Document:

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                                                                  Exhibit 10.40

                                    HYBRIDON

                                345 Vassar Street
                               Cambridge, MA 02139
                            Facsimile: (617) 679-5592

To:  Holders of Certain Hybridon Warrants and Shares of Series B Convertible
     Preferred Stock ("Series B Shares")

Ladies and Gentlemen:

         In recent discussions, we explored with you your interest in
participating in Hybridon, Inc.'s "early exercise" program intended to encourage
holders of certain warrants and holders of Series B Shares, in the near term, to
exercise their warrants to purchase, or convert their Series B Shares into,
shares of Hybridon common stock.

EARLY EXERCISE PROGRAM

         To assist us in this effort, we have engaged the investment banking
firm of Adams, Harkness & Hill. Based on their recommendations and our
discussions with you, we have decided to offer the holders of various warrants
and Series B Shares:

     -   a lower exercise price on their warrants in consideration for their
         exercising such warrants in the near term, either by paying the lower
         exercise price in cash or by engaging in a "cashless" exercise
         involving the cancellation of warrant shares; and

     -   a lower conversion price on their Series B Shares in consideration for
         their converting such shares of Series B Convertible Preferred Stock
         in the near term into our Common Stock.

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

THE SECURITIES OFFERED HEREBY PURSUANT TO REGULATION S UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, HAVE NOT BEEN REGISTERED UNDER SUCH ACT AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE UNITED
STATES OR TO A U.S. PERSON UNLESS AND UNTIL SUCH SECURITIES ARE REGISTERED UNDER
SUCH ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE. HEDGING TRANSACTIONS INVOLVING THE SECURITIES OFFERED HEREBY MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED.

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Page 2

     The purpose of the program would be to simplify our capital structure and
to reduce the number of outstanding securities which are exercisable for or
convertible into shares of our common stock. We believe that by simplifying our
capital structure and reducing the number of outstanding securities, we can
reduce the downward pressure on our stock price resulting from our having a
large number of "common share equivalents and related securities" (i.e.
securities which represent rights to acquire shares of common stock)
outstanding. In addition, conversion of our Series B Shares will reduce our
interest expense.

IMPLEMENTING THE PROGRAM

     Beginning on July 5, 2001, the Company will from time to time offer warrant
holders:

     -    the opportunity to immediately exercise their warrants for the
          purchase of the shares covered by such warrants at a reduced exercise
          price agreed to by us and the warrantholder by paying the exercise
          price for such shares in cash;

     -    or the opportunity to immediately convert (without the payment of any
          cash exercise price) their warrants into a specified number of shares
          of common stock based on an exchange ratio agreed to by us and the
          warrantholder in a "cashless" transaction, which number of shares
          would reflect (a) reduced exercise price, and (b) the effective
          payment of the exercise price of the warrants through the acceptance
          of a reduced number of shares of common stock.

     Similarly, beginning on July 5, 2001, the Company will offer holders of its
Series B Shares the right to convert such shares into common stock at a lower
conversion price than that set forth in the Certificate of Designation governing
the terms of Series B Shares.

     The Company will decide whether or not to make offers on any given date at
its own discretion. It may suspend the program with respect to the warrants or
the Series B Shares, or both, when it determines in its own discretion that a
sufficient number of warrants have been exercised or Series B Shares converted
to accomplish the purposes of the program.

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METHOD OF DETERMINING EARLY EXERCISE ADJUSTMENTS

     The valuation methodology used to arrive at the early exercise conversion/
strike price or exchange ratio is summarized in the presentation materials of
Adams, Harkness & Hill attached hereto. The basic premise is that the
conversion/strike price or exchange ratio as set forth in the original
instrument is adjusted to give effect to the economic value of the instrument if
exercised in the near term rather than held until the expiration date set forth
in the instrument. Hence, there is no gain or loss in value to Hybridon or the
holder of the warrant or Series B Shares upon participation in the early
exercise program. But, see "Accounting Considerations" for a discussion of a
likely non-cash charge to income resulting from the program.

     Warrants:

     The market value of warrants is calculated by formulae which take into
account several variables including prevailing discount rates, the volatility of
Hybridon's common stock, the exercise period remaining, the strike price as
written and the market value of the Company's common stock at the time of
exercise. To the extent that these variables may fluctuate on a daily basis, it
follows that the market value of the warrants may also fluctuate from day to
day.

     If we were to make offers under the "early exercise" program as of the
Letter's date, we would expect to offer the following:

<TABLE>
<CAPTION>
                                                      Exchange Ratio for Early
                      Reduced Exercise Price          Conversion of Warrants in
Warrant Type          for Early Cash Exercise         Cashless Transaction
<C>                    <C>                            <C>

$0.60 Warrants         $0.44  per share               0.6563 shares for each warrant share

$0.66 Warrants         $0.44  per share               0.6563 shares for each warrant share

$1.08 Warrants         $0.38  per share               0.7031 shares for each warrant share

$2.40 Warrants         $0.56  per share               0.5625 shares for each warrant share

</TABLE>

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     HOWEVER, WE ARE NOT MAKING ANY OFFER TO YOU UNDER THE "EARLY EXERCISE"
PROGRAM ON THESE TERMS. THE REDUCED EXERCISE PRICE AND THE EXCHANGE RATIO THAT
WE PLAN TO OFFER UNDER OUR "EARLY EXERCISE" PROGRAM WILL BE SUBJECT TO CHANGE
AND WILL NOT BE FINAL WITH RESPECT TO A WARRANTHOLDER UNTIL AGREED UPON BY US
AND THE WARRANTHOLDER IN THE MANNER DESCRIBED UNDER "PARTICIPATION PROCEDURES"
BELOW.

     Series B Preferred:

     The method for determining an appropriate adjustment in the conversion
price for Series B Shares is determined by a formula which is not sensitive to
the market value of the Company's common stock because it is more based upon the
stated dividend which accrues on the Series B Shares and the time value of money
if those shares are converted sooner than later. The Series B Shares have a
preference as to the payment of dividends and distributions in liquidation once
shares of the Company's Series A Convertible Preferred Stock and its Common
Stock. Accordingly, the Company will offer rights to holders of Series B shares
to convert their Series B Shares into shares of Common Stock at a conversion
price of forty cents ($.40) in lieu of the conversion price of fifty cents
($.50) stated in the Certificate of Designation establishing the class of Series
B Convertible Preferred Stock.

LOCK-UP AGREEMENTS

     As a condition of participating in the early exercise program, the warrant
holder or holder of Series B shares, as the case may be, will be required to
execute a "lock-up Agreement in the form attached hereto by which he or it will
agree to refrain from making public re-sales of the shares of common stock
received upon exercise or exchange of his or its warrant or conversion of his or
its Series B Shares except that one-third of such shares may be sold upon
expiration of five months from his or its acceptance date, two-thirds may be
sold upon the expiration of six months and all of such shares may be sold upon
the expiration of 7 months.

