  (c) the Offering Notes (as defined
in the Offer to Exchange) (including Offering Notes issued as interest thereon);
and (d) any amendments,  renewals, extensions,  modifications,  refinancings and
refundings of the above (provided that the maturity date is not advanced and the
original  amount thereof is not  increased);  and (ii) for the second 12 months,
(A)  incur  any  additional  Indebtedness  in  excess  of $10  million  over the
permitted  level for the  first 12  months  (provided  that  capitalized  leases
entered into in the first 24 months will count  against the $10 million  basket)
or (B) issue  more than $15  million  in  liquidation  preference  of any equity
securities  senior  in  dividends  or  liquidation  preference  to the  Series A
Preferred Stock.

2.       Affiliate Transactions.

Hybridon  agrees  that,  for so long as the  Series A  Preferred  Stock
remains outstanding,  following the Restructuring  Trigger, it will not, without
the consent of the  Designated  Director,  enter into any  transaction  with any
Affiliate (as defined in the Indenture) of Hybridon  unless such  transaction is
approved by a majority of the independent directors of Hybridon.

3.       Issuance of Reset Warrants.

Hybridon  hereby agrees to issue,  upon the  occurrence of the Series A
Reset (as defined in the Offer to Exchange), to the undersigned,  for each share
of Series A Preferred  Stock  issued in the Offer to the  undersigned,  warrants
(the "Reset  Warrants") to purchase a number of shares of Hybridon  Common Stock
equal to the quotient of (a) the number of shares of Hybridon

- 17 -

Common  Stock  underlying  the  warrants  issuable  to the  holders  of Series B
Preferred  Stock (as defined in the Offer to Exchange),  for each share thereof,
upon the Series B One-Year Reset (as defined in the Offer to Exchange),  divided
by (b)  2.125.  If the  foregoing  calculation  results  in a  fractional  Reset
Warrant,  such fractional Reset Warrant shall be rounded up to the nearest whole
number of Reset Warrants.  The Reset Warrants will be  substantially in the form
of the Exchange Warrants and be governed by a warrant agreement substantially in
the form of the  Warrant  Agreement  (a form of which is annexed to the Offer to
Exchange  as Annex B) for the  Exchange  Warrants,  except as  described  above.
Without  limiting the generality of the  foregoing,  such Reset Warrants will be
subject to redemption at the option of Hybridon on the same terms  applicable to
the Exchange Warrants,  and may contain any legends required by applicable laws.
In the event  that any shares of Series A  Preferred  Stock are  converted  into
shares of Hybridon  Common Stock prior to the  occurrence of the Series A Reset,
no Reset  Warrants  would be  issuable  with  respect to such shares of Series A
Preferred Stock.

ARTICLE V.  CERTAIN ADDITIONAL COVENANTS AND REPRESENTATIONS OF
HYBRIDON.

Hybridon hereby  represents and warrants to the undersigned that, since
March 26, 1997, no event has occurred  which would change the  Conversion  Price
(as defined in the  Indenture)  other than the reverse  stock split  effected by
Hybridon in December 1997. Hybridon also covenants not to engage in any act that
would change such Conversion  Price without  adjusting the conversion  price and
conversion  rate of the  Series  A  Preferred  Stock  to the  extent  that  such
adjustment  would be required  pursuant to the Certificate of Designation of the
Series A  Preferred  Stock.  In the  event  that the rate of  conversion  of the
Offering  Notes into Series B Preferred  Stock is increased  pursuant to Section
3(e) of the  Offering  Notes,  the  Series A  Preferred  Stock  then held by the
undersigned shall be adjusted so as to have the same increased conversion rate.

ARTICLE VI.  MISCELLANEOUS.

1.  Amendments  and Waivers.  (a) This Exchange  Agreement and
Letter of Transmittal and all exhibits and schedules hereto set forth the entire
agreement and  understanding  among the parties as to the subject  matter hereof
and merges and supersedes all prior  discussions,  agreements and understandings
of any and every nature among them.  Except as otherwise  provided in Section 11
of Article II, this Exchange  Agreement and Letter of Transmittal may be amended
only by mutual  written  agreement  of  Hybridon  and by the holders of at least
fifty  percent (50%) of the  outstanding  number of shares of Series A Preferred
Stock,  and Hybridon may take any action  herein  prohibited or omit to take any
action  herein  required to be performed by it, and any breach of any  covenant,
agreement,  warranty  or  representation  may be waived,  only if  Hybridon  has
obtained the written  consent or waiver of the holders of at least fifty percent
(50%) of the outstanding number of shares of Series A Preferred Stock. No course
of dealing  between or among any Persons  having any  interest in this  Exchange
Agreement and Letter of Transmittal will be deemed effective to modify, amend or
discharge any part of the same or any rights or  obligations of any Person under
or by reason of the same.  To secure a consent of the Holders under this Section
1, Article VI, it shall not be necessary for

- 18 -

the holders to approve the particular form of any proposed  amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.

(b) Until an amendment or waiver becomes effective,  a consent
to Hybridon by a holder of Series A Preferred  Stock is a continuing  consent by
such  holder and every  subsequent  holder of the same or any Series A Preferred
Stock declared and issued as dividend with respect to the same, even if notation
of the  consent  is not  made on the  certificate  representing  such  Series  A
Preferred  Stock.  However,  prior to  becoming  effective,  any such  holder or
subsequent  holder may revoke the consent as to its Series A Preferred  Stock if
Hybridon  receives written notice of revocation before the consent of holders of
the requisite  number of shares of Series A Preferred Stock then outstanding has
been obtained and not revoked.

