Exhibit
      10.1

    


    Execution
      Version

    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    


    ALTEON
      INC.

    


    SERIES
      B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    


    April
      5, 2007

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     


    
      
         

      

      
         

        
          

        

      

      
         

      

    


    


    SERIES
      B
      PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

    


    This
      Series B Preferred Stock and Warrant Purchase Agreement (this “Agreement”)
      is
      dated as of April 5, 2007, among Alteon Inc., a Delaware corporation (the
“Company”),
      and
      each purchaser identified on the signature pages hereto (each, including its
      successors and assigns, a “Purchaser”
and
      collectively the “Purchasers”).

     

    WHEREAS,
      subject to the terms and conditions set forth in this Agreement and pursuant
      to
      Section 4(2) of the Securities Act of 1933, as amended (the “Securities
      Act”)
      and
      Rule 506 promulgated thereunder, the Company desires to issue and sell to each
      Purchaser, and each Purchaser, severally and not jointly, desires to purchase
      from the Company, securities of the Company as more fully described in this
      Agreement.

     

    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration the receipt and adequacy of which
      are hereby acknowledged, the Company and each Purchaser agree as
      follows:

     

    ARTICLE
      I.

    DEFINITIONS

     

    1.1  Definitions

     

    In
      addition to the terms defined elsewhere in this Agreement, for all purposes
      of
      this Agreement, the following terms have the meanings indicated in this Section
      1.1:

     

    “Affiliate”
means
      any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by or is under common control with a Person as such
      terms are used in and construed under Rule 144 under the Securities Act,
provided,
      however,
      that
      for the avoidance of doubt it is acknowledged and agreed that Atticus Global
      Advisors, Ltd. and Green Way Managed Account Series, Ltd., in respect of its
      segregated account, Green Way Portfolio D, are affiliates. 

     

    “Amended
      and Restated Certificate of Incorporation”
means
      that certain Amended and Restated Certificate of Incorporation to be filed
      with
      the Secretary of State of the State of Delaware in substantially the form
      attached hereto as Exhibit
      A.

     

    “Business
      Day”
means
      any day except Saturday, Sunday, any day which shall be a federal legal holiday
      in the United States or any day on which banking institutions in the State
      of
      New York are authorized or required by law or other governmental action to
      close.

     

    “Closing”
means
      the closing of the purchase and sale of the Securities pursuant to Section
      2.1.

     

    “Closing
      Date”
means
      the Trading Day when all of the all conditions precedent to (i) the Purchasers’
obligations to pay the Subscription Amount and (ii) the Company’s obligations to
      deliver the Securities have been satisfied or waived.

     

    
      
         

      

      
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    “Closing
      Price”
means
      on any particular date (a) the last reported closing price per share of
      Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
      at 4:15 PM (New York time)), or (b) if there is no such price on such date,
      then
      the closing price on the Trading Market on the date nearest preceding such
      date
      (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the OTC
      Bulletin Board is not a Trading Market, the volume weighted average price of
      the
      Common Stock for such date (or the nearest preceding date) on the OTC Bulletin
      Board or (d)  if the Common Stock is not then listed or quoted on the
      Trading Market or the OTC Bulletin Board and if prices for the Common Stock
      are
      then reported in the “pink sheets” published by Pink Sheets LLC (or a similar
      organization or agency succeeding to its functions of reporting prices), the
      most recent price per share of the Common Stock so reported, or (e) if the
      shares of Common Stock are not then publicly traded the fair market value of
      a
      share of Common Stock as determined by an appraiser selected in good faith
      by
      the Purchasers representing at least a majority in interest of the Shares to
      be
      purchased hereunder.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.01 per share, and any other class
      of securities into which such securities may hereafter be reclassified or
      changed into. 

     

    “Common
      Stock Equivalents”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including, without limitation,
      any
      debt, preferred stock, rights, options, warrants or other instrument that is
      at
      any time convertible into or exercisable or exchangeable for, or otherwise
      entitles the holder thereof to receive, Common Stock.

     

    “Company
      Counsel”
means
      Mintz Levin Cohn Ferris Glovsky and Popeo P.C.

     

    “Conversion
      Shares”
means
      the shares of Common Stock of the Company issuable upon conversion of the Series
      B Preferred Stock.

     

    “Convertible
      Promissory Notes”
means
      those certain Senior Convertible Secured Promissory Notes of the Company in
      an
      aggregate principal amount of $3,000,000 each dated January 11, 2007, issued
      pursuant to the Note and Warrant Purchase Agreement.

     

    “Disclosure
      Schedules”
means
      the Disclosure Schedules of the Company delivered concurrently herewith.


     

    “Effective
      Date”
means
      the date that the initial Registration Statement filed by the Company pursuant
      to the Registration Rights Agreement is first declared effective by the
      Commission.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

    


    
      
         

      

      
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    “GAAP”
shall
      have the meaning ascribed to such term in Section 3.1(k).

     

    “Legend
      Removal Date”
shall
      have the meaning ascribed to such term in Section 4.1(c). 

     

    “Liens”
means
      a
      lien, charge, security interest, encumbrance, right of first refusal, preemptive
      right or other restriction.

     

    “Note
      and Warrant Purchase Agreement”
means
      the Note and Warrant Purchase Agreement dated January 11, 2007 by and among
      the
      Company and the lenders named therein.

     

    “Per
      Share Purchase Price”
means
      50% of the average Closing Price of the Common Stock for the fifteen (15)
      Trading Days beginning after the later of the Shareholder Meeting or
      implementation of the Reverse Stock Split. The per share price shall in no
      event
      (i) exceed the equivalent of $0.075 per share immediately prior to the Reverse
      Stock Split or (ii) be less than the equivalent of $0.05 per share immediately
      prior the Reverse Stock Split.

     

    “Person”
means
      an individual or corporation, partnership, trust, incorporated or unincorporated
      association, joint venture, limited liability company, joint stock company,
      government (or an agency or subdivision thereof) or other entity of any
      kind.

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Proxy
      Statement”
means
      that certain Proxy Statement to be prepared by the Company and submitted to
      the
      Commission for review and comment in order to properly call and notice the
      Shareholder Meeting.

     

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated the date hereof, among the Company
      and
      the Purchasers, in the form of Exhibit
      B
      attached
      hereto.

     

    “Registration
      Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement and covering the resale by the Purchasers of the Shares and
      the
      Warrant Shares. 

     

    “Reverse
      Stock Split”
shall
      have the meaning ascribed to such term in Section 4.11.

     

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule. 

     

    
      
         

      

      
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    “SEC
      Documents”
shall
      have the meaning ascribed to such term in Section 3.1(k).

     

    “Securities”
means
      the Shares, the Conversion Shares, the Warrants and the Warrant
      Shares.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Series
      B Preferred Stock”
means
      the Series B Preferred Stock of the Company, $.01 par value per
      share.

     

    “Shares”
means
      the shares of Series B Preferred Stock issued or issuable to each Purchaser
      pursuant to this Agreement.

     

    “Shareholder
      Meeting”
means
      that certain meeting of the Company’s stockholders currently anticipated to be
      held on or prior to April 30, 2007, unless the proxy statement relating to
      the
      Shareholder Meeting is reviewed by the Commission, in which case such date
      shall
      be extended to May 31, 2007. 

     

    “Short
      Sales”
shall
      include all “short sales” as defined in Rule 200 of Regulation SHO under the
      Exchange Act (but
      shall not be deemed to include the location and/or reservation of borrowable
      shares of Common Stock). 

     

    “Significant
      Holder”
shall
      mean any beneficial holder or holder of record of at least that number of shares
      of Series B Preferred Stock as is equal to $4,000,000 divided by the Per Share
      Purchase Price (as adjusted for stock splits, stock dividends, reverse stock
      splits or the like). All shares of Series B Preferred Stock held or acquired
      by
      affiliated entities or persons shall be aggregated together for the purpose
      of
      determining the status of a holder as a Significant Holder.

     

    “Subscription
      Amount”
means,
      as to each Purchaser, the aggregate amount to be paid for Shares and Warrants
      purchased hereunder in United States Dollars and in immediately available funds,
      in an aggregate amount for all Purchasers equal to $25,000,000, including the
      principal and accrued but unpaid interest on the Convertible Promissory
      Notes.

     

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

     

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange, or the Nasdaq Global
      Market.

     

    “Transaction
      Documents”
means
      this Agreement, the Warrants, the Registration Rights Agreement and any other
      documents or agreements executed in connection with the transactions
      contemplated hereunder.