ADAMS HARKNESS & HILL AND OTHER COMPENSATION

     Adams Harkness & Hill was retained by the Company in May 2001 to provide
financial advisory services. For these services, it is to receive a retainer of
$200,000 of which $100,000 may be credited against amounts owing in connection
with particular projects during the retainer period. Specific to the early
exercise program, Adams Harkness & Hill will be paid a fee for advising us as to
the terms and the timing of our offers under the "early exercise" program and
rendering to our Board of Directors its opinion that the "early exercise"
program is fair, from a

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Page 5

financial point of view, to the holders of the company's Common Stock. In
addition, in its capacity as an advisor, Adams Harkness & Hill has contacted and
will contact holders of warrants and Series B Shares regarding the "early
exercise" program.

     In addition, we will reimburse Adams Harkness & Hill for its reasonable
out-of-pocket expenses, including attorneys' fees, and have agreed to indemnify
Adams Harkness & Hill against certain liabilities and expenses in connection
with the "early exercise" program.

     We have also retained Pillar Investments Limited, an entity with which two
of our directors, Youssef El-Zein and Nasser Menhall, are affiliated, to provide
advisory services in connection with the "early exercise" program. We have
agreed to pay Pillar a fee to reimburse Pillar for its reasonable out-of-pocket
expenses, including attorneys' fees and to indemnify Pillar against certain
liabilities and expenses in connection with the "early exercise" program.

     PLEASE NOTE THAT ADAMS HARKNESS & HILL'S OPINION WILL BE PROVIDED TO OUR
BOARD OF DIRECTORS ONLY. THE OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE
"EARLY EXERCISE" PROGRAM FROM A FINANCIAL POINT OF VIEW TO THE COMPANY (AND NOT
TO THE ADDRESSEES OF THIS OFFER) AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO
WHETHER OR NOT YOU SHOULD PARTICIPATE IN THE "EARLY EXERCISE" PROGRAM.

     All expenses incident to the "early exercise" program will be borne by us,
including:

     -    any registration and filing fees (including, without limitation, fees
          and expenses of compliance with state securities or Blue Sky laws);

     -    printing expenses (including, without limitation, expenses of printing
          certificates for the shares of common stock in a form eligible for
          deposit with The Depository Trust Company;

     -    fees and disbursements of our counsel, fees and disbursements of
          independent certified public accountants;

     -    our internal expenses (including all salaries and expenses of our
          officers and employees, performing legal or accounting duties; and

     -    fees and expenses incurred in connection with the listing of the
          shares of common stock on a securities exchange.

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     We will pay all transfer taxes, if any, applicable to the exercise of
warrants or conversion of shares of Series B Convertible Preferred Stock under
the "early exercise" program. If, however, a transfer tax is imposed for any
reason other than the exercise of warrants or conversion of shares of Series B
Convertible Preferred Stock under the "early exercise" program, such a transfer
by a warrantholder of the shares of common stock issuable upon conversion of
warrants, then the amount of such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the holder. If
satisfactory evidence of payment of such taxes or exemption is not submitted at
the time of exercise or conversion, the amount of such transfer taxes will be
billed directly to such holder.

INFORMATION ABOUT HYBRIDON

     We are enclosing a copy of our annual report on Form 10-K for the year
ended December 31, 2000, our quarterly report on Form 10-Q for the period ended
March 31, 2001, and our periodic reports on Form 8-K dated May 10, 2001, May 29,
2001, June 8, 2001 and June 11, 2001 and the proxy statement relating to our
June 28, 2001 annual stockholder's meeting. Any information in any documents we
file later with the SEC will automatically update and supersede information
included in or incorporated by reference in this document. We incorporate by
reference in this document any future filings we will make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended.

     We will provide a copy of any document filed with the SEC, at no cost, to
any person who receives this document. To request a copy, you should write or
telephone us as instructed at the end of the Acceptance and Lock-Up Agreement.
In addition, our SEC filings are available from the SEC's internet site at
http://www.sec.gov.

PRO FORMA EFFECT OF EARLY EXERCISE PROGRAM

     The following table shows the pro forma effect on the company's
capitalization of the early exercise program assuming that the holders of all of
the warrants and Series B Shares accept the offer. Also reflected in the table
is the effect of an offer, not reflected in this Offer Letter, which the company
contemplates making to the holders of its 8% Notes, again, assuming that all of
such holders accept the offer.

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<TABLE>
<CAPTION>
                                      ORIGINAL
                             ----------------------------
 CATEGORY OF SHARES          STRIKE             BEFORE                AFTER
(COMMON STOCK EQUIV)          PRICE          TRANSACTIONS         TRANSACTIONS
--------------------         ------          ------------         ------------
<C>                           <C>              <C>                 <C>
8% Notes                      $0.60            1,200,117                     0
$3M Loan                      $2.40            1,250,000             1,250,000
Series A                      23.53           14,891,106            14,891,106
Preferred
conv ratio=>
Series B Preferred            $0.50           15,294,400                     0
Common                           --           18,698,259            45,661,998
$0.60 Warrants                $0.60            2,750,000                     0
$0.66 Warrants                $0.66              679,047                     0
$1.08 Warrants                $1.08            1,500,000                     0
$2.40 Warrants                $2.40            4,987,811                     0
$3.00 Warrants                $3.00              173,333               173,333
$4.25 Warrants                $4.25            3,591,193             3,591,193
                              -----           ----------            ----------
Total                                         65,015,266            65,567,630
                                              ==========            ==========
</TABLE>

INTEREST OF DIRECTORS AND OTHERS

     The Directors of the Company and persons or entities whose ownership of is
attributed to the Directors own warrants and Series B Shares which are the
subject of this offer. The table set forth below shows as to the Company's
directors ( after giving effect to warrants and Series B Shares whose ownership
is attributed to them) the number of shares of common stock which they would be
entitled to if they were to convert their Series B Shares or exercise their
warrants. Ownership of all warrants having an exercise price of $2.40 or less
are combined.