Hybridon may, but shall not be obligated to, fix a record date
pursuant  to  paragraph  (c) below for the  purpose of  determining  the holders
entitled to consent to any amendment or waiver.  If a record date is fixed, then
notwithstanding  the provisions of the immediately  preceding  paragraph,  those
Persons who were holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given,  whether or not such Persons continue
to be holders  after such record  date.  After an  amendment  or waiver  becomes
effective  it shall bind every holder of the Series A Preferred  Stock.  In such
case,  the  amendment or waiver shall bind each holder of the Series A Preferred
Stock who has  consented  to it and  every  subsequent  holder of such  Series A
Preferred Stock (including any shares declared and issued as a dividend).

(c)  Whenever  in  this  Exchange   Agreement  and  Letter  of
Transmittal  it is  provided  that the  holders  of a  specified  percentage  of
outstanding  number of shares of Series A  Preferred  Stock may take any  action
(including  the  making of any  demand or  request,  the  giving of any  notice,
consent or waiver or the taking of any other action),  the fact that at the time
of taking any such  action,  the  holders of such  specified  number have joined
therein may be evidenced (i) by any  instrument or any number of  instruments of
similar tenor executed by holders in person or by proxy  appointed in writing or
(ii) by the record of the  holders  voting in favor  thereof  at any  meeting of
holders.  Whenever  Hybridon  solicits  the  taking of  action  by the  holders,
Hybridon may fix in advance of such  solicitation  a date as the record date for
determining  holders  entitled to take such  action.  If a record date is fixed,
those and only those  Persons who are  holders at the record  date so fixed,  or
their proxies,  shall be entitled to take action  regardless of whether they are
holders at the time of such action.

2.  Successors  and Assigns.  Once  effective,  this  Exchange
Agreement  and Letter of  Transmittal  may not be  assigned  by  Hybridon.  Upon
acceptance  of any of the  Notes  tendered  by the  undersigned,  this  Exchange
Agreement  and  Letter of  Transmittal  shall be  binding  upon and inure to the
benefit of Hybridon and its permitted successors and assigns and the undersigned
and its permitted successors and assigns.

3. Notices.  All notices,  demands and other communications to
be given or  delivered  under or by reason of the  provisions  of this  Exchange
Agreement and Letter of  Transmittal  shall be in writing and shall be deemed to
have been given personally or when

- 19 -

mailed by certified or registered  mail,  return  receipt  requested and postage
prepaid,  and  addressed to the  addresses of the  respective  parties set forth
below or to such  changed  addresses  as such  parties may have fixed by notice;
provided,  however, that any notice of change of address shall be effective only
upon receipt:

If to Hybridon:

Hybridon, Inc.
620 Memorial Drive
Cambridge, MA  02139
Attn: E. Andrews Grinstead, III

If to the undersigned:

At its address indicated under "Description of Notes"
in Box One above.

4. Governing Law. The validity, performance,  construction and
effect of this Exchange Agreement and Letter of Transmittal shall be governed by
the internal laws of the State of New York without giving effect to such State's
principles of conflict of laws.

5. Headings.  The headings of the Articles and Sections hereof
are inserted as a matter of  convenience  and for  reference  only and in no way
define,  limit or describe the scope of this  Exchange  Agreement  and Letter of
Transmittal or the meaning of any provision hereof.

6.  Severability.  In the  event  that any  provision  of this
Exchange Agreement and Letter of Transmittal or the application of any provision
hereof is declared to be illegal,  invalid or otherwise unenforceable by a court
of competent  jurisdiction,  the remainder of this Exchange Agreement and Letter
of Transmittal  shall not be affected  except to the extent  necessary to delete
such illegal,  invalid or  unenforceable  provision  unless the  provision  held
invalid shall substantially  impair the benefit of the remaining portion of this
Exchange Agreement and Letter of Transmittal.

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

BOX TWO
- --------------------------------------------------------------------------------

BOOK ENTRY RETURN INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4 AND 5)

To be completed  ONLY if the Notes tendered by book entry transfer which are not
tendered in full or not accepted for exchange are to be returned by credit to an
account maintained at a Book Entry Transfer Facility.

- 20 -

ISSUE AND MAIL NOTES TO:

Name(s):
------------------------------------------
(Please print)

------------------------------------------
(Please print)
Address:
------------------------------------------

------------------------------------------
(Zip Code)
------------------------------------------
(Tax Identification or Social Security No.)

(Complete Substitute Form W-9)

Credit  unexchanged  Notes  tendered  by book entry  transfer  to the Book Entry
Transfer Facility Account set forth below:

------------------------------------------
Account No.
------------------------------

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

BOX THREE
- --------------------------------------------------------------------------------

PLEASE SIGN HERE
TO BE COMPLETED BY ALL HOLDERS TENDERING NOTES
(WHETHER OR NOT NOTES ARE BEING PHYSICALLY
TENDERED)

I have read this Exchange  Agreement and Letter of  Transmittal  and agree to be
bound by the foregoing.

x
----------------------------------------------------------------------
Signature(s) of Registered Noteholder(s) or Authorized Signatory

x
----------------------------------------------------------------------
Type or Print Name

Dated:                                                        , 1998
--------------------------------------------------------

Area Code and telephone No(s).:
---------------------------------------

Tax Identification or Social Security No(s).:--------------------------

- 21 -

Must be signed by the registered  Noteholder(s) exactly as the name(s) appear(s)
on  the   certificate   and  by  person(s)   authorized  to  become   registered
Noteholder(s) as evidenced by endorsements and documents.  See Instruction 4. If
signature is by a trustee, executor, administrator,  guardian, attorney-in-fact,
officer of a  corporation,  agent,  or other  person  acting in a  fiduciary  or
representative capacity, please see Instruction 4.