     

    
      
         

      

      
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    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted for trading as reported by Bloomberg Financial L.P. (based
      on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York
      City
      time); (b)  if the OTC Bulletin Board is not a Trading Market, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a
      similar organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or
      (d) in all other cases, the fair market value of a share of Common Stock as
      determined by an independent appraiser selected in good faith by the applicable
      Purchaser and reasonably acceptable to the Company. 

     

    “Warrants”
means
      collectively the Series B Preferred Stock purchase warrants, in the form of
      Exhibit
      C
      delivered to the Purchasers at the Closing in accordance with Section 2.2(b)
      hereof, which Warrants shall be exercisable six months after the Closing Date
      and have a term of exercise equal to five years.

     

    “Warrant
      Shares”
means
      the shares of Preferred Stock issuable upon exercise of the
      Warrants.

     

    ARTICLE
      II.
PURCHASE
      AND SALE

     

    2.1  Closing.
      On the Closing Date, upon the terms and subject to the conditions set forth
      herein, (i) as consideration for receipt of the Subscription Amounts the Company
      agrees to sell, and each Purchaser, severally and not jointly, agrees to
      purchase the allocation, as set forth opposite such Purchaser’s name on Schedule
      A attached hereto, of Shares and Warrants at the Per Share Purchase Price and
      (ii) the Convertible Promissory Notes plus all accrued but unpaid interest
      thereon will be automatically converted pursuant to their terms, and will be
      of
      no further force or effect. Each Purchaser shall deliver to the Company via
      wire
      transfer or a certified check immediately available funds equal to their
      Subscription Amount, as set forth opposite their names on Schedule A attached
      hereto, and the Company shall deliver to each Purchaser their respective Shares
      and Warrants, as set forth opposite their names on Schedule A attached hereto,
      and the other items set forth in Section 2.2 issuable at the Closing; provided
      that the Subscription Amount for any holder of Convertible Promissory Notes
      shall be credited for the amount of principal and accrued interest thereon.
      Upon
      satisfaction of the conditions set forth in Sections 2.2 and 2.3, the Closing
      shall occur at the offices of Company Counsel, or such other location as the
      parties shall mutually agree.

     

    


    
      
         

      

      
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    2.2  Deliveries.

     

    (a)  On
      the
      date hereof, the Company and each of the Purchasers shall deliver or cause
      to be
      delivered to the other, this Agreement, together with all exhibits and schedules
      attached thereto, duly executed by an authorized representative. 

     

    (b)  On
      the
      Closing Date, the Company shall deliver or cause to be delivered to each
      Purchaser the following:

     

    (i)  a
      legal
      opinion of Company Counsel dated the Closing Date, in the form of Exhibit
      D
      attached
      hereto; 

     

    (ii)  a
      copy of
      the irrevocable instructions to the Company’s transfer agent instructing the
      transfer agent to deliver, on an expedited basis, a certificate evidencing
      a
      number of Shares equal to such Purchaser’s Subscription Amount divided by the
      Per Share Purchase Price, including any Shares issuable upon conversion of
      the
      Convertible Promissory Notes, each registered in the name of such
      Purchaser;

     

    (iii)  a
      certificate of the Secretary of the Company dated the Closing Date, certifying
      the incumbency and authority of the officers or authorized signatories of the
      Company who execute this Agreement and the other Transaction Documents and
      the
      truth, correctness and completeness of the following exhibits which shall be
      attached thereto: (i) a copy of resolutions duly adopted by the Board of
      Directors of the Company, in full force and effect at the time this Agreement
      is
      entered into, authorizing the execution of this Agreement and the other
      Transaction Documents and the consummation of the transactions contemplated
      herein and therein, (ii) a copy of the Amended and Restated Certificate of
      Incorporation of the Company, as amended through the Closing Date, and as filed
      with and accepted and certified by an appropriate official of the Company’s
      jurisdiction of incorporation, and (iii) a copy of the By-Laws of the Company,
      as amended through the Closing Date;

     

    (iv)  a
      Warrant
      registered in the name of such Purchaser to purchase up to a number of shares
      of
      Series B Preferred Stock equal to twenty five (25%) percent of such Purchaser’s
      Subscription Amount, divided by the Per Share Purchase Price; and

     

    (v)  the
      Registration Rights Agreement duly executed by the Company.

     

    (c)  On
      the
      Closing Date, each Purchaser shall deliver or cause to be delivered to the
      Company the following:

     

    (i)  such
      Purchaser’s Subscription Amount by wire transfer to the account as specified in
      writing by the Company;

     

    (ii)  the
      Registration Rights Agreement duly executed by such Purchaser; 

     

    (iii)  if
      applicable, such Purchaser’s originally executed Convertible Promissory Note;


     

    
      
         

      

      
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    (iv)  if
      applicable, evidence of the filing of a UCC-3 termination statement with respect
      to any UCC-1 financing statement filed in connection with the Note and Warrant
      Purchase Agreement; and 

     

    (v)  if
      applicable, evidence of the termination of the security interest filed against
      the Company’s intellectual property with the United States Patent and Trademark
      Office pursuant to that certain Intellectual Property Security Agreement entered
      into contemporaneously with the Note and Warrant Purchase
      Agreement.

     

    2.3  Closing
      Conditions. 

     

    (a) The
      obligations of the Company hereunder in connection with the Closing are subject
      to the following conditions having been met:

     

    (i)  the
      accuracy in all material respects when made and on the Closing Date of the
      representations and warranties of the Purchasers contained herein; 

     

    (ii)  all
      obligations, covenants and agreements of the Purchasers contained herein
      required to be performed at or prior to the Closing Date shall have been
      performed; and

     

    (iii)  the
      delivery by the Purchasers of the items set forth in Section 2.2(c) of this
      Agreement.

     

    (b)  The
      respective obligations of the Purchasers hereunder in connection with the
      Closing are subject to the following conditions having been met:

     

    (i)  the
      accuracy in all material respects on the Closing Date of the representations
      and
      warranties of the Company contained herein;

     

    (ii)  all
      obligations, covenants and agreements of the Company contained herein required
      to be performed at or prior to the Closing Date shall have been performed;
      

     

    (iii)  the
      delivery by the Company of the items set forth in Section 2.2(b) of this
      Agreement; 

     

    (iv)  the
      approval by the stockholders of the Company as to all matters in connection
      with
      the Reverse Stock Split and the issuance of the Securities at the Shareholder
      Meeting and the other matters set forth in Section 4.11;

     

    (v)  the
      filing with the Secretary of State of the State of Delaware of the Amended
      and
      Restated Certificate of Incorporation;

     

    
      
         

      

      
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    (vi)  from
      the
      date hereof to the Closing Date, trading in the Common Stock shall not have
      been
      suspended by the Commission or the Company’s principal Trading Market (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg Financial Markets shall not have been suspended or limited, or minimum
      prices shall not have been established on securities whose trades are reported
      by such service, or on any Trading Market; and

     

    (vii)  the
      Company and its Board of Directors shall have taken all necessary action, if
      any, in order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under that certain Amended
      and Restated Stockholders’ Rights Agreement, dated as of July 25, 2005, between
      the Company and American Stock Transfer & Trust Company, as amended, and any
      other rights agreement) or other similar anti-takeover provision under
      the
      Amended
      and Restated Certificate of Incorporation
      or the
      laws of the jurisdiction of its formation which is or could become applicable
      to
      (i) any Purchaser as a result of the transactions contemplated by this
      Agreement, including, without limitation, the Company’s issuance of the
      Securities and any Purchaser’s ownership of the Securities and (ii) the
      Purchasers and their affiliates for a period of not less than five (5) years
      after the Closing Date.

     

    ARTICLE
      III.


    REPRESENTATIONS
      AND WARRANTIES

     

    3.1  Representations
      and Warranties of the Company. As of the date hereof, and as of the Closing,
      the
      Company hereby acknowledges, represents, warrants and/or agrees as
      follows:

     

    (a)  Organization,
      Standing and Qualification of the Company.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware. The Company has all requisite corporate
      power and authority to own and operate its properties and to carry on its
      business as now being conducted and as proposed to be conducted. The Company
      is
      duly qualified to do business as a foreign corporation and is in good standing
      in each jurisdiction in which failure to so qualify would materially and
      adversely affect the business, properties, operations or condition, financial
      or
      otherwise, of the Company. The resolutions adopted by the directors of the
      Company on March 30, 2007 authorizing the transactions contemplated by this
      Agreement have not been amended or modified in any way, have not been rescinded
      and are in full force and effect on the date hereof.