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<TABLE>
<CAPTION>
                                                                             total
                                                          Series B          warrants
                                                         PREFERRED          <= $2.40
                                                         ---------          --------
Exercise Price                                             $0.50
<S>                                                      <C>               <C>

DIRECTORS - DIRECT & BENEFICIAL OWNERSHIP

Keith Hartley - direct ownership                                   0         138,570
Beneficial ownership:                                                              0
Founders Financial Group L.P. (a)                                  0       2,010,012
                                                             -------       ---------
Keith Hartley - beneficial ownership (d)                           0       2,148,582
                                                             -------       ---------
                                                                                   0
Art Berry - direct ownership                                 443,000               0
Beneficial ownership:                                                              0
   Delaware (a)                                                    0         661,046
   ICI (a)                                                         0         253,620
   Zeneca (a)                                                      0         169,794
                                                             -------       ---------
Art Berry - beneficial ownership                             443,000       1,084,460
                                                             -------       ---------
                                                                                   0
Youssef El Zein - direct ownership                           753,400         438,499
    Kincroft Ltd. (controlled by YEZ)                                        309,749
                                                             -------       ---------
    subtotal direct YEZ                                      753,400         748,248
Beneficial ownership: (none)(e)
                                                             -------       ---------
Youssef El Zein - beneficial ownership(e)                    753,400         748,248
                                                             -------       ---------
                                                                                   0
Nasser Menhall - direct ownership                             32,000         136,029
Beneficial ownership: (none)(e)                                                    0
                                                             -------       ---------
Nasser Menhall - beneficial ownership(e)                      32,000         136,029
                                                             -------       ---------
                                                                                   0
Paul Zamecnik - direct ownership                             208,200         230,793
recently issued shares                                                             0
                                                             -------       ---------
subtotal direct PCZ                                          208,200         230,793
shares held by children                                                            0
                                                             -------       ---------
Paul Zamecnik - beneficial ownership                         208,200         230,793
                                                             -------       ---------
                                                                                   0
James Wyngaarden - direct ownership                                0          27,737
shares held by children                                                            0
                                                             -------       ---------
James Wyngaarden - beneficial ownership                            0          27,737
                                                             -------       ---------
</TABLE>

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<TABLE>
<CAPTION>
                                                                                  total
                                                                Series B         warrants
                                                               Preferred         <= $2.40
                                                               ---------         --------
Exercise Price                                                   $0.50

<S>                                                                                     <C>
   Sudhir Agrawal - direct ownership                                                    0
   Beneficial ownership: (none)                                                         0
                                                              ----------------------------
   Sudhir Agrawal - beneficial ownership                             0                  0
                                                              ----------------------------
                                                                                        0
   Camille Chebeir (in street name) - direct ownership                                  0
   Affiliate ownership:                                                                 0
   Global Investments.                                                             55,872
   Bin Mahfouz Cos.: Intercity Holdings and HTI                                         0
       Investments                                                   0            375,000
                                                                                        0
                                                              ----------------------------
   Camille Chebeir & affiliate ownership                             0             430,872
                                                              ----------------------------
</TABLE>

(a)  Assumes that the remaining $3,000,000 Founders/Pecks loan is repaid in
     cash.

(b)  Excludes shares held in street name unless the director has informed
     Hybridon.

(c)  Includes all stock options.

(d)  Excludes shares held by Forest Funds, Hal Purkey, Steven DeVoe and Eric
     Grant.

(e)  Excludes shares held by other Pillar contacts.

TAX CONSEQUENCES

     The Company will implement the early exercise program as a recapitalization
meeting the requirements of section 368(a)(1)(E) of the Internal Revenue Code
for a tax-free reorganization. Transactions under the early exercise program
will not result in any tax consequences to the Company.

     In the case of U.S. taxpayers, (a) acceptance of the early exercise offer,
framed as a reduction in the strike price of a warrant or conversion price of
preferred stock and the involves the payment of such price to the Company,
should not result in recognition of gain, whereas (b) acceptance of an offer
involving purely the exchange of common stock for the warrant (a "cashless"
transaction where in effect the warrant holder "pays" the strike price with
common shares issued upon exercise rather than cash) may require a recognition
of gain equal to the excess of the fair market value of the common shares used
to pay the adjusted strike price over the tax basis of such common shares. We
advise you to seek the opinion of a tax advisor regarding the tax effect to you.

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SECURITIES LAWS

     This offer would be deemed under the Securities Act of 1933, as amended, to
encompass an offer to exchange a new security for the presently held. The offer
and sale of securities involved in early exercise transactions will not be
registered under Section 5 of the Securities Act of 1933 in reliance upon, among
other things, the provisions of Regulation S having to do with securities
transactions deemed to be "off-shore" and the provisions of Regulation D in the
case of transactions not off-shore. Offers and sales will be made only to
persons or entities which are deemed to be "off-shore" as that term is defined
in Regulation S or are "accredited investors" as the term is defined in
Regulation D.

     The new securities consisting of this offer and the shares of common stock
which the Company will issue to those accepting this offer may not be sold,
pledged, transferred, hypothecated or otherwise transferred unless the same have
been registered under the Securities Act of 1933 or an exemption from such
registration requirements is available.

REGISTRATION RIGHTS

     Under US securities laws persons holding restricted shares (i.e. shares
which were not obtained in a public offering) for a period of at least one year
may sell them into the public market by meeting certain volume and other
requirements set forth in Rule 144 promulgated by the SEC. Such persons who have
held their shares for 2 years or more and who have not been affiliates of the
Company with the preceding 3 months may sell their shares into the public market
without any restrictions.

     In determining their holding period for purposes of Rule 144, persons
converting their preferred shares into common stock will be able to add to
(tack) such common shares the period during which they have held their preferred
shares. Persons accepting common shares in exchange for their warrants in a
so-called cashless transaction (i.e. without the payment of any exercise or
purchase price) may also tack to such common shares the period of time during
which they held the warrants.

     Persons exercising their warrants and purchasing common shares would begin
a new holding period for purposes of Rule 144 transactions.

     Affiliates of the Company (meaning any person "controlling, controlled by
or under common control with Hybridon) are not, regardless of holding period,
eligible to sell restricted securities in Rule 144(k) transactions.

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     Given the foregoing, the Company will enter into agreements to register the
re-sale of shares of its common stock which are obtained by persons accepting
this offer and making an early exercise to the extent such persons either (a)
are affiliates, or (b) elect to make an early exercise by purchasing common
shares upon exercise of their warrants. The form of such registration agreement
is attached.

ACCOUNTING AND OTHER CONSIDERATIONS

     With respect to the conversion of the Series B Convertible Preferred Stock,
we will recognize on our income statement a non-cash charge equal to the product
of (a) the number of additional shares of common stock issued upon conversion of
the Series B Convertible Preferred Stock due to the reduced conversion price,
and (b) the market price of our Common Stock on the date of conversion. For
example, if all of the Series B Convertible Preferred Stock was converted at a
conversion price of $0.40 per share on a date when the market price of our
Common Stock was $1.22, we would recognize a one-time charge of approximately
$4.66M.

     Given that the value assigned to the various warrants will be established
using a weighted average closing price, any difference between the value
assigned to these securities and the market price of the securities at the time
the offer is accepted, will have either a positive or negative accounting
impact, depending on the market price of the stock.