Name(s):
Address(es) (include zip code)

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Type or Print
Capacity (Full Title):----------------------------------------------------------

GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 4)

Name of firm:
-------------------------------------------------------------------

Authorized Signature:
-----------------------------------------------------------

Title:
--------------------------------------------------------------------------

Dated:                                                     , 1998
----------------------------------------------------

PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW

PAYOR'S NAME:

- --------------------------------------------------------------------------------
Name as shown on account (if joint  account,  list first and circle the
name of the person or entity whose number you enter below)

- --------------------------------------------------------------------------------
Address (if Holder does not complete,  signature  below will constitute
certification that the address indicated in Box One above is correct)

- --------------------------------------------------------------------------------
City, State and Zip Code

SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE

PAYOR'S REQUEST FOR TAXPAYER IDENTIFICATION NO. FOR ALL ACCOUNTS

Enter your taxpayer  identification number on the appropriate line. For
most individuals, this is your Social Security number.

Social Security Number
or Employer Identification Number

- -----------------------------------------------
If you do not have a TIN but are awaiting one,  write "Applied For" in the space
above for the TIN and sign and date below.

- 22 -

CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me),
(2) I am not subject to backup  withholding  either  because I have not
been  notified by the  Internal  Revenue  Service  ("IRS")  that I am subject to
backup  withholding  as a result  of the  failure  to  report  all  interest  or
dividends,  or the IRS has  notified  me that I am not longer  subject to backup
withholding, and
(3) any other information provided on this form is true and correct.

CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified  by the IRS that you are  subject  to  backup  withholding  because  of
under-reporting interest or dividends on you tax return. However, if after being
notified by the IRS that you were  subject to backup  withholding,  you received
another  notification  from the IRS that you are no  longer  subject  to  backup
withholding, do not cross out item (2).

SIGNATURE
----------------------------
DATE                  , 1998
------------------

CERTIFICATE OF AWAITING
TAXPAYER IDENTIFICATION NUMBER

I certify  under  penalties of perjury  that a taxpayer  identification
number has not been issued to me, and either (a) I have mailed or  delivered  an
application  to  receive a  taxpayer  identification  number to the  appropriate
Internal Revenue Service Center or Social Security  Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of any payments made to me thereafter may be withheld until I provide a number.

, 1998
- ------------------------------------                   -------------------
SIGNATURE                                          DATE

NOTE:    FAILURE TO COMPLETE  AND RETURN THIS FORM MAY IN CERTAIN  CIRCUMSTANCES
RESULT  IN  BACKUP  WITHHOLDING  OF  31% OF ANY  PAYMENTS  MADE  TO YOU
PURSUANT  TO THE OFFER.  PLEASE  REVIEW  THE  ENCLOSED  GUIDELINES  FOR
CERTIFICATION OF TAXPAYER  IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE CERTIFICATE OF AWAITING TAXPAYER
IDENTIFICATION NUMBER IF YOU WROTE "APPLIED FOR" IN THE SPACE FOR
THE TIN ABOVE.

INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE OFFER

1. DELIVERY OF THIS EXCHANGE  AGREEMENT AND LETTER OF  TRANSMITTAL  AND
CERTIFICATES;  GUARANTEED DELIVERY  PROCEDURES;  BOOK ENTRY TRANSFER PROCEDURES.
This Exchange Agreement and Letter of Transmittal is to be

- 23 -

used  if (a)  certificates  for  Notes  are to be  physically  delivered  to the
Depositary  herewith,  (b) tenders are to be made by book entry  transfer to the
accounts  maintained  by the  Depositary  at the Book  Entry  Transfer  Facility
pursuant to the  procedures  set forth in the Offer to Exchange,  or (c) tenders
are to be made according to the guaranteed  delivery procedures set forth in the
Offer to Exchange.

To validly  tender Notes  pursuant to the Offer,  either (a) a properly
completed  and duly  executed  copy of the  Exchange  Agreement  and  Letter  of
Transmittal  (or  facsimile  thereof)  with all required  signature  guarantees,
together with either a properly completed and duly executed Notice of Guaranteed
Delivery or certificates for the Notes and any other documents  required by this
Exchange  Agreement and Letter of Transmittal must be received by the Depositary
at one of its  addresses or numbers set forth on the first page of this Exchange
Agreement  and  Letter of  Transmittal  or the tender of Notes  pursuant  to the
procedures  for book entry transfer as set forth below must be effected prior to
12:00 midnight,  New York City time, on the Expiration Date, or (b) a Noteholder
must  comply  with the  guaranteed  delivery  procedures  described  in the next
succeeding paragraph.