     

    (b)  Corporate
      Authority; Enforceability.
      The
      Company has full right, power and authority to issue and sell the Securities
      as
      herein contemplated and the Company has full power and authority to enter into
      and perform its obligations under this Agreement, the Securities, the Amended
      and Restated Certificate of Incorporation and the Registration Rights Agreement.
      The execution and delivery of this Agreement, the Securities, the Amended and
      Restated Certificate of Incorporation and the Registration Rights Agreement
      by
      the Company and the consummation of the transactions contemplated herein and
      therein have been duly authorized and approved by all requisite corporate
      action, and each of this Agreement, the Securities, the Amended and Restated
      Certificate of Incorporation and the Registration Rights Agreement are a valid
      and legally binding obligation of the Company; provided, however, that the
      issuance of the Securities and the conversion of the Convertible Promissory
      Notes will require approval of the Company’s stockholders under the applicable
      rules of the American Stock Exchange, which approval will be sought at the
      Shareholder Meeting, but as of the date hereof, has not been obtained.


     

    
      
         

      

      
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    (c)  Conflicts.
      Subject
      to Section 3.1(b)(i) and (ii) above, neither the authorization, execution and
      delivery of this Agreement, the Securities and the Registration Rights Agreement
      nor the consummation of the transactions herein and therein contemplated, will
      (i) conflict with or result in a breach of any of the terms of the Company’s
      Certificate of Incorporation or By-Laws, (ii) violate any judgment, order,
      injunction, decree or award of any court or governmental body, having
      jurisdiction over the Company, against or binding on the Company or to which
      its
      property is subject, (iii) violate any material law or regulation of any
      jurisdiction which is applicable to the Company, (iv) violate, conflict with
      or
      result in the breach or termination of, or constitute a default under, the
      terms
      of any material agreement to which the Company is a party, except for such
      violations or defaults which do not materially and adversely affect the
      business, assets, operations or financial condition of the Company, or (v)
      violate or conflict with the rules and regulations of the American Stock
      Exchange applicable to the Company.

     

    (d)  Capitalization.
      The
      capitalization of the Company is as set forth on Schedule 3.1(d) attached
      hereto. The Company has not issued any capital stock since its most recently
      filed periodic report under the Exchange Act, other than pursuant to the
      exercise of employee stock options under the Company’s stock option plans and
      the issuance of shares of Common Stock to employees pursuant to the Company’s
      employee stock purchase plan outstanding as of the date of the most recently
      filed periodic report under the Exchange Act. All of the outstanding shares
      of
      capital stock of the Company are validly issued, fully paid and nonassessable.
      No further approval or authorization of any stockholder or the Board of
      Directors of the Company is required for the issuance and sale, except as
      described in Section 3.1(b)(i) above. The issuance of the Securities pursuant
      to
      the provisions of this Agreement will not violate any preemptive rights or
      rights of first refusal granted by the Company that will not be validly waived
      or complied with, and will be free of any liens or encumbrances, other than
      any
      liens or encumbrances created by or imposed upon the Purchasers through no
      action of the Company. There are no stockholders agreements, voting agreements
      or other similar agreements with respect to the Company’s capital stock to which
      the Company is a party or, to the knowledge of the Company, between or among
      any
      of the Company’s stockholders. 

     

    (e)  Litigation.
      There
      are no actions, suits or proceedings at law or in equity or by or before any
      governmental instrumentality or other agency or regulatory authority now
      pending, or, to the best knowledge of the Company, threatened against the
      Company which, if adversely determined, could materially and adversely affect
      the business, assets, operations or condition, financial or otherwise, of the
      Company. There is no action, suit or proceeding by the Company currently pending
      or that the Company currently intends to initiate.

     

    
      
         

      

      
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    (f)  Compliance
      with Laws.
      The
      Company is not in violation of any statute, law, rule or regulation, or in
      default with respect to any judgment, writ, injunction, decree, rule or
      regulation of any court or governmental agency or instrumentality, except for
      such violations or defaults which do not materially and adversely affect the
      business, assets, operations or condition, financial or otherwise, of the
      Company.

     

    (g)  Governmental
      Consents.
      Subject
      to the accuracy of the representations and warranties of the Purchasers set
      forth herein, no registration or filing with, or consent or approval of or
      other
      action by, any Federal, state or other government agency under laws and
      regulations thereof as now in effect is or will be necessary for the valid
      execution, delivery and performance by the Company of this Agreement and the
      Registration Rights Agreement, and the issuance, sale and delivery of the
      Securities, other than the filing of a Form D with the Commission and the
      filings required by state securities law.

     

    (h)  Title.
      The
      Company has good and marketable title in fee simple to all real property and
      good and marketable title to all personal property owned by it which is material
      to the business of the Company, in each case free and clear of all liens,
      encumbrances and defects except such as do not materially affect the value
      of
      such property and do not interfere with the use made and proposed to be made
      of
      such property by the Company. Any real property and facilities held under lease
      by the Company are held by it under valid, subsisting and enforceable leases
      with such exceptions as are not material and do not interfere with the use
      made
      and proposed to be made of such property and buildings by the
      Company.

     

    (i)  Regulatory
      Matters.
      The
      clinical, pre-clinical and other trials, studies and tests conducted by or
      on
      behalf of or sponsored by the Company relating to its pharmaceutical product
      candidates were and, if still pending, are being conducted in all material
      respects in accordance with medical and scientific protocols and research
      procedures that the Company reasonably believes are appropriate. The
      descriptions of the results of such trials, studies and tests as set forth
      in
      the SEC Documents (as defined in Section 4(k)), provided to the Purchasers
      are
      accurate in all material respects and fairly present the data derived from
      such
      trials, studies and tests. The Company has operated and currently is in
      compliance in all material respects with applicable statutes and implementing
      regulations administered or enforced by the United States Food and Drug
      Administration (“FDA”).
      Except as set forth in the SEC Documents, the Company has not received any
      warning letters or written correspondence from the FDA and/or any other
      governmental entity requiring the termination, suspension or modification of
      any
      clinical, pre-clinical and other trials, studies or tests that are material
      to
      the Company. The Company has submitted to the FDA an Investigational New Drug
      Application or amendment or supplement thereto for all clinical trials it has
      conducted or sponsored or is conducting or sponsoring with respect to its
      product candidates termed “Alagebrium” and “ALT-2074” (the “Specified
      Candidates”),
      and
      all such submissions were in material compliance with applicable laws and rules
      and regulations when submitted and no material deficiencies are presently being
      asserted by the FDA with respect to any such submissions. None of the clinical
      trials that the Company is currently conducting or sponsoring or intends to
      conduct or sponsor with respect to the Specified Candidates is subject to any
      temporary or permanent clinical hold by the FDA or any other government agency,
      and the Company has no reason to believe that such clinical trials will be
      subject to any such action.

     

    
      
         

      

      
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    (j)  Material
      License Agreements.
      Each of
      the Material License Agreements (as defined below) is in full force and effect,
      and neither the Company nor, to its knowledge, the licensor, is in breach of
      any
      Material License Agreement and the Company is aware of no circumstances or
      grounds that would reasonably be expected to give rise to a claim of material
      breach or right of rescission, termination, revision, or amendment of any
      Material License Agreement. True and correct copies of the Material Agreements
      have been provided to the Purchasers, and no amendment or other modification
      with respect to such Material Agreements has been entered into by the Company.
      As used herein, the term “Material
      License Agreement”
shall
      mean: Exclusive License Agreement dated as of September 28, 2004 by and between
      Oxis International, a Delaware corporation, and HaptoGuard, as amended on March
      22, 2005, as further amended on July 19, 2006, and as further amended on April
      2, 2007; and License and Research Agreement dated as of July 12, 2004 by and
      between BIO-RAP Technologies, Ltd., an Israeli corporation, on its own behalf
      and on behalf of the Rappaport Family Institute for Research in the Medical
      Sciences, and HaptoGuard, as amended on April 1, 2007. 