     Implementation of the early exercise program might result in the Company's
foregoing the amount of cash proceeds which it would have received if the
conversion price of Series B Shares was not lowered, the warrant strike prices
were not changed and if cashless exercises were not permitted. The amount of
cash proceeds so foregone is material although estimating the amount would
involved predications of future market prices for the Company's common stock as
well as the behavior of the warrant holders and holders of Series B Shares. The
Company's Board of Directors has judged the benefits of the early exercise
program to outweigh this potential loss.

PARTICIPATION PROCEDURES

     If you are interested in participating in the "early exercise" program,
please contact us at 1-800-223-3771, ext. 5575, to determine whether we are
making offers under the "early exercise" program on that day and the terms we
are offering on that day.

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Page 12

     If we are not making offers on the day you contact us or have terminated
the "early exercise program, we will advise you.

     If we are making offers with respect to warrants on the day you contact us,
we will advise you as to the reduced exercise price and the exchange ratio we
are offering that day with respect to the warrants. If we reach agreement with
you as to the terms of your participation in the "early exercise" program, then
the exercise of warrants or conversion of Series B Convertible Preferred Stock
on the agreed-upon terms can be consummated.

     Warrants

     In order to consummate your "early exercise" of warrants, you must complete
the enclosed Acceptance and Lock-Up Agreement, specifying the number of shares
you are purchasing and the manner of exercise, and sign and date it and fax it
to us before 5:00 p.m. (Boston time) on the day on which we and you have agreed
upon the terms of your "early exercise". Your execution and delivery of the
Acceptance and Lock-Up Agreement will give rise to a binding obligation on your
part to consummate the warrant exercise. You must, as soon as practical
thereafter, send us your original warrant certificate for cancellation, as well
a payment of the exercise price of the warrant unless you have chosen to
exercise the warrant in a "cashless" transaction. Upon receipt from you of all
of the necessary documentation and funds from you, if applicable, we will advise
our transfer agent to issue to you a certificate for the appropriate number of
shares of Common Stock in accordance with your instructions in the Acceptance
and Lock-Up Agreement.

     Series B Convertible Preferred Stock

     In order to consummate your "early exercise" of Series B Convertible
Preferred Stock, you must complete the enclosed Acceptance Agreement, specifying
the number of shares of Series B Shares to be converted, and sign and date it
and fax it to us. Our receipt of your Acceptance and Lock-Up Agreement will give
rise to a binding obligation on your part to consummate the share conversion,
and from and after the date of receipt (the "Conversion Date"), your shares of
Series B Convertible Preferred Stock will be deemed to have been converted and
you will have no further rights with respect to your shares of Series B
Convertible Preferred Stock other than the right to receive the shares of common
stock to which you are entitled. You must, as soon as practical thereafter, send
us your original Series B stock certificate for cancellation. Upon receipt from
you of all of the necessary documentation, we will advise our transfer agent to
issue to you a certificate for the appropriate number of shares of common stock
in accordance with your instructions in the Acceptance and Lock-Up Agreement,
along with a new

<PAGE>
Page 13

certificate for any shares of Series B Convertible Preferred Stock you have not
converted. Accrued, but unpaid dividends through the Conversion Date will be
paid in additional Series B Shares.

     ENCLOSURES

     This booklet consists of:

     (a)  This overview document;

     (b)  A copy of the Adams, Harkness and Hill summary presentation;

     (c)  An Acceptance and Lock-Up Agreement to be signed by those who wish to
          participate in the "early exercise" program;

     (d)  A copy of our most recent SEC filings; and

     (e)  Form of Registration Rights Agreement.

                                                Very truly yours,

                                                Hybridon, Inc.

                                                By Robert Andersen
                                                Chief Financial Officer

<PAGE>

                        ACCEPTANCE AND LOCK-UP AGREEMENT
                     RELATING TO THE EARLY EXERCISE PROGRAM
                         OF HYBRIDON, INC. ("HYBRIDON")

Hybridon, Inc., a Delaware corporation ("Hybridon"), has offered (the "Offer"),
certain rights enabling (a) holders of shares its Series B Preferred Stock (the
Series B "Shares") to convert such shares into shares of the Hybridon's common
stock in the near term at a reduced conversion price and (b) holders of warrants
in the near term to purchase common shares at a reduced strike price or exchange
their warrants for commons shares at a similarly adjusted exchange ratio. To
accept the Offer, you must complete sign and submit to Hybridon this Acceptance
and Lock-Up Agreement (the "Acceptance"). The terms and conditions of the Offer
are fully set forth in the Offer Letter accompanying this Acceptance.

PLEASE READ THE ENTIRE OFFER LETTER CAREFULLY. QUESTIONS AND REQUESTS FOR
ASSISTANCE SHOULD BE DIRECTED TO HYBRIDON AT THE ADDRESS AND TELEPHONE NUMBER
SET FORTH AT THE END OF THIS ACCEPTANCE. REQUESTS FOR ADDITIONAL COPIES OF THE
OFFERING DOCUMENTS SHOULD BE DIRECTED TO HYBRIDON IN THE SAME FASHION.

YOU SHOULD NOT CONSTRUE THE CONTENTS OF THE OFFER LETTER AS LEGAL, TAX OR
INVESTMENT ADVICE. YOU SHOULD SEEK YOUR OWN LEGAL, TAX AND INVESTMENT ADVICE
FROM QUALIFIED PROFESSIONALS PRIOR TO MAKING A DECISION TO INVEST

<PAGE>

                                LOCK-UP AGREEMENT

In consideration for the right to participate in the "early exercise" program
and for other good and valuable consideration, receipt of which is hereby
acknolwedged, the undersigned agrees that without the prior written consent of
the Company, the undersigned will not directly or indirectly offer, sell, offer
to sell, sell short, contract to sell or otherwise dispose of (a "disposition")
any of the shares (the "Shares) of Common Stock the undersigned receives upon
exercise or exchange of warrants or conversion of Preferred Stock, except that
the undersigned may sell (i) one-third of the Shares upon the expiration of five
months from the undersigned's acceptance date (the "Acceptance Date"), (ii)
two-thirds of the Shares upon the expiration of six months from the Acceptance
Date and (iii) all of the Shares upon the expiration of seven months from the
Acceptance Date.

The undersigned agrees that the Company may, and that the undersigned will, with
respect to any Shares for which the undersigned is the record holder, cause the
transfer agent for the Company to note stop transfer instructions with respect
to such Shares on the transfer book and records of the Company.

     The undersigned understands that the Company will proceed with the "early
exercise" program in reliance on this Lock-up Agreement.

                            OFFEREE'S REPRESENTATIONS

By accepting Hybridon's offer, you represent as follows:

INVESTMENT INTENT

You are acquiring the securities under the Offer Letter for its account and not
with a view to the making of a public distribution unless such securities have
been registered under the Securities Act of 19233, as amended, or pursuant to an
exemption from the registration requirements of the Act.