Noteholders  who desire to tender their Notes pursuant to the Offer and
whose certificates  representing such Notes are not lost but are not immediately
available,  or time  will  not  permit  all  required  documents  to  reach  the
Depositary  prior to 12:00 midnight,  New York City time, on the Expiration Date
or who cannot  complete the procedure for book entry  transfer on a timely basis
may tender their Notes pursuant to the guaranteed  delivery procedures set forth
in the Offer to Exchange  under  "Procedure  for  Tendering  Notes -- Guaranteed
Delivery  Procedure."  Pursuant  to such  procedures,  (i)  tender  must be made
through a  commercial  bank or trust  company  having an office or branch in the
United States or by a firm which is a member of a registered national securities
exchange  or of  the  National  Association  of  Securities  Dealers,  Inc.  (an
"Eligible  Institution"),  (ii) the  Depositary  must  have  received  from such
Eligible  Institution,  prior to 12:00  midnight,  New York  City  time,  on the
Expiration  Date, a properly  completed and duly  executed  Notice of Guaranteed
Delivery (by mail, hand delivery, telegram or facsimile transmission), and (iii)
the  certificates  for all  tendered  Notes in proper  form for  transfer,  or a
confirmation  of  book  entry  transfer  of such  Notes  into  the  Depositary's
applicable account at the Book Entry Transfer Facility, together with a properly
completed and duly executed  Exchange  Agreement and Letter of  Transmittal  (or
facsimile  thereof) and all other documents  required by this Exchange Agreement
and Letter of Transmittal, must be received by the Depositary no later than 5:00
P.M.,  New York City time, on the third business day after the date of execution
of the Notice of Guaranteed  Delivery,  all as provided in the Offer to Exchange
under  the  caption  "Procedure  for  Tendering  Notes  -  Guaranteed   Delivery
Procedure."

THE  METHOD  OF  DELIVERY  OF THIS  EXCHANGE  AGREEMENT  AND  LETTER OF
TRANSMITTAL,  THE CERTIFICATES FOR NOTES AND OTHER REQUIRED  DOCUMENTS IS AT THE
ELECTION AND RISK OF THE  TENDERING  NOTEHOLDER.  EXCEPT AS  OTHERWISE  PROVIDED
HEREIN AND IN THE OFFER TO EXCHANGE, SUCH DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY.  INSTEAD OF EFFECTING  DELIVERY BY MAIL, IT
IS RECOMMENDED  THAT NOTEHOLDERS USE AN OVERNIGHT OR HAND DELIVERY  SERVICE.  IF
DELIVERY  IS BY MAIL,  IT IS  RECOMMENDED  THAT  THE  NOTEHOLDER  USES  PROPERLY
INSURED,  REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, AND THAT THE MAILING BE
MADE  SUFFICIENTLY  IN ADVANCE OF THE EXPIRATION  DATE TO PERMIT DELIVERY TO THE
DEPOSITARY PRIOR TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.

- 24 -

The Depositary has  established an account with respect to the Notes at
the Book Entry Transfer Facility for the purpose of the Offer, and any financial
institution  that is a participant in a Book Entry Transfer  Facility system may
make a book  entry  transfer  of the Notes by causing  the Book  Entry  Transfer
Facility to transfer such Notes into the Depositary's account in accordance with
such Book Entry  Transfer  Facility's  procedures  for such  transfer.  Although
delivery  of  Notes  may be  effected  through  book  entry  transfer  into  the
Depositary's  account  at  the  Book  Entry  Transfer  Facility,  this  Exchange
Agreement and Letter of Transmittal (or a facsimile thereof),  together with any
required  signature  guarantees and any other required  documents,  must, in any
case, be  transmitted  to and received or confirmed by the  Depositary at one of
the  addresses  or  numbers  set forth on the first page  hereof  prior to 12:00
midnight,  New York City  time,  on the  Expiration  Date,  except as  otherwise
provided herein.  DELIVERY OF SUCH DOCUMENTS TO THE DEPOSITARY'S  ACCOUNT AT THE
BOOK  ENTRY  TRANSFER  FACILITY  IN  ACCORDANCE  WITH  ITS  PROCEDURES  DOES NOT
CONSTITUTE  DELIVERY TO THE  DEPOSITARY.  NOTWITHSTANDING  COMPLIANCE  WITH BOOK
ENTRY TRANSFER  DELIVERY  PROCEDURES,  FAILURE TO DELIVER THIS EXECUTED EXCHANGE
AGREEMENT AND LETTER OF TRANSMITTAL TO THE DEPOSITARY  PRIOR TO 12:00  MIDNIGHT,
NEW YORK CITY TIME, ON THE EXPIRATION DATE WILL RESULT IN THE TENDERED NOTES NOT
BEING ACCEPTED FOR EXCHANGE.

All questions as to the validity,  form, eligibility (including time of
receipt), acceptance,  withdrawal and revocation of tendered Notes and delivered
Exchange  Agreement  and Letter of  Transmittal  will be determined by Hybridon,
whose  determination  will be final and binding.  Hybridon reserves the absolute
right to reject any or all tenders or  withdrawals  of Notes and  deliveries  or
revocations  of Exchange  Agreement  and Letter of  Transmittal  that are not in
proper  form or the  acceptance  of which  would,  in the  opinion of counsel to
Hybridon,   be  unlawful.   Hybridon  also  reserves  the  right  to  waive  any
irregularities  or conditions of tenders and this Exchange  Agreement and Letter
of Transmittal as to particular  Notes.  The  interpretation  of Hybridon of the
terms and conditions of the Offer  (including the  Instructions  herein) will be
final and  binding  and  irregularities  in  connection  with  tenders  and this
Exchange  Agreement  and Letter of  Transmittal  must be cured (if so permitted)
within such time as Hybridon shall  determine.  No  alternative,  conditional or
contingent  tenders  will be  accepted by  Hybridon.  Neither  Hybridon  nor the
Depositary nor any other person will be under any duty to give  notification  of
any defects or  irregularities  in any tender nor will incur any  liability  for
failure  to give any such  notification.  Tenders of Notes will not be deemed to
have  been  made  until  irregularities  have been  cured or  waived.  Any Notes
received  by the  Depositary  that  are not  properly  tendered  and as to which
irregularities  have not been cured or waived will be returned by the Depositary
to the  tendering  Noteholders,  unless  otherwise  provided  in  this  Exchange
Agreement  and  Letter of  Transmittal,  as soon as  practicable  following  the
Expiration Date.