     

    (k)  SEC
      Documents; Financial Statements.
      During
      the two (2) years prior to the date hereof, the Company has filed all
      reports, schedules, forms, statements and other documents required to be filed
      by it with the Commission pursuant to the reporting requirements of the Exchange
      Act (all of the foregoing filed prior to the date hereof and all exhibits
      included therein and financial statements, notes and schedules thereto and
      documents incorporated by reference therein being hereinafter referred to as
      the
“SEC
      Documents”).
      The
      Company has delivered to the Purchasers or their respective representatives
      true, correct and complete copies of each of the SEC Documents not available
      on
      the Electronic Data Gathering, Analysis, and Retrieval system of the Commission
      (“EDGAR”)
      that
      have been requested by each Purchaser. As of their respective dates, the SEC
      Documents complied as to form in all material respects with the requirements
      of
      the Exchange Act and the rules and regulations of the Commission promulgated
      thereunder applicable to the SEC Documents, and none of the SEC Documents,
      at
      the time they were filed with the Commission, contained any untrue statement
      of
      a material fact or omitted to state a material fact required to be stated
      therein or necessary in order to make the statements therein, in the light
      of
      the circumstances under which they were made, not misleading. As of their
      respective dates, the financial statements of the Company included in the SEC
      Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the
      Commission with respect thereto as in effect as of the time of filing. Such
      financial statements have been prepared in accordance with generally accepted
      accounting principles (“GAAP”),
      consistently applied, during the periods involved (except (i) as may be
      otherwise indicated in such financial statements or the notes thereto, or
      (ii) in the case of unaudited interim statements, to the extent they may
      exclude footnotes or may be condensed or summary statements) and fairly present
      in all material respects the financial position of the Company as of the dates
      thereof and the results of its operations and cash flows for the periods then
      ended (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). The Company has no liabilities or obligations required to be
      disclosed in the SEC Documents that are not so disclosed in the SEC Documents,
      other than those incurred in the ordinary course of the Company’s business. The
      information contained in the Company’s interim balance sheet as of November 30,
      2006 is true and correct in all material respects.

     

    
      
         

      

      
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    (l)  Sarbanes-Oxley;
      Internal Accounting Controls.
      Except
      as set forth in Part I - Item 4 of the Company’s Quarterly Report on Form 10-Q
      for the quarter ended September 30, 2006 (the “Specified
      Weakness”),
      the
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 which are applicable to it as of the Closing Date. The Company is taking
      all reasonable measures to implement remedial controls to address the Specified
      Weakness. The Company maintains a system of internal accounting controls
      sufficient to provide reasonable assurance that (i) transactions are executed
      in
      accordance with management’s general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability, (iii)
      access to assets is permitted only in accordance with management’s general or
      specific authorization, and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences. The Company has established disclosure
      controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
      15d-15(e)) for the Company and designed such disclosure controls and procedures
      to ensure that information required to be disclosed by the Company in the
      reports it files or submits under the Exchange Act is recorded, processed,
      summarized and reported, within the time periods specified in the Commission’s
      rules and forms. The Company’s certifying officers have evaluated the
      effectiveness of the Company’s disclosure controls and procedures as of the end
      of the period covered by the Company’s most recently filed periodic report under
      the Exchange Act (such date, the “Evaluation
      Date”).
      The
      Company presented in its most recently filed periodic report under the Exchange
      Act the conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no changes in the
      Company’s internal control over financial reporting (as such term is defined in
      the Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial
      reporting.

     

    (m)  Absence
      of Changes.
      Except
      as disclosed in Schedule 3.1(m), since September 30, 2006, and except as
      otherwise disclosed in the SEC Documents, the Company has not (i) declared
      or paid any dividends, (ii) sold any assets, individually or in the
      aggregate, in excess of One Hundred Thousand Dollars ($100,000) outside of
      the
      ordinary course of business, or (iii) had capital expenditures,
      individually or in the aggregate, in excess of One Hundred Thousand Dollars
      ($100,000). During the two (2) years prior to the date hereof, except as
      disclosed in the SEC Documents (i) the Common Stock has been designated for
      quotation on the American Stock Exchange, (ii) trading in the Common Stock
      has not been suspended by the Commission or the American Stock Exchange and
      (iii) the Company has received no communication, written or oral, from the
      Commission or the American Stock Exchange regarding the suspension or delisting
      of the Common Stock from the American Stock Exchange. The Company has not taken
      any steps to seek protection pursuant to any bankruptcy law nor does the Company
      have any knowledge or reason to believe that its creditors intend to initiate
      involuntary bankruptcy proceedings or any actual knowledge of any fact which
      would reasonably lead any creditor or creditors having claims individually
      or in
      the aggregate in excess of One Hundred Thousand Dollars ($100,000) to do so.
      Based on the financial condition of the Company as of the Closing, after giving
      effect to the receipt by the Company of the proceeds from the transactions
      contemplated hereby, the Company reasonably believes that (i) the fair saleable
      value of the Company’s assets exceeds the amount that will be required to be
      paid on or in respect of the Company’s existing debts and other liabilities
      (including, without limitation, known contingent liabilities and the principal
      and interest on the Convertible Notes) as they mature; (ii) the Company’s assets
      do not constitute unreasonably small capital to carry on its business as now
      conducted and as proposed to be conducted including its capital needs taking
      into account the particular capital requirements of the business conducted
      by
      the Company, and projected capital requirements and capital availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds the Company would receive, were it to liquidate all of its assets,
      after taking into account all anticipated uses of the cash, would be sufficient
      to pay all amounts on or in respect of its liabilities when such amounts are
      required to be paid, including, without limitation, with respect to the
      principal and interest on the Convertible Notes. The Company does not intend
      to
      incur debts beyond its ability to pay such debts as they mature (taking into
      account the timing and amounts of cash to be payable on or in respect of its
      debt). The SEC Documents set forth as of the dates thereof all outstanding
      secured and unsecured Indebtedness of the Company or any Subsidiary, or for
      which the Company or any Subsidiary has commitments. For the purposes of this
      Agreement, “Indebtedness”
shall
      mean (a) any liabilities for borrowed money or amounts owed (other than trade
      accounts payable incurred in the ordinary course of business), (b) all
      guaranties, endorsements and other contingent obligations in respect of
      Indebtedness of others, whether or not the same are or should be reflected
      in
      the Company’s balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of
      any lease payments due under leases required to be capitalized in accordance
      with GAAP. Neither the Company nor any Subsidiary is in default with respect
      to
      any Indebtedness.

     

    
      
         

      

      
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    (n)  Patents
      and Trademarks.
      The
      Company has rights to use all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, trade secrets, inventions,
      copyrights, licenses and other intellectual property rights and similar rights
      necessary or material for use in connection with its business as described
      in
      the SEC Documents and which the failure to so have would have a material adverse
      effect on the results of operations, assets, business, or condition (financial
      or otherwise) of the Company (collectively, the “Intellectual
      Property Rights”).
      The
      Company has not received any notice (written or otherwise) that the Intellectual
      Property Rights used by the Company violate or infringe upon the rights of
      any
      other person or entity. To the knowledge of the Company, all such Intellectual
      Property Rights are enforceable and there is no existing infringement by another
      person or entity of any of the Intellectual Property Rights. The Company has
      taken reasonable security measures to protect the secrecy, confidentiality
      and
      value of all of its Intellectual Property Rights.

     

    
      
         

      

      
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    (o)  Labor
      Relations.
      No
      material labor dispute exists or, to the knowledge of the Company, is imminent
      with respect to any of the employees of the Company which could reasonably
      be
      expected to result in a material adverse effect on the results of operations,
      assets, business, prospects or condition (financial or otherwise) of the
      Company. To the knowledge of the Company, no executive officer is, or is now
      expected to be, in violation of any material term of any employment contract,
      confidentiality, disclosure or proprietary information agreement or
      non-competition agreement, or any other contract or agreement or any restrictive
      covenant, and the continued employment of each such executive officer does
      not
      subject the Company to any liability with respect to any of the foregoing
      matters. The Company is in compliance with all U.S. federal, state, local and
      foreign laws and regulations relating to employment and employment practices,
      terms and conditions of employment and wages and hours, except where the failure
      to be in compliance could not, individually or in the aggregate, reasonably be
      expected to have a material adverse effect on the results of operations, assets,
      business, prospects or condition (financial or otherwise) of the
      Company.

     

    (p)  Offering.
      Assuming the accuracy of the representations and warranties of the Purchasers
      contained in Section 3.2 hereof, the offer, issue, and sale of the
      Securities are exempt from the registration and prospectus delivery requirements
      of the Securities Act and the registration or qualification requirements of
      all
      applicable state securities laws.
      Neither
      the Company nor any authorized agent acting on its behalf will knowingly take
      any action hereafter that would cause the loss of such exemptions.

