Subscription Agreement

SUBSCRIPTION AGREEMENT


SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of May 9, 2001, by and among DynaGen, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), with headquarters located at 200 Highland Avenue, Needham, Massachusetts and the undersigned ("Purchaser").


WHEREAS:


A. The Company and Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").


B. The Company desires to sell and issue to Purchaser and Purchaser desires to purchase, upon the terms and conditions stated in this Agreement, the number of shares of Series P Preferred Stock., $.01 par value per share (the "Preferred Stock"), of the Company convertible into shares of common stock, par value $.01 per share, of the Company (the "Common Stock") in accordance with the terms and conditions set forth herein. The Series P Preferred Stock Designation setting forth the rights, preferences, including the terms upon which the shares of Preferred Stock are convertible into shares of Common Stock, is attached hereto as Exhibit A. The shares of Common Stock issuable upon conversion of the Preferred Stock or otherwise pursuant to the Preferred Stock are referred to herein as the "Conversion Shares." The Preferred Stock and the Conversion Shares are collectively referred to herein as the "Securities."


NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:


1. PURCHASE AND SALE OF PREFERRED STOCK


a. Purchase of Preferred Stock. On the Closing Date (as defined below), subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall issue and sell to Purchaser and Purchaser agrees to purchase from the Company, the number of shares of Preferred Stock (the "Preferred Shares") set forth on the signature page. The purchase price (the "Purchase Price Per Share") for each of the Preferred Shares is $100.00 per share.


b. Form of Payment. On the Closing Date (as hereinafter defined), Purchaser shall pay the aggregate Purchase Price for the Preferred Shares by wire transfer to the Company and shall deliver by telecopier (with originals following by first class mail) a fully executed copy of this Subscription Agreement to the Company. Payment and delivery instructions are attached as Exhibit B hereto. Promptly upon receipt of the Purchase Price and the executed Agreement, the Company shall deliver a certificate (the "Certificate") representing the Preferred Shares together with the accepted Agreement to the Purchaser by Federal Express or other overnight courier at the address set forth on the signature page of this Agreement.


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c. Closing Date. Subject to the satisfaction (or waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the shares of Preferred Shares pursuant to this Agreement shall take place from time to time as may be mutually agreed upon by the Company and Purchaser. Each closing shall occur at the offices of the Company.


2. PURCHASER'S REPRESENTATIONS AND WARRANTIES. Purchaser represents and warrants to the Company that:


a. Investment Purpose. Purchaser is purchasing the Preferred Stock for Purchaser's own account for investment only and not with a present view towards the public sale or distribution thereof, except pursuant to sales that are exempt from the registration requirements of the Securities Act and/or sales registered under the Securities Act. Purchaser understands that Purchaser must bear the economic risk of this investment indefinitely, unless the Preferred Shares or the Conversion Shares are registered pursuant to the Securities Act and any applicable state securities or blue sky laws or an exemption from such registration is available, and that the Company has no present intention of registering any such Securities other than as contemplated by the Registration Rights Agreement, dated as of the date hereof, between the Company and the Purchaser (the "Registration Rights Agreement").


b. Accredited Investor Status. Purchaser is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act.


c. Reliance on Exemptions. Purchaser understands that the Preferred Shares and the Conversion Shares are being offered and sold to Purchaser in reliance upon 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, and Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of Purchaser to acquire the Preferred Shares and Conversion Shares.


d. Information. Purchaser and its counsel or representative, if any, have been furnished all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Preferred Shares which have been requested by Purchaser or its counsel or representative. Purchaser and its counsel, if any, have been afforded the opportunity to ask questions of the Company and have received what Purchaser believes to be complete and satisfactory answers to any such inquiries. Neither such inquiries nor any other due diligence investigation conducted by Purchaser or its counsel or any of its representatives shall modify, amend or affect Purchaser's right to rely on the Company's representations and warranties contained in Section 3 below. Purchaser has been informed and understands that (i) this investment involves a HIGH DEGREE OF RISK, (ii) the Company's independent auditors have included an explanatory paragraph in their opinion on the Company's financial statements expressing substantial doubt about the Company's ability to continue as a going concern, and (iii) the Company's common stock has been delisted by the NASDAQ Stock


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Market and is currently quoted on the NASD OTC Bulletin Board and traded on the Boston Stock Exchange.