LEGEND

You consent to the placement of the legend set forth below on any certificate or
other document evidencing the shares of the Common Stock issued upon conversion
of the Series B Shares or exercise of the warrants.

          THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
          UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
          ACT"), OR THE

<PAGE>

          SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND WERE OFFERED
          AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS
          OF THE ACT AND SUCH LAWS. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN
          APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE
          COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
          AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
          ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
          CONTRARY IS UNLAWFUL. NO OFFER OR SALE OF THE SECURITIES OFFERED
          HEREBY MAY BE MADE IN THE UNITED STATES OR TO FOR THE ACCOUNT OR
          BENEFIT OF A "U.S. PERSON" (AS THAT TERM IS DEFINED IN REGULATION S OF
          THE SECURITIES ACT) DURING ANY APPLICABLE "DISTRIBUTION COMPLIANCE
          PERIOD" (AS THAT TERM IS DEFINED IN REGULATION S OF THE SECURITIES
          ACT) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
          SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
          UNDER THE SECURITIES ACT. FURTHER, NO HEDGING TRANSACTION INVOLVING
          THESE SECURITIES MAY BE CONDUCTED DURING SUCH DISTRIBUTION COMPLIANCE
          PERIOD UNLESS IN COMPLIANCE WITH THE REGISTRATION OR EXEMPTION
          PROVISIONS OF THE SECURITIES ACT.

POWER AND AUTHORITY

You represent that you have full power and authority (corporate, statutory and
otherwise) to execute and deliver this Acceptance and comply with the
obligations attendant upon such acceptance. Such Acceptance constitutes your
legal, valid and binding obligation enforceable against you in accordance with
its terms.

ACCREDITED INVESTOR

You represent that you are an "accredited investor" as such term is defined in
Rule 501 of Regulation D.

Generally, to be an "accredited investor," an investor who is a natural person
must, at the time of his purchase, (i) have a net worth, individually or jointly
with one's spouse, in excess of $1,000,000 or (ii) have had an individual income
in excess of $200,000 in each of the two most recent years, or joint income with
one's spouse in

<PAGE>
excess of $300,000 in each of those years and have a reasonable expectation of
reaching the same income level in the current year. An organization or entity
subscribing for Units may qualify as an "accredited investor" if it is (a) a
bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan
association or other institution defined in Section 3(a)(5)(A) of the Securities
Act whether acting in its individual or fiduciary capacity; a broker-dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934, as
amended; an insurance company as defined in Section 2(13) of the Securities Act;
an investment company registered under the Investment Company Act of 1940, as
amended, or a business development company as defined in Section 2(a)(48) of the
Securities Act; any small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958, as amended; a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality thereof, for
the benefit of its employees, if such plan has total assets in excess of
$5,000,000; an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA,
which is either a bank, savings and loan association, insurance company or
registered investment adviser, or if the employee benefit plan has total assets
in excess of $5,000,000, or, if a self-directed plan, with investment decisions
made solely by persons that are accredited investors, (b) a private business
development company as defined in Section 292(a)(22) of the Investment Advisers
Act of 1940, as amended, (c) an organization described in Section 503(c) of the
Internal Revenue Code of 1986, as amended, a corporation, Massachusetts or
similar business trust or partnership, not formed for the specific purpose of
acquiring Units, with total assets in excess of $5,000,000, (d) a director or
officer of the Company, (e) a trust with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring Units, whose purchase is
directed by a sophisticated person and described in Rule 506(b)(2)(ii) of the
Securities Act or (f) an entity all of the equity owners of which are accredited
investors, all as defined in Regulation D.

<PAGE>

                 SIGNATURE(S) MUST BE PROVIDED IN BOX TWO BELOW

                                     BOX ONE
--------------------------------------------------------------------------------

LIST BELOW THE WARRANTS OR SERIES B SHARES TO WHICH THIS ACCEPTANCE RELATES. IF
THE SPACE PROVIDED BELOW IS INADEQUATE, THE CERTIFICATE NUMBERS AND SHARE
AMOUNTS SHOULD BE LISTED ON A SEPARATE SIGNED SCHEDULE AFFIXED HERETO.

--------------------------------------------------------------------------------
     1                          2                  3                    4

NAME(S) AND                CERTIFICATE          EXERCISE/            CASHLESS
ADDRESS(ES) OF             NUMBER(S)          CONVERSION OF        CONVERSION OF
REGISTERED HOLDER(S)                         TOTAL POSITION          WARRANTS
                                                (YES/NO)1            (YES/NO)2

$0.60 Warrants             ___________       _____________         _____________

$0.66 Warrants             ___________       _____________         _____________

$1.08 Warrants             ___________       _____________         _____________

$2.40 Warrants             ___________       _____________         _____________

Series B Shares            ___________       _____________

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

NOTES:

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

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

---------
1 IF A PARTIAL EXERCISE OF WARRANT IS INTENDED, PLEASE STATE THE NUMBER OF
  WARRANTS YOU INTEND TO EXERCISE IN THE NOTES SECTION. IF A PARTIAL EXERCISE OF
  SERIES B SHARERS IS INTENDED, PLEASE STATE THE NUMBER OF SERIES B SHARES TO BE
  CONVERTED IN THE NOTES SECTION.

2 UNLESS OTHERWISE INDICATED, THE WARRANTHOLDER WILL BE DEEMED TO HAVE ACCEPTED
  ANY PARTIAL EXERCISE AS A CASHLESS EXERCISE.

<PAGE>
--------------------------------------------------------------------------------
                                     BOX TWO
--------------------------------------------------------------------------------

                              ACCEPTANCE OF OFFER

                                PLEASE SIGN HERE

I have read the Offering documents, and hereby accept the Offer described
therein, and further agree to be bound by the foregoing.

_________________________________________________________________
Signature(s) of Registered Stockholder(s) or Authorized Signatory

_________________________________________________________________
Type or Print Name

Dated: ___________ _______, 2001

Area Code and Telephone No(s): _________________________________________________

Must be signed by the registered Warrant or Series B Holder(s) exactly as the
name(s) appear(s) on the certificate representing the Shares as the case may be.

                               HYBRIDON'S ADDRESS

Please fax this signed Acceptance to Hybridon at the following address:

                                 Hybridon, Inc.
                            Attn: Robert G. Andersen
                                345 Vassar Street
                               Cambridge, MA 02139
                            Facsmile: (617) 679-5592

<PAGE>

                          TERMS OF REGISTRATION RIGHTS

       The following are the terms (the "TERMS") of the registration rights
granted to those equity securityholders (the "HOLDERS") of Hybridon, Inc., a
Delaware corporation (the "COMPANY") who are party to an Acceptance and Lock-Up
Agreement (the "AGREEMENT") pursuant to that certain Offer Letter from the
Company dated July 29, 2001 (the "OFFER LETTER") that describes the early
exercise of Preferred Stock and/or Common Stock Purchase Warrants (both as
defined below). These terms are specifically referenced and incorporated into
the Agreement and are a part thereof.