     

    (q)  Acknowledgment.
      The
      Company acknowledges and agrees that each Purchaser is acting solely in the
      capacity of an arm’s length purchaser with respect to the Securities and the
      transactions contemplated hereby and thereby and that no Purchaser is
      (i) an officer or director of the Company, (ii) an Affiliate of the
      Company or (iii) to the knowledge of the Company, a “beneficial owner” of
      more than 10% of the shares of Common Stock (as defined for purposes of Rule
      13d-3 of the Exchange Act). The Company further acknowledges that no Purchaser
      is acting as a financial advisor or fiduciary of the Company (or in any similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby, and any advice given by any Purchaser or any of its representatives
      or
      agents in connection with this Agreement and the transactions contemplated
      hereby is merely incidental to such Purchaser’s purchase of the Securities. The
      Company further represents to each Purchaser that the Company’s decision to
      enter into this Agreement, the Amended and Restated Certificate of Incorporation
      and the Registration Rights Agreement and issue the Securities has been based
      solely on the independent evaluation by the Company and its
      representatives.

     

    (r)  No
      General Solicitation; Placement Agent’s Fees.
      Neither
      the Company, nor any of its Affiliates, nor any person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D of the Securities Act) in connection with
      the offer or sale of the Securities. The Company shall be responsible for the
      payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for persons engaged by any Purchaser or its investment
      advisor) relating to or arising out of the transactions contemplated hereby.
      The
      Company shall pay, and hold each Purchaser harmless against, any liability,
      loss
      or expense (including, without limitation, attorney’s fees and out-of-pocket
      expenses) arising in connection with any such claim. The Company acknowledges
      that it has engaged Rodman & Renshaw, LLC as placement agent (the
“Agent”)
      in
      connection with the sale of the Securities. Other than the Agent, the Company
      has not engaged any placement agent or other agent in connection with the sale
      of the Securities.

     

    
      
         

      

      
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    (s)  No
      Integrated Offering.
      Neither
      the Company nor any person acting on its behalf has, directly or indirectly,
      made any offers or sales of any security or solicited any offers to buy any
      security, under circumstances that would require registration of any of the
      Securities under the Securities Act or cause this offering of the Securities
      to
      be integrated with prior offerings by the Company for purposes of the Securities
      Act or any applicable shareholder approval provisions, including, without
      limitation, under the rules and regulations of the American Stock Exchange
      or
      any other exchange or automated quotation system on which any of the securities
      of the Company are listed or designated. 

     

    (t)  Application
      of Takeover Protections; Rights Agreement.
      The
      Company and its Board of Directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business
      combination, poison pill (including any distribution under that certain
      Stockholders’ Rights Agreement, dated as of July 27, 1995, between the Company
      and Registrar and Transfer Company, as amended, and any other rights agreement)
      or other similar anti-takeover provision under the Certificate of Incorporation
      or the laws of the jurisdiction of its formation which is or could become
      applicable to (i) any Purchaser as a result of the transactions contemplated
      by
      this Agreement, including, without limitation, the Company’s issuance of the
      Securities and any Purchaser’s ownership of the Securities and (ii) the
      Purchasers and their Affiliates for a period of not less than five (5) years
      after the Closing Date.

     

    (u)  Form
      S-3 Eligibility.
      The
      Company meets the eligibility requirements set forth in the Commission’s Form
      S-3 promulgated under the Securities Act for the registration of the Conversion
      Shares for resale by the Purchasers.

     

    (v)  Registration
      Rights.
      Except
      as set forth on Schedule 3.1(v), and except for such rights as have previously
      be satisfied, other than each of the Purchasers, no person or entity has any
      right to cause the Company to effect the registration under the Securities
      Act
      of any securities of the Company.

     

    (w)  Manipulation
      of Price.
      The
      Company has not, and to its knowledge no one acting on its behalf has, (i)
      taken, directly or indirectly, any action designed to cause or to result in
      the
      stabilization or manipulation of the price of any security of the Company to
      facilitate the sale or resale of any of the Securities, (ii) other than the
      Agent, sold, bid for, purchased, or paid any compensation for soliciting
      purchases of, any of the Securities, or (iii) other than the Agent, paid or
      agreed to pay to any person any compensation for soliciting another to purchase
      any other securities of the Company.

     

    
      
         

      

      
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    (x)  Disclosure.
      All
      disclosure provided to the Purchasers with regard to the representations and
      warranties contained in this Section 3.1 regarding the Company, its business
      and
      the transactions contemplated hereby, furnished in writing by the Company is
      true and correct in all material respects and does not contain any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements made therein, in the light of the circumstances
      under which they were made, not misleading.

     

    3.2  Representations
      and Warranties of each Purchaser.
      As of
      the date hereof and as of the Closing, each Purchaser hereby acknowledges,
      represents, warrants and/or agrees as follows:

     

    (a)  The
      sale
      of the Securities has not been registered under the Securities Act or any state
      securities laws. The Purchaser understands that the offering and sale of the
      Securities is intended to be exempt from registration under the Securities
      Act,
      by virtue of Section 4(2) and/or Section 4(6) of the Securities Act and the
      provisions of Regulation D promulgated thereunder;

     

    (b)  The
      Purchaser is acquiring the Securities solely for its own account for investment
      and not with a view to resale or distribution and has no present intention
      of
      transferring the Securities to any other person or entity;

     

    (c)  The
      Purchaser is an “accredited investor” as that term is defined in Rule 501 of
      Regulation D under the Securities Act;

     

    (d)  The
      Purchaser is a sophisticated investor and has such knowledge and experience
      in
      financial, tax, and business matters, including, without limitation, experience
      in investments by actual participation, so as to enable it to utilize the
      information made available to it in connection with the offering of the
      Securities, to evaluate the merits and risks of an investment in the Securities
      and to make an informed investment decision with respect thereto;

     

    (e)  The
      Purchaser is either a natural person or an entity which was not formed for
      the
      specific purpose of acquiring the Securities. With respect to any
      entity-Purchaser, the execution, delivery and performance of this Agreement
      by
      the Purchaser have been duly authorized and the Agreement is a valid and legally
      binding agreement of the Purchaser;

     

    (f)  The
      Purchaser has received all documents requested by the Purchaser regarding the
      Company and has reviewed them and believes it is well-informed about the
      Company;

     

    (g)  The
      Purchaser acknowledges that neither the Commission nor any U.S. state or foreign
      securities commission has approved the Securities or passed upon or endorsed
      the
      merits of the offering;

     

    
      
         

      

      
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    (h)  The
      Purchaser is aware that an investment in the Securities involves a number of
      very significant risks;

     

    (i)  The
      Purchaser must bear the economic risk of the investment indefinitely because
      none of the Securities may be sold, hypothecated or otherwise disposed of unless
      subsequently registered under the Securities Act and applicable state securities
      laws or an exemption from registration is available. Legends shall be placed
      on
      the Securities to the effect that they have not been registered under the
      Securities Act or applicable state securities laws and of the resulting
      limitations on transfer and that appropriate notations thereof will be made
      in
      the Company’s books and stock transfer records;

     

    (j)  The
      aggregate purchase price of the Securities does not exceed twenty percent (20%)
      of the Purchaser’s net worth;

     

    (k)  The
      Purchaser has taken no action which would give rise to any claim by any person
      for brokerage commission, finders’ fees or the like relating to this Agreement
      or the transactions contemplated hereby; and

     

    (l)  The
      information contained herein is accurate and may be relied upon by the Company
      in determining the availability of an exemption from registration under Federal
      and state securities laws in connection with the offering of the
      Securities.

     

     

    ARTICLE
      IV.
OTHER
      AGREEMENTS OF THE PARTIES

     

    4.1  Transfer
      Restrictions. 

     

    (a)  The
      Securities may only be disposed of in compliance with state and federal
      securities laws. In connection with any transfer of Securities other than
      pursuant to an effective registration statement or Rule 144, to the Company
      or
      to an Affiliate of a Purchaser or in connection with a pledge as contemplated
      in
      Section 4.1(b), the Company may require the transferor thereof to provide to
      the
      Company an opinion of counsel selected by the transferor and reasonably
      acceptable to the Company, the form and substance of which opinion shall be
      reasonably satisfactory to the Company, to the effect that such transfer does
      not require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in writing
      to
      be bound by the terms of this Agreement and shall have the rights of a Purchaser
      under this Agreement and the Registration Rights Agreement.