e. Governmental Review. Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.


f. Transfer or Resale. Purchaser understands that (i) except as provided in the Registration Rights Agreement, the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be transferred unless (a) subsequently registered thereunder, or (b) Purchaser shall have delivered to the Company an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, including without limitation Rule 144 promulgated under the Securities Act (or a successor rule) ("Rule 144"), or (c) transferred without consideration to an affiliate of Purchaser; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule 144 is not applicable, any resale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the Securities and Exchange Commission (the "SEC") thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case, other than pursuant to the Registration Rights Agreement).


g. Legends. Purchaser understands that the Preferred Shares and, until such time as the Conversion Shares have been registered under the Securities Act as contemplated by Section 5 of this Agreement or otherwise may be sold by Purchaser pursuant to Rule 144 without any restriction as to the public resale thereof, the certificates for the Conversion Shares, may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):


The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of
counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, that registration is not required
under said Act or unless the Company is provided with reasonable
assurances that the securities were sold pursuant to Rule 144 under
said Act.


h. Authorization: Enforcement. This Agreement and the Registration Rights Agreements (together, the "Transaction Agreements") have been duly and validly authorized, executed and delivered on behalf of Purchaser and are valid and binding agreements of Purchaser enforceable in accordance with their respective terms.


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i. Location of Purchaser. Purchaser has advised the Company in writing with respect to the jurisdictions wherein the investment decision regarding Purchaser's acquisition of the Preferred Stock has been made.


j. Conversion Limitation. Notwithstanding the provisions hereof, in no event (except (i) in the event of a Mandatory Conversion (as defined in the Certificate of Designations, Preferences and Rights of Series P Preferred Stock (the "Certificate of Designation") or (ii) if the Company is in default under any provision of the Transaction Agreements, as defined above) shall the holder be entitled to convert any of the Preferred Shares to the extent that, after such conversion, the sum of (1) the number of shares of Common Stock beneficially owned by the Purchaser and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of unconverted Preferred Shares), and (2) the number of shares of Common Stock issuable upon the conversion of the Preferred Shares with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Purchaser and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise provided in clause (1) of such proviso.


k. Company Reliance On Purchaser's Representations. Purchaser understands that the Company is relying on the truth and accuracy of the representations and warranties made herein by Purchaser in offering the Preferred Shares for sale and in relying upon applicable exemptions available under the Act and applicable state securities laws.


3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to Purchaser that:


a. Organization and Qualification. The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware, and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction where the failure so to qualify would have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on the operations, properties, condition (financial or otherwise) or prospects of the Company and its subsidiaries, taken as a whole on a consolidated basis or on the ability of the Company to perform its obligations in connection with the transactions contemplated hereby on a timely basis.


b. Authorization: Enforcement. The Company has the requisite corporate power and authority to enter into and perform this Agreement and the Registration Rights Agreement, to issue and sell the Preferred Shares in accordance with the terms hereof, and to issue the Conversion Shares upon conversion of the Preferred Shares in accordance with their terms. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Preferred Shares and the issuance and reservation for issuance of the Conversion Shares) have been duly authorized by the Company's


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Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders is required; this Agreement has been duly executed and delivered by the Company; and this Agreement constitutes the valid and binding obligations of the Company enforceable against the Company in accordance with its respective terms.


c. Issuance of Securities. The Preferred Stock is duly authorized and, upon issuance in accordance with the terms of this Agreement, the Preferred Shares will be validly issued, fully paid and non-assessable. The Conversion Shares have been duly authorized by the Company's Board of Directors, and have been reserved for issuance upon conversion of the Preferred Shares in accordance with the terms thereof, and upon issuance in accordance with the terms of this Agreement will be validly issued, fully paid and non-assessable.


d. Valid Issuance of Securities. The Company has an authorized capitalization consisting of 225,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, par value $0.01 per share. As of the date of this Agreement, the Company has issued and outstanding the shares of capital stock, options, warrants and convertible securities set forth on Schedule 3(d). All of the shares of Common Stock of the Company issued to date have been duly and validly authorized and issued and are fully paid and non-assessable. Except as set forth above or as disclosed in Schedule 3(d) or in the SEC Documents as of the date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of it subsidiaries is or may become bound to redeem or issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Sec ...