Any tendered  Notes which are not  accepted for exchange  because of an
invalid tender, the occurrence of certain other events set forth in the Offer to
Exchange or  otherwise,  will be  returned  without  expense to the  appropriate
tendering  Noteholder (or in the case of Notes tendered by book entry  transfer,
to an account  maintained at the Book Entry Transfer  Facility),  as promptly as
practicable following the expiration, withdrawal or termination of the Offer.

2.  WITHDRAWAL  RIGHTS.  Notes  tendered  pursuant  to the Offer may be
withdrawn,  as hereinafter  provided,  at any time prior to 12:00 midnight,  New
York City time, on the  Expiration  Date.  In addition,  tenders of Notes may be
withdrawn after April 6, 1998, if not yet accepted by Hybridon.

- 25 -

For the withdrawal of a tender to be effective,  a written or facsimile
transmission  notice of withdrawal  must be received by the Depositary at one of
the addresses or numbers set forth on the front page of this Exchange  Agreement
and Letter of  Transmittal  prior to the  Expiration  Date.  Any such  notice of
withdrawal  must  specify  the name of the person who  tendered  the Notes,  the
principal amount of Notes to be withdrawn and (where certificates for Notes have
been tendered) the names in which such Notes are  registered,  if different from
that of the person  tendering  such Notes.  If the Notes have been  delivered or
otherwise  identified  to the  Depositary,  then,  prior to the  release of such
Notes, the serial numbers of the particular certificates evidencing the Notes to
be withdrawn and a notice of withdrawal  signed by the registered  Noteholder in
the same manner as the original  Exchange  Agreement  and Letter of  Transmittal
with the signature(s)  guaranteed by an Eligible Institution (except in the case
of Notes tendered by an Eligible Institution) must be submitted.  Withdrawals of
tenders  of  Notes  may  not  be  rescinded;  however,  withdrawn  Notes  may be
retendered on or prior to 12:00 midnight,  New York City time, on the Expiration
Date by following any of the procedures described above under Instruction 1.

All questions as to the validity (including time of receipt) of notices
of withdrawal will be determined by Hybridon,  whose determination will be final
and binding. Neither Hybridon, the Depositary nor any other person will be under
any duty to give  notification of any defects or irregularities in any notice of
withdrawal or will incur any liability for failure to give such notification.

3.       ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF
CONSIDERATION; PARTIAL TENDERS. Any tender of Notes which involves denominations
of less than $1,000 in Exchange  Value  thereof  will be exchanged on a pro rata
basis,  except to the extent that such proration would result in the issuance of
a  fractional  share  of  Series A  Preferred  Stock.  In the  event  that  such
fractional share would result,  Hybridon shall, at its sole  discretion,  either
(a) round such fractional  share to the nearest whole number of shares (with 0.5
being  rounded  up),  or (b) pay in  cash  an  amount  equal  to  such  fraction
multiplied  by $100 (which is the per share  stated  value of Series A Preferred
Stock).  Hybridon  will not issue any  fractional  shares of Series A  Preferred
Stock in the Offer. In the event that a tendering  Noteholder would otherwise be
entitled to receive a fractional Exchange Warrant,  Hybridon shall round up such
fractional  Exchange  Warrant to the nearest whole number of Exchange  Warrants.
The  entire  Exchange  Value of the Notes  will be deemed to have been  tendered
unless otherwise indicated.  If less than the entire Exchange Value of any Notes
evidenced by a submitted certificate is to be tendered, the tendering Noteholder
should  fill in the  principal  amount of the Notes  which is to be  tendered in
column (4) of the table in Box One above. No Noteholder may tender any or all of
the Exchange Value  attributable to accrued but unpaid interest on the principal
amount of the Notes being  tendered  without also  tendering the Exchange  Value
attributable to such principal amount, and vice versa.

Upon  the  terms  and  subject  to the  conditions  of the  Offer,  the
acceptance  for  exchange  of Notes  validly  tendered  under  the Offer and not
withdrawn  and the  delivery of shares of Series A Preferred  Stock and Exchange
Warrants will be made promptly after the Expiration Date.

For purposes of the Offer,  Hybridon  shall be deemed to have  accepted
for exchange  validly  tendered Notes when, as and if Hybridon has given oral or
written notice thereof to the  Depositary.  The Depositary will act as agent for
the  tendering  Noteholders  for the purpose of receiving the shares of Series A
Preferred  Stock  and  Exchange  Warrants  and  transmitting  the  same  to such
Noteholders.  Tendered  Notes not  accepted  for  exchange by  Hybridon  will be
returned  without  expense  to  tendering  Noteholders  as soon  as  practicable
following the Expiration Date.