       1.     DEFINITIONS. As used herein, the terms below shall have the
following meanings. Any such term, unless the context otherwise requires, may be
used in the singular or plural, depending upon the reference.

              "AFFILIATE" shall have the meaning provided in the Exchange Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

              "COMMON STOCK" shall mean the common stock, par value $0.001 per
share, of the Company.

              "COMMON STOCK PURCHASE WARRANT" shall mean the Common Stock
Purchase Warrants of the Company identified in the Offer Letter.

              "CONVERSION STOCK" shall mean the shares of Common Stock issued
upon the conversion of any shares of Preferred Stock or the exercise of any
Common Stock Purchase Warrant pursuant to the terms of the Offer Letter and
Agreement.

              "PERSON" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.

              "PREFERRED STOCK" shall mean the Series B Convertible Redeemable
Preferred Stock, par value $0.01 per share, of the Company identified in the
Offer Letter.

              "REGISTER," "REGISTERED," and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the SEC.

              "REGISTRABLE SECURITIES" shall mean (a) the Conversion Stock
beneficially owned by any Holder, or (b) any Common Stock of the Company issued
to a Holder as (or issuable upon the conversion or exercise of any warrant,
option, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, any of
the Conversion Stock beneficially owned by any Holder; provided, however, that
shares of Common Stock or other securities shall only be treated as Registrable
Securities if and so long as (i) they have not been sold to or through a broker
or dealer or underwriter in a public distribution or otherwise pursuant to an
effective Registration Statement under the Securities Act, (ii) they have not
been sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(l) thereof (including any
sale pursuant to Rule

                                      -1-
<PAGE>

144 of the Securities Act or any similar provision) so that all transfer
restrictions and restrictive legends with respect thereto are removed upon the
consummation of such sale, or (iii) they may not immediately be resold by the
Holder pursuant to Rule 144 (without regard to subsection (k) thereof). In no
event shall any securities of the Company other than Common Stock (or any
successor security) constitute Registrable Securities. Common Stock issuable
upon conversion or exercise of any shares of convertible securities (including
the Preferred Stock), warrants, options or rights will be registered for resale
only.

              The number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities. The
number of shares of Registrable Securities owned by any Holder shall be deemed
to include the number of shares of Common Stock issuable pursuant to equity
securities convertible into, or exercisable for, convertible securities
(regardless of whether such securities are then convertible or exercisable,
except for compensatory stock options, which shall not be deemed outstanding
unless they have vested).

              "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

              "SEC" shall mean the Securities and Exchange Commission.

       2.     COMPANY OBLIGATIONS. The Company shall:

              (a)    REGISTRATION REQUIREMENT. Prepare and file with the SEC on
or before October 1, 2001 a registration statement to register for resale the
Registrable Securities and use its best efforts to cause such registration
statement to be declared effective by the SEC as promptly as practicable; and

              (b)    EFFECTIVE PERIOD OF REGISTRATION STATEMENT. Prepare and
file with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such
registration statement effective until the first anniversary of the date such
registration statement is declared effective, or, if earlier, until such time as
the Holder shall have completed the distribution of all Registrable Securities
covered by the registration statement, and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such effective period in accordance with the
intended methods of disposition by the Holders, and cause the prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act. The Company is entitled to
withdraw such registration statement at such time as it no longer is required to
keep such registration statement effective under this clause (b) and following
such withdrawal, the Holders shall have no further right to offer or sell any
Registrable Securities pursuant to such registration statement; and

              (c)    PROSPECTUS. Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the

                                      -2-
<PAGE>

disposition of Registrable Securities owned by them, and cause all related
filings to be made with the SEC as required by Rule 424.

              (d)    PROSPECTUS DELIVERY. Promptly notify each Holder of
Registrable Securities covered by the registration statement at any time when
the Company becomes aware of the happening of any event as a result of which the
registration statement or the prospectus included in such registration statement
or any supplement to the prospectus (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus, in light of the
circumstances under which they were made) not misleading or, if for any other
reason it shall be necessary during such time period to amend or supplement the
registration statement or the prospectus in order to comply with the Securities
Act, whereupon, in either case, each Holder shall immediately cease to use such
registration statement or prospectus for any purpose and, as promptly as
practicable thereafter, the Company shall prepare and file with the SEC, and
furnish without charge to the appropriate Holders a supplement or amendment to
such registration statement or prospectus which will correct such statement or
omission or effect such compliance and such copies thereof as the Holders may
reasonably request.

       3.     FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to these Terms with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. Such information shall be used specifically for inclusion in the
registration statement and the prospectus and any supplement thereto with
respect to the Registrable Securities. The selling Holders shall promptly notify
the Company at any time when any such Holder becomes aware that any information
furnished pursuant to this SECTION 3 becomes materially incorrect.

       4.     EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities pursuant to SECTION 2, including
(without limitation) all registration, filing, and qualification fees, printers
and accounting fees relating or apportionable thereto, but EXCLUDING (i)
underwriting discounts and commissions, if any, (ii) stock transfer taxes and
(iii) fees and expenses of separate counsel, if any, to the Holders relating to
Registrable Securities.

       5.     DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of these Terms.

       6.     INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under these Terms:

              (a)    INDEMNIFICATION BY THE COMPANY. To the fullest extent
permitted by law, the Company will indemnify and hold harmless each Holder and,
if applicable, its officers, directors, stockholders, partners, owners and
agents, for such Holder, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject

                                      -3-
<PAGE>

under the Securities Act, the Exchange Act, or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (I) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, or
any state securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act, or any state securities law; and the Company
will pay to each such Holder, or controlling person, as incurred, any legal or
other expenses reasonably incurred by one law firm retained by them, plus
appropriate local counsel in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this SECTION 6(A) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to which any Holder, or
controlling person may become subject to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, or controlling person.

              (b)    INDEMNIFICATION BY SELLING HOLDER. To the fullest extent
permitted by law, each selling Holder severally, but not jointly, will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, any other
Holder selling securities in such registration statement and any controlling
person of any other Holder against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this SECTION 6(B), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this SECTION 6(B)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, further,
that, in no event shall any indemnity under this SECTION 6(B) exceed the net
after-tax proceeds from the offering actually received by such Holder.

              (c)    PROCEDURES. Promptly after receipt by an indemnified party
under this SECTION 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this SECTION 6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly

                                      -4-
<PAGE>

noticed, to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel (plus appropriate local
counsel), with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall relieve such indemnifying party of any liability to the indemnified
party under this SECTION 6 to the extent (and only the extent) that it is
actually prejudiced thereby, but the omission so to deliver written notice to
the indemnifying party will not relieve it of any liability that it may have to
any indemnified party otherwise than under this SECTION 6.

