  We examine the inter-relationship of the superpotential containing hidden and
observable matter fields and the ensuing condensates in free fermionic string
models. These gauge and matter condensates of the strongly interacting hidden
gauge groups play a crucial role in the determination of the physical
parameters of the observable sector. Supplementing the above information with
the requirement of modular invariance, we find that a generic model with only
trilinear superpotential allows for a degenerate (and sometimes pathological)
set of vacua. This degeneracy may be lifted by higher order terms in the
superpotential. We also point out some other subtle points that may arise in
calculations of this nature. We exemplify our observations by computing
explicitly the modular invariant gaugino and matter condensates in the flipped
SU(5) string model with hidden gauge group $SO(10)\times SU(4)$.