     

    (b)  The
      Purchasers agree to the imprinting, so long as is required by this Section
      4.1,
      of a legend on any of the Securities in the following form:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
      INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
      SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    
      
         

      

      
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    The
      Company acknowledges and agrees that a Purchaser may from time to time pledge
      pursuant to a bona fide margin agreement with a registered broker-dealer or
      grant a security interest in some or all of the Securities to a financial
      institution that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act and who agrees to be bound by the provisions of this Agreement
      and the Registration Rights Agreement and, if required under the terms of such
      arrangement, such Purchaser may transfer pledged or secured Securities to the
      pledgees or secured parties. Such a pledge or transfer would not be subject
      to
      approval of the Company and no legal opinion of legal counsel of the pledgee,
      secured party or pledgor shall be required in connection therewith. Further,
      no
      notice shall be required of such pledge. At the appropriate Purchaser’s expense,
      the Company will execute and deliver such reasonable documentation as a pledgee
      or secured party of Securities may reasonably request in connection with a
      pledge or transfer of the Securities, including, if the Securities are subject
      to registration pursuant to the Registration Rights Agreement, the preparation
      and filing of any required prospectus supplement under Rule 424(b)(3) under
      the
      Securities Act or other applicable provision of the Securities Act to
      appropriately amend the list of Selling Stockholders thereunder.

     

    (c)  Certificates
      evidencing the Conversion Shares and Warrant Shares shall not contain any legend
      (including the legend set forth in Section 4.1(b)), (i) while a registration
      statement (including the Registration Statement) covering the resale of such
      security is effective under the Securities Act, or (ii) following any sale
      of
      such Conversion Shares or Warrant Shares pursuant to Rule 144, or (iii) if
      such
      Conversion Shares or Warrant Shares are eligible for sale under Rule 144(k),
      or
      (iv) if such legend is not required under applicable requirements of the
      Securities Act (including judicial interpretations and pronouncements issued
      by
      the staff of the Commission). The Company shall cause its counsel to issue
      a
      legal opinion to the Company’s transfer agent promptly after the Effective Date
      if required by the Company’s transfer agent to effect the removal of the legend
      hereunder. If all or any portion of a Warrant is exercised at a time when there
      is an effective registration statement to cover the resale of the Warrant
      Shares, such Warrant Shares shall be issued free of all legends. The Company
      agrees that at such time as such legend is no longer required under this Section
      4.1(c), it will, no later than three Trading Days following the delivery by
      a
      Purchaser to the Company or the Company’s transfer agent of a certificate
      representing Conversion Shares or Warrant Shares, as the case may be, issued
      with a restrictive legend (such third Trading Day, the “Legend
      Removal Date”),
      deliver or cause to be delivered to such Purchaser a certificate representing
      such shares that is free from all restrictive and other legends. The Company
      may
      not make any notation on its records or give instructions to any transfer agent
      of the Company that enlarge the restrictions on transfer set forth in this
      Section except in the case of a Purchaser or its permitted transferee becoming
      an Affiliate. Certificates for Securities subject to legend removal hereunder
      shall be transmitted by the transfer agent of the Company to the Purchasers
      by
      crediting the account of the Purchaser’s prime broker with the Depository Trust
      Company System.

    


    
      
         

      

      
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    (d)  In
      addition to such Purchaser’s other available remedies, the Company shall pay to
      a Purchaser, in cash, as partial liquidated damages and not as a penalty, for
      each $1,000 of Conversion Shares or Warrant Shares (based on the VWAP of the
      Common Stock on the date such Securities are submitted to the Company’s transfer
      agent) delivered for removal of the restrictive legend and subject to Section
      4.1(c), $10 per Trading Day (increasing to $20 per Trading Day three (3) Trading
      Days after such damages have begun to accrue) for each Trading Day after the
      second Trading Day following the Legend Removal Date until such certificate
      is
      delivered without a legend. Nothing herein shall limit such Purchaser’s right to
      pursue actual damages for the Company’s failure to deliver certificates
      representing any Securities as required by the Transaction Documents, and such
      Purchaser shall have the right to pursue all remedies available to it at law
      or
      in equity including, without limitation, a decree of specific performance and/or
      injunctive relief.

     

    (e)  Each
      Purchaser, severally and not jointly with the other Purchasers, agrees that
      the
      removal of the restrictive legend from certificates representing Securities
      as
      set forth in this Section 4.1 is predicated upon the Company’s reliance that the
      Purchaser will sell any Securities pursuant to either the registration
      requirements of the Securities Act, including any applicable prospectus delivery
      requirements, or an exemption therefrom, and that if Securities are sold
      pursuant to a Registration Statement, they will be sold in compliance with
      the
      plan of distribution set forth therein.

     

    4.2  Financial
      Information. The Company shall maintain a system of accounting established
      and
      administered in accordance with GAAP consistently applied, and shall set aside
      on its books, all such proper reserves as shall be required by GAAP. Any
      Purchaser may direct the Company by written notice from time to time to provide
      any or all of the following materials or information in which case the Company
      shall furnish such materials or information, at the Company’s expense, to such
      Purchaser:

     

    (a)  Unless
      otherwise filed and available on the EDGAR system, no later than ninety (90)
      days after the end of each fiscal year, audited consolidated financial
      statements of the Company, together with all notes thereto, prepared in
      reasonable detail in accordance with GAAP, together with an opinion, based
      on an
      audit by independent certified public accountants selected by the Company,
      stating that such financial statements have been so prepared. The consolidated
      financial statements of the Company shall contain a balance sheet as of the
      end
      of such fiscal year and a statement of operations, cash flows and stockholders’
equity for such fiscal year, each setting forth in comparative form the
      corresponding figures for the preceding fiscal year. 

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (b)  Subject
      to the prior receipt by the Company of a written Regulation FD-compliant
      confidentiality agreement from the requesting Purchaser, no later than thirty
      (30) days prior to the first day of each fiscal year of the Company, a budget
      prepared by the Company for each of the four quarters of such fiscal year
      prepared in the same level of detail as prepared for and delivered to the
      Company’s Board of Directors for the Company.

     

    (c)  Unless
      otherwise filed and available on the EDGAR system, no later than forty-five
      (45)
      days after the end of each of the first three fiscal quarters of the Company’s
      fiscal year, the Company’s unaudited consolidated balance sheet as of the end of
      such fiscal quarter and an unaudited consolidated statement of operations and
      cash flows for such fiscal quarter and for the period from the beginning of
      the
      then current fiscal year to the end of such fiscal quarter, setting forth in
      each case, in comparative form, figures for the corresponding periods in the
      preceding fiscal year, all in reasonable detail and prepared in accordance
      with
      GAAP, subject to changes resulting from normal or recurring year-end
      adjustments.

     

    (d)  Subject
      to the prior receipt by the Company of a written Regulation FD-compliant
      confidentiality agreement from the requesting Purchaser, no later than thirty
      (30) days after the end of each calendar month, the Company’s unaudited
      consolidated interim balance sheet as of the end of such month and the related
      unaudited consolidated interim statements of operations and cash flows for
      such
      one-month period and the portion of the fiscal year through the end of such
      month, setting forth in each case, in comparative form, figures for the
      corresponding fiscal periods in the preceding fiscal year (subject to normal
      year-end audit adjustments and the absence of footnote disclosure).

     

    4.3  Inspections.
      The Company shall, and shall cause its Subsidiaries to, furnish to each
      Purchaser any information which such Purchaser may from time to time reasonably
      request concerning any covenant, provision or condition of this Agreement,
      the
      Registration Rights Agreement or the Securities or any matter in connection
      with
      the Company’s business and operations. During normal business hours, upon
      reasonable notice from Purchasers holding a majority of all then outstanding
      Shares, and without undue interruption of the Company’s business, the Company
      shall permit representatives of each Purchaser, including each Purchaser’s
      independent accountants, agents, attorneys, appraisers and any other
      representatives, to visit and inspect any of the Company’s property, including
      its books of account, other books and records, and any facilities or other
      business assets. The inspections in accordance with the preceding sentence
      shall
      be limited to no more than four (4) times each calendar year, and all
      out-of-pocket costs and expenses of such inspections shall be borne by the
      applicable Purchasers; provided, however, that during any period in which an
      Event of Default (as such term is defined in the Convertible Notes) has occurred
      and is continuing, the number of inspections shall not be limited, and the
      reasonable, documented out-of-pocket costs and expenses of the inspections
      during the period in which an Event of Default has occurred and is continuing
      shall be borne by the Company. The information and access set forth in this
      Section 5(b) shall in each case be subject to the Company’s prior receipt of a
      written Regulation FD-compliant confidentiality agreement from the requesting
      Purchaser.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    4.4  Use
      of
      Proceeds. The Company shall use the net cash proceeds of the sale of the
      Securities for general corporate and working capital purposes.