              (d)    CONTRIBUTION. If the indemnification provided for in this
SECTION 6 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and the indemnified parties on the other
in connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or related to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action; provided, however, that in no event shall the
liability of any selling Holder hereunder be greater in amount than the
difference between the dollar amount of the net after-tax proceeds received by
such Holder upon the sale of the Registrable Securities giving rise to such
contribution obligation and all amounts previously contributed by such Holder
with respect to such losses, claims, damages, liabilities and expenses. The
amount paid or payable to a party as a result of the losses, claims damages,
liabilities and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.

              The parties hereto agree that it would not be just and equitable
if contribution pursuant to this SECTION 6(D) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

              (e)    SURVIVAL. The obligations of the Company and Holders under
this SECTION 6 shall survive the completion of any offering of Registrable
Securities in a registration statement under these Terms, and otherwise.

                                      -5-
<PAGE>

       7.     ASSIGNMENT OF REGISTRATION RIGHTS. Except as otherwise provided
herein, the rights to cause the Company to register Registrable Securities
pursuant to these Terms may not be assigned to a purchaser, assignee or
transferee of the underlying Registrable Securities without the Company's
written consent.

       8.     AMENDMENT OF REGISTRATION RIGHTS. Any provision of these Terms may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of a majority of the outstanding
shares of Registrable Securities. Any amendment or waiver effected in accordance
with this SECTION 8 shall be binding upon each Holder of any Registrable
Securities then outstanding, each future holder of all such Registrable
Securities and the Company.

       9.     TERMINATION. The rights provided in these Terms shall terminate on
the first year anniversary of the date the registration statement filed pursuant
to SECTION 2(a) is declared effective by the SEC.

       10.    RECAPITALIZATIONS, ETC. The provisions of these Terms (including
any calculation of share ownership) shall apply, to the full extent set forth
herein with respect to the Registrable Securities, to any and all shares of
capital stock of the Company or any capital stock, partnership units or any
other security evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) that may
be issued in respect of, in exchange for, or in substitution of the Common Stock
by reason of any stock dividend, split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or otherwise.

       11.    TITLES AND SUBTITLES. The titles and subtitles used in these Terms
are used for convenience only and are not to be considered in construing or
interpreting these Terms.

       12.    GOVERNING LAW; DISPUTE RESOLUTION. These Terms shall be construed
in accordance with and governed by the laws of the State of Delaware (without
giving effect to its conflicts of law principles), except with respect to
matters of law concerning the internal corporate affairs of any corporate entity
which is a party to or the subject of these Terms, and as to those matters the
law of the jurisdiction under which the respective entity derives its powers
shall govern.

              The parties hereby agree that, in order to obtain prompt and
expeditious resolution of any disputes under these Terms, each claim, dispute or
controversy of whatever nature, arising out of, in connection with, or in
relation to the interpretation, performance or breach of these Terms, including
without limitation any claim based on contract, tort or statute, or the
arbitrability of any claim hereunder (an "ARBITRABLE CLAIM"), shall be settled,
at the request of any party of these Terms, exclusively by final and binding
arbitration conducted in Boston, Massachusetts. All such Arbitrable Claims shall
be settled by three arbitrators in accordance with the Commercial Arbitration
Rules then in effect of the American Arbitration Association. EACH PARTY HERETO
EXPRESSLY CONSENTS TO, AND WAIVES ANY FUTURE OBJECTION TO, SUCH FORUM AND
ARBITRATION RULES. Judgment upon any award may be entered by any state or
federal court having jurisdiction thereof. Except as required by law (including,
without limitation, the rules

                                      -6-
<PAGE>

and regulations of the Securities and Exchange Commission and stock exchange on
which the Company's securities are listed, if applicable), no party nor the
arbitrator shall disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of all parties. Except as provided
herein, the Massachusetts Arbitration Act shall govern the interpretation,
enforcement and all proceedings pursuant to this SECTION 12. Adherence to this
dispute resolution process shall not limit the right of the parties hereto to
obtain any provisional remedy, including without limitation, injunctive or
similar relief, from any court of competent jurisdiction as may be necessary to
protect their respective rights and interests pending arbitration.
Notwithstanding the foregoing sentence, this dispute resolution procedure is
intended to be the exclusive method of resolving any Arbitrable Claims arising
out of or relating to these Terms.

              The arbitration procedures shall follow the substantive law of the
State of Massachusetts, including the provision of statutory law dealing with
arbitration, as it may exist at the time of the demand for arbitration, insofar
as said provisions are not in conflict with these Terms and specifically
excepting therefrom sections of any such statute dealing with discovery and
sections requiring notice of the hearing date by registered or certified mail.
The arbitrators shall determine the prevailing party and shall include in their
award that party's reasonable attorneys' fees and costs.

       13.    NEGOTIATION OF THE TERMS. Each party hereto represents and agrees
with each other that it has been represented by or had the opportunity to be
represented by, independent counsel of its own choosing, and that it has had the
full right and opportunity to consult with its respective attorney(s), that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand these Terms in its entirety and have had it
fully explained to them by such party's respective counsel, that each is fully
aware of the contents thereof and its meaning, intent and legal effect, and that
it or its authorized officer (as the case may be) is competent to execute the
Agreement of which these Terms is a part and has executed the Agreement free
from coercion, duress or undue influence. These Terms is the product of
negotiations between the parties hereto represented by counsel and any rules of
construction relating to interpretation against the drafter of an agreement,
shall not apply to these Terms and are expressly waived.

       14.    NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party hereto to another party hereto shall be in writing,
shall be deemed to have been duly given or delivered when delivered personally
or sent via facsimile (receipt confirmed, with a copy sent by reputable
overnight courier), or one business day after delivery to a reputable overnight
courier, postage prepaid, to the address of the party set forth in the Agreement
or to such address as the party to whom notice is to be given may provide in a
written notice to each of the other parties to the Agreement Terms, a copy of
which written notice shall be on file with the Secretary of the Company.

       15.    SEVERABILITY. If one or more provisions of these Terms are held to
be unenforceable under applicable law, such provision shall be excluded from
these Terms and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its terms
to the fullest extent permitted by law.

                                      -7-

<PAGE>
       16.    FURTHER ASSURANCES. Each of the parties shall, without further
consideration, use reasonable efforts to execute and deliver such additional
documents and take such other action as the other parties, or any of them may
reasonably request to carry out the intent of these Terms and the transactions
contemplated hereby.

       17.    SUCCESSORS AND ASSIGNS. These Terms shall be binding upon and all
rights hereto shall inure to the benefit of the Company, its successors and
permitted assigns, and shall be binding upon and all rights hereto shall inure
to the benefit of the other parties hereto and their respective heirs,
successors and permitted assigns.