- 26 -

4.  SIGNATURES  ON THIS EXCHANGE  AGREEMENT AND LETTER OF  TRANSMITTAL;
BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES.
With  respect  to a tender of  Notes,  this  Exchange  Agreement  and  Letter of
Transmittal  must be signed by the registered  holder(s) of the Notes  tendered,
and such  signatures  must  correspond  with the  name(s) of such  holder(s)  as
written on the face of the certificate  without  alteration,  enlargement or any
change  whatsoever.  If this  Exchange  Agreement and Letter of  Transmittal  is
signed by a person other than the registered  holder(s) of the Notes,  such must
be endorsed or  accompanied by  appropriate  bond powers and proxies,  in either
case,  signed  exactly as the name(s) of the registered  holder(s)  appear(s) on
such Notes.  Signatures of  endorsement on any such Notes or bond powers must be
guaranteed by an Eligible Institution.

(a) If any of the  Notes  are  held of  record  by two or more
persons,  all such persons must sign this Exchange Agreement and Letter
of Transmittal.

(b) If any of the Notes are registered in different  names, it
will be  necessary  to  complete,  sign  and  submit  as many  separate
Exchange  Agreements  and  Letters  of  Transmittal  and any  necessary
accompanying documents as there are different registrations.

(c) If this Exchange  Agreement and Letter of  Transmittal  is
signed by a person  other than the  registered  holder(s) of the Notes,
such Notes must be endorsed or accompanied  by appropriate  bond powers
and proxies,  and in either case,  signed exactly as the name(s) of the
registered  holders(s) appear(s) on such Notes.  Signatures on any such
Notes or bond powers  must be  guaranteed  by an  Eligible  Institution
(unless signed by an Eligible Institution).

(d) If this Exchange  Agreement and Letter of  Transmittal  or
any  certificates  or bond  powers are  signed by a trustee,  executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or
other person  acting in a fiduciary or  representative  capacity,  such
person should so indicate when signing and,  unless waived by Hybridon,
proper  evidence  satisfactory  to  Hybridon of the  authority  of such
person to so act must be submitted  with this  Exchange  Agreement  and
Letter of Transmittal.

ENDORSEMENTS  ON NOTES OR BOND POWERS  REQUIRED BY THIS  INSTRUCTION  4
MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.

THE AUTHENTICITY OF THE SIGNATURE ON THIS EXCHANGE AGREEMENT AND LETTER
OF TRANSMITTAL  MUST BE GUARANTEED BY AN ELIGIBLE  INSTITUTION,  UNLESS (A) THIS
EXCHANGE  AGREEMENT AND LETTER OF TRANSMITTAL IS SIGNED BY THE REGISTERED HOLDER
OF THE  NOTES  TENDERED  HEREWITH  AND  THE  BOX  ENTITLED  "BOOK  ENTRY  RETURN
INSTRUCTIONS"  IN THIS  EXCHANGE  AGREEMENT AND LETTER OF  TRANSMITTAL  HAS BEEN
COMPLETED,  OR (B) THE  NOTES  ARE  TENDERED  FOR  THE  ACCOUNT  OF AN  ELIGIBLE
INSTITUTION.

5. BROKERAGE FEES AND TRANSFER TAXES. Tendering Noteholders will not be
required to pay brokerage  commissions or fees or transfer taxes with respect to
the  exchange of Notes  pursuant to the Offer.  If,  however,  a transfer tax is
imposed  for any reason  other than the  transfer  or sale of Notes to  Hybridon
pursuant to the Offer,  the amount of any transfer taxes (whether imposed on the
registered  holders(s),  such other person or otherwise)  will be payable by the
tendering  Noteholders.  Unless  satisfactory  evidence  of the  payment of such
taxes,  or  exemption  therefrom,  is  submitted  herewith,  the  amount of such
transfer taxes will be billed directly to the tendering

- 27 -

Noteholder(s).  EXCEPT  AS  PROVIDED  IN THIS  INSTRUCTION  5,  IT  WILL  NOT BE
NECESSARY  FOR  TRANSFER TAX STAMPS TO BE AFFIXED TO THE  CERTIFICATES  TENDERED
PURSUANT TO THIS EXCHANGE AGREEMENT AND LETTER OF TRANSMITTAL.

6.  SUBSTITUTE  FORM W-9. Under federal income tax laws, each tendering
Noteholder must provide the Depositary with such  Noteholder's  correct taxpayer
identification  number by completing the Substitute Form W-9 as set forth above.
In general, if a Noteholder is an individual, the taxpayer identification number
is the Social  Security  number of such  individual.  If the  Depositary  is not
provided with the correct taxpayer  identification number, the Noteholder may be
subject to a $50 penalty imposed by the IRS, as well as "backup  withholding" as
described below. Certain Noteholders (including,  among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting  requirements.  In order to  satisfy  the  Depositary  that a  foreign
individual  qualifies  as an exempt  recipient,  such  Noteholder  must submit a
statement  (Form W-8),  signed  under  penalties  of perjury,  attesting to that
individual's  exempt status.  Such Form W-8 can be obtained from  Hybridon.  For
further   information   concerning  backup   withholding  and  instructions  for
completing  the  Substitute  Form  W-9  (including  how  to  obtain  a  taxpayer
identification  number if you do not have one and how to complete the Substitute
Form W-9 if the Notes  are held in more  than one  name),  please  consult  your
counsel.