     

    4.5  Maintenance
      of Corporate Existence and Business. The Company will take such commercially
      reasonable action as may from time to time be necessary to preserve its
      corporate existence, rights and franchises, maintain its properties in good
      repair and to comply with the laws of the United States and all states and
      locations in which the Company shall do business as shall be necessary to permit
      the Company to conduct its business, and to preserve all of its rights,
      franchises and privileges.

     

    4.6  Compliance
      with Laws. The Company shall comply with applicable laws, rules and regulations
      of all governmental authorities, the violation of which might have a material
      adverse effect upon its business or financial condition.

     

    4.7  Payment
      of Taxes. The Company shall (i) timely file all required tax returns; and (ii)
      timely pay all taxes, assessments, and other governmental charges or levies
      imposed upon it or upon its income, profits or property, except to the extent
      the same are being contested in good faith and for which adequate reserves
      under
      GAAP have been established.

     

    4.8  Insurance.
      The Company shall maintain insurance in such amounts and covering such risks
      as
      are usually and customarily carried with respect to the Company’s assets and any
      other assets and property of the Company of a character usually insured by
      similar entities engaged in the same or similar businesses as the Company.
      The
      Company shall at all times maintain insurance against its liability for injury
      to persons or property, which insurance shall be by financially sound and
      reputable insurers.

     

    4.9  Listing.
      The Company shall promptly secure the listing of all of the Registrable
      Securities (as defined in the Registration Rights Agreement) upon each national
      securities exchange and automated quotation system, if any, upon which the
      Company’s Common Stock is then listed (subject to official notice of issuance)
      and shall maintain such listing of all Registrable Securities. The Company
      shall
      use commercially reasonable efforts to maintain the authorization for listing
      of
      the Common Stock on the American Stock Exchange. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligations under this
      Section 4.10.

     

    4.10  Pre-Emptive
      Rights. From the Closing Date until the later of (a) January 11, 2010 or (b)
      the
      date on which less than that number of shares of Series B Preferred Stock that
      is equal to 50% of the Shares issued at the Closing remain outstanding, the
      Company shall not directly or indirectly, offer, sell or grant any option to
      purchase (or announce any offer, sale, grant or any option to purchase or other
      disposition of) any Common Stock, Options or Convertible Securities (any such
      offer, sale, grant, disposition or announcement being referred to as a
“Subsequent
      Placement”)
      unless
      the Company shall have first complied with this Section 4.10.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    (a)  The
      Company shall deliver, at least ten (10) business days prior to the closing
      of a
      Subsequent Placement, to each Purchaser then holding at least the number of
      shares of Series B Preferred Stock that is equal to 50% of the Shares initially
      issued to such Purchaser at the Closing (an “Eligible
      Purchaser”),
      a
      written notice (the “Offer
      Notice”)
      of any
      proposed or intended issuance or sale or exchange (the “Offer”)
      of the
      securities being offered (the “Offered
      Securities”)
      in a
      Subsequent Placement, which Offer Notice shall (A) identify and describe
      the Offered Securities, (B) describe the price and other terms upon which
      they are to be issued, sold or exchanged, and the number or amount of the
      Offered Securities to be issued, sold or exchanged, and (C) offer to issue
      and sell to or exchange with such Eligible Purchasers 50% of the Offered
      Securities, allocated among such Eligible Purchasers (a) based on such
      Eligible Purchaser’s pro rata portion of the aggregate principal amount of
      shares of Series B Preferred Stock then held by all Eligible Purchasers (the
      “Basic
      Amount”),
      and
      (b) with respect to each Eligible Purchaser that elects to purchase its
      Basic Amount, any additional portion of the Offered Securities attributable
      to
      the Basic Amounts of other Eligible Purchasers as such Eligible Purchaser shall
      indicate it will purchase or acquire should the other Eligible Purchasers
      subscribe for less than their Basic Amounts (the “Undersubscription
      Amount”).

     

    (b)  To
      accept
      an Offer, in whole or in part, such Eligible Purchaser must deliver a written
      notice to the Company prior to the end of the 10th
      business
      day after such Eligible Purchaser’s receipt of the Offer Notice (the
“Offer
      Period”),
      setting forth the portion of such Eligible Purchaser’s Basic Amount that such
      Eligible Purchaser elects to purchase and, if such Eligible Purchaser shall
      elect to purchase all of its Basic Amount, the Undersubscription Amount, if
      any,
      that such Eligible Purchaser elects to purchase (in either case, the
“Notice
      of Acceptance”).
      If
      the Basic Amounts subscribed for by all Purchasers are less than the total
      of
      all of the Basic Amounts, then each Eligible Purchaser who has set forth an
      Undersubscription Amount in its Notice of Acceptance shall be entitled to
      purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
      Amount it has subscribed for; provided,
      however,
      that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the
      total of all the Basic Amounts and the Basic Amounts subscribed for (the
“Available
      Undersubscription Amount”),
      each
      Eligible Purchaser who has subscribed for any Undersubscription Amount shall
      be
      entitled to purchase only that portion of the Available Undersubscription Amount
      as the Basic Amount of such Eligible Purchaser bears to the total Basic Amounts
      of all Eligible Purchasers that have subscribed for Undersubscription Amounts,
      subject to rounding by the Company to the extent its deems reasonably
      necessary.

     

    (c)  The
      Company shall have thirty (30) days from the expiration of the Offer Period
      above to offer, issue, sell or exchange all or any part of such Offered
      Securities as to which a Notice of Acceptance has not been given by the Eligible
      Purchasers (the “Refused
      Securities”),
      but
      only upon terms and conditions (including, without limitation, the total amount
      of the financing, unit prices and interest rates) that are not more favorable
      to
      the acquiring person or persons or less favorable to the Company than those
      set
      forth in the Offer Notice.

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    (d)  Upon
      the
      closing of the issuance, sale or exchange of all or less than all of the Refused
      Securities, the Eligible Purchasers shall acquire from the Company, and the
      Company shall issue to the Purchasers, the number or amount of Offered
      Securities specified in the Notices of Acceptance, as reduced pursuant to
      Section 4.10(c) above if the Purchasers have so elected, upon the terms and
      conditions specified in the Offer. 

     

    (e)  Any
      Offered Securities not acquired by the Eligible Purchasers or other persons
      in
      accordance with Section 4.10(c) above may not be issued, sold or exchanged
      until they are again offered to the Eligible Purchasers under the procedures
      specified in this Agreement.

     

    (f)  The
      restrictions contained in this Section 4.10 shall not apply to the issuance
      of any Common Stock issued or issuable: (i) under any Approved Stock Plan;
      or (ii) upon conversion of the Convertible Promissory Notes or the exercise
      of the Warrants. “Approved
      Stock Plan”
means
      any employee benefit plan which has been approved by the Board of Directors
      and
      stockholders of the Company prior to the date of this Agreement and as amended
      hereafter solely consistent with Section 4.14, pursuant to which the Company’s
      securities may be issued to any employee, officer or director for services
      provided to the Company.

     

    4.11  Meeting
      of Company Stockholders.

     

    (a)  As
      promptly as practicable after the execution of this Agreement, the Company
      shall
      prepare and file with the Commission the Proxy Statement in form and substance
      reasonably satisfactory to the Company and the Purchasers in order to duly
      call,
      give notice of and hold the Shareholder Meeting on or prior to May 15, 2007,
      unless the Proxy Statement relating to the Shareholder Meeting is reviewed
      by
      the Commission, in which case such date shall be extended to June 15, 2007.
      The
      Company shall respond to any comments of the Commission and use its commercially
      reasonable efforts to have the Proxy Statement declared effective under the
      Securities Act as promptly as practicable after such filing. The Company shall
      cause the Proxy Statement to be distributed to the stockholders as promptly
      as
      practicable after the Proxy Statement shall have become effective under the
      Securities Act. 