       18.    ENTIRE AGREEMENT. These Terms embodies the entire agreement and
understanding of the parties hereto in respect of the actions and transactions
contemplated by these Terms. There are no restrictions, promises, inducements,
representations, warranties, covenants or undertakings with regard to the
registration of the Company's capital stock pursuant to the Securities Act,
other than those expressly set forth or referred to in these Terms.

                                      -8-<PAGE>
                                                                    EXHIBIT 10.3

           CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
         SECURITIES AND EXCHANGE COMMISSION. BRACKETS DENOTE OMISSIONS.

                                                         (G) Modfn. (1) 070501ps
SESAMEWORKSHOP(TM)
                                            One Lincoln Plaza  New York NY 10023
Dated as of July 1, 2001                tel 212 595 3456 www.sesameworkshop.org
                                                         ----------------------

The First Years, Inc.
One Kiddie Drive
Avon, Massachusetts  02322

Ladies and Gentlemen:

The following, when signed by you ("The First Years") and by us ("Sesame
Workshop"), will constitute a renewal of the agreement between Sesame Workshop
and The First Years dated as of the 1st day July, 1996, as the same may have
heretofore been amended and/or extended (hereinafter referred to as the
"Agreement"):

The Term of the Agreement, solely with respect to the distribution and sale of
Products in the United States including its Territories and Possessions, is
hereby renewed for an additional period of two (2) years commencing July 1, 2001
and ending June 30, 2003, upon all the terms and conditions therein contained,
except as herein otherwise specified:

     1.   During the Term of this renewal, The First Years shall have the right
to manufacture, distribute and sell the Products listed in Appendix A annexed
hereto and hereby made a part hereof. It is further understood and agreed that
if The First Years fails to achieve at least [ ] ([ ]) [ ] of its projected
sales for [ ] during the first contract year of the Term of this renewal (July
1, 2001 - June 30, 2002), then Sesame Workshop shall have the right, at its
election, to delete "[ ]" as a Product hereunder for the second contract year of
the Term hereof. The current sales forecast for [ ] is $[ ] for the period
ending June 30, 2002.

     2.   The First Years' Authorized Channels of Distribution, during the Term
of this renewal, shall be as follows:

               "MASS MARKET CHANNELS" means those channels of distribution
               through wholesalers, distributors and retailers which result in
               the Products being offered for sale in value-oriented retail
               stores, which in the normal course of business usually sell
               product items in the same category as the Products and catalog
               operations conducted by major retailers;
<PAGE>

The First Years, Inc.
Page 2                                                  Dated as of July 1, 2001

               "MID-TIER DEPARTMENT STORE CHANNELS" means those channels of
               distribution through wholesalers, distributors and retailers
               which result in the Products being offered for sale in moderately
               priced department stores such as J.C. Penny, Sears, Kohl's, etc;

               "SPECIALTY STORES" means those channels of distribution through
               wholesalers, distributors and retailers which result in the
               Products being offered for sale primarily to specialty stores,
               gift stores, card stores and gift and card departments of
               department stores;

               DRUG STORES AND GROCERY STORES;

               REGIONAL DISCOUNTERS;

               E-TAILERS (I.E. AMAZON.COM); AND

               INTERNET SITES OF RETAILERS THAT ARE IN THE ABOVE CHANNELS OF
               DISTRIBUTION.

     3.   The Royalty that is payable by The First Years to Sesame Workshop,
during the Term of this renewal, pursuant to subparagraph 5(a) hereof with
respect to each Product hereunder is as follows:

               [    ]

     4.   The First Years guarantees that Sesame Workshop's minimum earnings,
during the Term of this renewal, shall be as follows:

               $[      ] for the Guaranteed Period July 1, 2001 - June 30, 2002

               $[      ] for the Guaranteed Period July 1, 2002 - June 30, 2003

     5.   Effective December 29, 2000, all rights and interest in, and title to,
the Licensed Elements which were owned by JHP and controlled by Sesame Workshop
were acquired by Sesame Workshop, and consequently, subsequent to such date, {i}
any right of JHP under the Agreement shall inure to Sesame Workshop and {ii}
any obligation owed to JHP by The First Years hereunder shall be owed to Sesame
Workshop.

<PAGE>

The First Years, Inc.
Page 3                                                  Dated as of July 1, 2001

     6.   Division {iii} of subparagraph 9(a) of the Agreement is hereby
modified by deleting the term "CTWs Quality Control Department" and substituting
in its place and stead "Sesame Workshop's and/or its representative."

     7.   All notices to Sesame Workshop should be sent to:

              Sesame Workshop
              One Lincoln Plaza
              New York, New York 10023
              Attention: Group President, Products and to David Chan,

                                               Vice President,
                                               Deputy General Counsel
                                               Legal and Business Affairs.

Except as herein expressed modified and/or amended, the Agreement shall remain
in full force and effect according to the terms thereof and, as herein modified,
amended and/or extended, is hereby expressly ratified and confirmed. This
modification, its construction and effect shall be determined in accordance with
the laws of the State of New York with respect to agreements to be fully
performed therein.

If the foregoing accords with your understanding, please sign this renewal at
the place set forth below.

Very truly yours,                           ACCEPTED AND AGREED TO:

SESAME WORKSHOP                             THE FIRST YEARS, INC.

By:                                         By:
   --------------------------------            ---------------------------------

<PAGE>

                                   APPENDIX A

Products hereunder for which THE FIRST YEARS has been granted the non-exclusive
right to distribute and sell in the Territory shall consist solely of the
following Infant Care Items:

    Reusable & Disposable Bottles
    Pacifiers and Attachers
    Splat Mats
    Cups: trainer cups, spout cups, straw cups, and spill proof cups
    Sport Bottles
    *#Teethers (with or without sound)
    100% Vinyl Bibs (specifically excluding fabric and vinyl coated fabric bibs)
    Melamine Set (two-section dish with sippy cup and sculpted spoon)
    Feeding and Soothing Gift Set combinations consisting of the above Products

    *#Rattles (with and without sound)
    Baby Bather
    Baby Bath Tubs
    Car Sunshades
    Bed Rails
    Boo Boo Cold Packs
    Harness and Handstrap
    Medicine Feeders
    Thermometers
    Plastic Step Stools
    Toilet Training
    Potty Booster Seats
    Bathtub Toy Bags
    #Crib Pull Downs
    #Chime Balls
    #Squeaky Playbook for bath use (with sound and visual-no text or story)
    Comb and Brush Set
    Spout Guards
    *#High Chair Suction Toys

* Combination Plastic and Plush elements shall be of equal proportion.
  Specifically excluded are plush only designs.

# These Products shall be sold solely to Juvenile Product Buyers of the
  Authorized Distribution Channels specified in Paragraph 2 of the renewal and
  must be packaged on blister cards and merchandised on racks. Peggable boxed
  items will be approved on a case-by-case basis.

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