Failure to complete the Substitute Form W-9 will not, by itself,  cause
the Notes to be deemed to be invalidly tendered, but may require the Depositary,
in certain  circumstances,  to withhold 31% of the amount of any  payments  made
pursuant to the Offer.  Backup  withholding is not an additional  federal income
tax.  Rather,  the federal  income tax  liability of a person  subject to backup
withholding  will be  reduced  by the  amount of tax  withheld.  If  withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.

7. WAIVER OF CONDITIONS.  Hybridon reserves the absolute right to waive
certain of the specified  conditions to the Offer,  as described in the Offer to
Exchange under "Terms of the Offer--Certain Conditions of the Offer."

8. MUTILATED,  LOST, STOLEN OR DESTROYED  CERTIFICATES.  Any Noteholder
whose certificates for the Notes have been mutilated,  lost, stolen or destroyed
should  contact  the  Depositary  at the  address  indicated  above for  further
instructions.

9. EXPIRATION  DATE. The Offer will expire at 12:00 midnight,  New York
City time,  on the  Expiration  Date,  unless  extended  by  Hybridon.  Hybridon
reserves  the right to extend  the Offer for such  period or  periods  as it may
determine in its sole  discretion,  in which event the Expiration  Date shall be
the time and date on which such Offer,  as so extended,  shall expire.  Hybridon
will notify the  Depositary  of any extension by written or oral notice and will
make a public  announcement  thereof by  release  to the Dow Jones News  Service
prior to 9:00 a.m.,  New York City time,  on the next business day following the
previously  scheduled  Expiration  Date.  During any such  extension,  all Notes
previously  tendered and not accepted  for exchange  will remain  subject to the
Offer and may,  subject to the terms and  conditions  hereof,  be  accepted  for
exchange by Hybridon, subject to the withdrawal rights of tendering Noteholders.

10.  REQUESTS  FOR  ASSISTANCE  OR  ADDITIONAL  COPIES.  Questions  and
requests for  assistance  may be directed to the  Depositary  at its address and
telephone number set forth above. Additional copies of the Offer to Exchange and
this Exchange Agreement and Letter of

- 28 -

Transmittal  may be obtained from  Hybridon at the address and telephone  number
set forth on the back cover page of the Offer to Exchange.

IMPORTANT:  A MANUALLY  SIGNED  EXCHANGE  AGREEMENT AND LETTER OF TRANSMITTAL OR
FACSIMILE COPY HEREOF (TOGETHER WITH  CERTIFICATES OR CONFIRMATION OF BOOK ENTRY
TRANSFER AND ALL OTHER REQUIRED  DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO 12:00 MIDNIGHT,  NEW YORK CITY TIME,
ON THE EXPIRATION DATE.

- 29 -

EXHIBIT 9(a)(3)

HYBRIDON, INC.

Notice of Guaranteed Delivery of 9%
Convertible Subordinated Notes due 2004 of
Hybridon, Inc.

This form,  or a form  substantially  equivalent  to this form,  must be used to
accept  the  Offer  (as  defined  below)  if  certificates  for  9%  Convertible
Subordinated Notes due 2004 of Hybridon,  Inc. (the "Notes") are not immediately
available,  if the procedure for  book-entry  transfer  cannot be completed on a
timely  basis,  or if time will not permit all other  documents  required by the
Exchange  Agreement  and Letter of  Transmittal  to be delivered to  ChaseMellon
Shareholder Services,  L.L.C., as a Depositary, on or prior to the expiration of
the Offer.  Such form may be delivered  by hand or  transmitted  by mail,  or by
facsimile transmission,  to the Depositary.  See "Procedure for Tendering Notes"
in the Offer to Exchange  (as  defined  below).  THE  ELIGIBLE  INSTITUTION  (AS
DEFINED BELOW) WHICH  COMPLETES THIS FORM MUST  COMMUNICATE THE GUARANTEE TO THE
DEPOSITARY AND EITHER (A) THE EXCHANGE  AGREEMENT AND LETTER OF TRANSMITTAL  AND
CERTIFICATES FOR NOTES MUST BE DELIVERED TO THE DEPOSITARY OR (B) THE DEPOSITARY
MUST  RECEIVE   CONFIRMATION  OF  BOOK-ENTRY   TRANSFER  OF  THE  NOTES  TO  THE
DEPOSITARY'S  ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND THE EXCHANGE AGREEMENT
AND LETTER OF  TRANSMITTAL  MUST BE  DELIVERED  TO THE  DEPOSITARY  WITHIN THREE
BUSINESS DAYS AFTER THE DATE OF EXECUTION OF THIS NOTICE OF GUARANTEED DELIVERY.
Failure to do so could result in a financial loss to such Eligible Institution.

To: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., DEPOSITARY

By Mail:                    By Overnight Delivery:        By Hand:

P.O. Box 3301               85 Challenger Road            120 Broadway
South Hackensack, NJ 07606  Mail Drop-Reorg               13th Floor
Ridgefield Park, NJ  07660    New York, NY  10271
Attn:  Reorganization Dept.

Facsimile (for eligible institutions): (201) 329-8936
Confirm facsimile by telephone ONLY: (201) 296-4860

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS  VIA A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

THIS NOTICE OF GUARANTEED  DELIVERY IS TO BE USED FOR THE TENDER OF THE
NOTES ONLY.

This form is not to be used to guarantee signatures.  If a signature on
an Exchange  Agreement and Letter of Transmittal is required to be guaranteed by
an Eligible Institution (as defined herein) under the

instructions  thereto,  such  signature  guarantee must appear in the applicable
space  provided in the  signature  box on the Exchange  Agreement  and Letter of
Transmittal.

- 2 -

Ladies and Gentlemen:

The   undersigned   hereby  tenders  to  Hybridon,   Inc.,  a  Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Exchange, dated February 6, 1998 (the "Offer to Exchange"),  and the Exchange
Agreement and Letter of Transmittal (which, together with the Offer to Exchange,
constitutes the "Offer"), receipt of which hereby is acknowledged, the principal
amount of the Notes listed below,  pursuant to the guaranteed delivery procedure
set forth in "Procedure for Tendering Shares -- Guaranteed  Delivery  Procedure"
in the Offer to Exchange.

Principal Amount of the Notes:                   Signature

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

Certificate Nos. (if available):                 Name(s) of Record Holder(s)
(Please print)

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

If the Notes will be tendered by                 Address
Book-entry Transfer,
Name of Tendering Institution:
- ---------------------------------------          -------------------------------

- ---------------------------------------          -------------------------------
Account No. at The Depository Trust              Area Code and Telephone Number
Company

GUARANTEE

(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned  financial  institution  (including most banks, savings and loan
associations  and  brokerage  houses)  that  is a  participant  in the  Security
Transfer Agents Medallion Program or the Stock Exchange Medallion Program (each,
an "Eligible Institution") guarantees to deliver to the Depositary at one of its
addresses set forth above (i)  certificate(s)  for the Notes tendered hereby, in
proper form for transfer,  together with a properly  completed and duly executed
Exchange  Agreement  and  Letter of  Transmittal,  with any  required  signature
guarantee(s)  and any other  required  documents,  or (ii)  confirmation  of the
book-entry  transfer of the Notes tendered hereby into the Depositary's  account
at The  Depository  Trust Company,  together with a properly  completed and duly
executed  Exchange  Agreement  and  Letter  of  Transmittal,  with any  required
signature  guarantee(s)  and any other  required  documents,  all  within  three
business days after the date of execution of this Notice of Guaranteed Delivery.

- --------------------------------------       ----------------------------------
Name of Firm                                 Authorized Signature
- --------------------------------------       ----------------------------------
Address                                      Name
- --------------------------------------       ----------------------------------
City, State, Zip Code                        Title
- --------------------------------------
Area Code and Telephone Number

Dated:                  , 1998
------------------

DO NOT SEND CERTIFICATES WITH THIS FORM. YOUR CERTIFICATES MUST BE SENT WITH THE
EXCHANGE AGREEMENT LETTER OF TRANSMITTAL.

- 3 -

EXHIBIT 9(a)(4)

Company Press Release

SOURCE:  Hybridon, Inc.

Hybridon Announces Commencement of Exchange Offer for its 9% Convertible
Subordinated Notes Due 2004

CAMBRIDGE,  Mass., February 6, 1998/PRNewswire/ -- Hybridon,  Inc. (OTC Bulletin
Board:  HYBN news) (the  "Company")  today  announced  that it has  commenced an
exchange offer to the holders of its 9% Convertible  Subordinated Notes due 2004
(the "9%  Notes") to  exchange  such 9% Notes for Series A  Preferred  Stock and
certain warrants of the Company (the "Exchange Offer").  As more fully described
in the  applicable  Offer to  Exchange,  in the Exchange  Offer,  each $1,000 of
principal  amount and accrued but unpaid  interest will be  exchanged,  upon the
terms  and  subject  to the  conditions  set  forth in the  applicable  Offer to
Exchange,  for 10 shares of Series A  Preferred  Stock and  warrants to purchase
such number of shares of Common Stock of the Company  equal to 15% of the number
of shares of Common  Stock into which such  Series A  Preferred  Stock  would be
convertible at the Exercise  Price (as defined in the Offer to Exchange).  There
can be no assurance that such Exchange Offer will be successful.

This announcement is neither an offer to purchase or exchange nor a solicitation
of an offer to sell or exchange the 9% Notes.  The offers are made solely by the
Offer to  Exchange,  dated as of the date  hereof,  and are  subject  to certain
conditions specified therein.

The  depositary  for the exchange  offer is  ChaseMellon  Shareholder  Services,
L.L.C.

Holders of 9% Notes who have  questions or requests for  assistance  should call
the Company at (617) 528- 7000.  The Company has filed with the  Securities  and
Exchange  Commission  (the  "Commission")  a Schedule  13e-4,  together with all
exhibits  thereto  (including  the Offer to  Exchange).  Copies of such Schedule
13e-4  and  exhibits  may be  obtained  from  the  Company  or from the web site
maintained on the World Wide Web by the Commission at http://www.sec.gov.

The  Company,  headquartered  in  Cambridge,  Massachusetts,  is  engaged in the
discovery  and  development  of genetic  medicines  for the treatment of certain
diseases, based primarily on antisense technology. Antisense technology attempts
to  use  synthetic   segments  of  DNA  and  RNA  to  stop  the   production  of
disease-associated  proteins by  interacting  at the  genetic  level with target
strands of messenger RNA.

EXHIBIT 9(g)(3)

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As   independent   public   accountants,   we  hereby  consent  to  the
incorporation  by reference in this Schedule  13E-4 of our report dated February
21, 1997 (except with respect to the matter discussed in Note 1, as to which the
date is March 26,  1997)  included  in  Hybridon's  Form 10-K for the year ended
December 31, 1996,  and to all  references to our Firm included in this Schedule
13E-4.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 2, 1998