     

    (b)  The
      Company’s Board of Directors shall recommend that the all of the proposals set
      forth in the Proxy Statement be approved, which proposals shall include the
      following: 

     

    (i)  the
      approval of a reverse split of 1-for 50 of the Company’s outstanding shares of
      Common Stock, or such other amount within the range of 1-for-45 to 1-for-55
      as
      may be determined by the Board of Directors and reasonably acceptable to the
      Purchasers who surrender Convertible Promissory Notes (the “Reverse
      Stock Split”);

     

    (ii)  the
      approval of the issuance of the Securities;

     

    (iii)  the
      approval of the Amended and Restated Certificate of Incorporation; 

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (iv)  the
      increase in the shares of Common Stock reserved for issuance as incentive awards
      to the Company’s management and other employees, directors and consultants
      pursuant to the Company’s equity incentive plan for purposes of additional
      grants to current employees and initial grants to new hires consistent with
      Section 4.14 below; and

     

    (v)  any
      other
      terms and conditions of this Agreement and the Transaction Documents which
      may
      be required in accordance with applicable law and the rules and regulations
      of
      the Trading Market. 

     

    (c)  The
      Company shall notify the Purchasers promptly of the receipt of any comments
      from
      the Commission (or its staff) and of any request by the Commission (or its
      staff) or any other Government Authority for amendments or supplements to the
      Proxy Statement or any Other Filing for additional information, and shall
      promptly supply the Purchasers with copies of all correspondence between the
      Company or any of its representatives, on the one hand, and the Commission,
      its
      staff or any other Government Authority, on the other hand, with respect to
      the
      Proxy Statement, or any Other Filings. 

     

    (d)  As
      promptly as practicable after the date of this Agreement, the Company shall
      prepare and file any other filings required under the Exchange Act, the
      Securities Act or any other federal or state securities Law relating to the
      transactions contemplated by this Agreement (the “Other
      Filings”).
      

     

    (e)  The
      Company shall cause all documents that it is responsible for filing with the
      Commission or other regulatory authorities under this Section 4.11 to comply
      in
      all material respects with all applicable requirements of the Securities Act,
      the Exchange Act and the rules and regulations promulgated thereunder.


     

    (f)  Notwithstanding
      anything to the contrary contained in this Agreement, the Company, may adjourn
      or postpone the Shareholder Meeting to the extent necessary to ensure that
      any
      supplement or amendment to the Proxy Statement required under applicable
      requirements of the Securities Act, the Exchange Act and the rules and
      regulations promulgated thereunder is provided to the Company’s stockholders;
      provided that the Shareholder Meeting shall not be delayed for more than fifteen
      (15) days with out the Purchasers representing at least a majority in interest
      of the Shares to be purchased hereunder.

     

    4.12  Abstention
      from Trading.
      From
      the date hereof until the Closing Date and the public announcement of the
      transactions contemplated hereby, (i) the Purchasers will not engage in any
      financial market transactions (whether long, short or other hedging
      transactions) with respect to the Company’s Common Stock and (ii) the Company
      will not, and the Company shall cause its directors and officers and each of
      its
      and their respective Affiliates to not, engage in any financial market
      transactions (whether long, short or other hedging transactions) with respect
      to
      the Company’s Common Stock.

     

    4.13  Board
      of
      Directors. At the Shareholder Meeting, the Company will fix the size of its
      Board of Directors at seven (7) persons, which will consist of the following:
      (a) upon and after the Closing, four (4) incumbent directors, (b) one (1)
      vacancy that may be filled at any time after the Closing with a new director
      designated by the Purchasers who surrender Convertible Promissory Notes (the
      “Bridge
      Lenders”),
      which
      new director shall be reasonably acceptable to the Company (the “Initial Purchaser
      Designee”),
      and
      (c) two (2) additional vacancies. For so long as the Bridge Lenders hold at
      least that number of shares of Series B Preferred Stock that is equal to 50%
      of
      the Shares issued to the Bridge Lenders at the Closing, such Purchasers will
      have the right, but not the obligation, to designate the Initial Purchaser
      Designee and two (2) additional directors to the Board of Directors
      (the “Subsequent Purchaser
      Designees”
and,
      together with the Initial Purchaser Designee, the “Purchaser
      Designees”),
      to
      fill the two (2) additional vacancies that will exist following the Closing.
      Upon the Bridge Lenders’ request at the Closing or from time to time thereafter,
      the Company shall cause the Purchaser Designees or any successor designee
      identified in writing by the Bridge Lenders to become members of the Board
      of
      Directors. The Company further covenants and agrees that it will take all
      reasonably necessary actions to ensure that the Purchaser Designees will be
      included on the Company’s slate of nominees for the Board of Directors submitted
      for a shareholder vote at any applicable annual meeting of stockholders after
      the Closing, including preparation of proxy materials and solicitation of the
      Company’s stockholders to give effect to this Section 4.13.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    4.14  Option
      Pool Increase. On or before the Closing the Company shall cause an increase
      in
      the shares of Common Stock reserved for issuance as incentive awards to the
      Company’s management and other employees, directors and consultants pursuant to
      its equity incentive plan for purposes of additional grants to current employees
      and initial grants to new hires, in an aggregate amount equal to the sum of
      (i)
      10% of the Series B Preferred Stock (on an as-converted basis) issued at the
      Closing (excluding the Warrants) and (ii) 13,000,000 shares of Common Stock
      calculated prior to the Reverse Stock Split. 

     

    4.15  Protective
      Provisions. At any time when any shares of Series B Preferred Stock issued
      pursuant to this Agreement, including upon exercise of the Warrants, are
      outstanding, the Company shall not, without first obtaining the approval (by
      vote or written consent, as provided by law) of the holders of at least a
      majority of the shares of the Series B Preferred Stock then held by Significant
      Holders, if any (it shall be understood, however, that the following Protective
      Provisions are identical to those set forth in Subsection 3.2 of the rights
      and
      preferences of the Series B Preferred Stock set forth in Article Fourth of
      the
      Company’s Amended and Restated Certificate of Incorporation, and approval or
      waiver of any of the following provisions in accordance with the Company’s
      Amended and Restated Certificate of Incorporation, will be deemed approval
      or
      waiver of the same provision hereunder):

     

    	a)  	
            authorize
              or incur any Indebtedness in excess of
              $2,000,000;

          


     

    	b)  	
            issue
              or sell any convertible debt, preferred stock (convertible or otherwise)
              or any other equity or equity-linked security at a price that values
              the
              Company’s Common Stock at a price less than the Per Share Purchase Price
              (as adjusted for all subsequent stock splits, stock dividends,
              consolidations, recapitalizations and reorganizations) other than any
              equity or equity linked security that is issued pursuant to any
              transactions approved under Subsection 4.15(k)
              hereof;

          


     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    	c)  	
            increase
              or decrease the authorized number of shares of capital stock of the
              Company;

          


     

    	d)  	
            create
              or issue any new class or series of shares having rights, preferences
              or
              privileges senior to the Common Stock;

          


     

    	e)  	
            issue
              any shares of Series A Preferred Stock other than pursuant to the terms
              of
              that certain Amended and Restated Stockholders’ Rights Agreement, dated as
              of July 25, 2005, between the Company and American Stock Transfer &
              Trust Company;

          


     

    	f)  	
            amend,
              alter, or repeal any provision of the Amended and Restated Certificate
              of
              Incorporation or Amended and Restated Bylaws of the Company (including
              any
              filing of a certificate of designation), that alters or changes the
              voting
              powers, preferences, or other special rights or privileges, or
              restrictions of the Series B Preferred
              Stock;

          


     

    	g)  	
            pay
              or declare any dividends or make other distributions upon its shares
              of
              capital stock;

          


     

    	h)  	
            purchase,
              redeem or otherwise acquire any of the Company’s equity securities
              (including warrants, options and other rights to acquire equity
              securities) other than the repurchase of equity securities pursuant
              to
              existing agreements disclosed to the Purchasers in writing prior to
              the
              date hereof specifically referencing this Subsection
              4.15(h);

          


     

    	i)  	
            issue
              any equity or equity-linked securities to any employee other than pursuant
              to the Company’s Approved Stock Plans, or increase the shares of Common
              Stock or other securities reserved for issuance as incentive awards
              to the
              Company’s management and other employees, directors and consultants
              pursuant to the Approved Stock Plans or any other any equity incentive
              plan or similar arrangement, other than the increase contemplated by
              Section 4.14 hereof;

          


     

    	j)  	
            liquidate,
              dissolve or wind-up;

          


     

    	k)  	
            merge
              or consolidate with another corporation in which the holders of the
              Company’s voting equity securities immediately prior to the transaction
              would own 50% or less of the voting securities of the surviving
              corporation or engage in any other Deemed Liquidation Event (as defined
              in
              the Amended and Restated Certificate of
              Incorporation);

          


     

    	l)  	
            sell,
              license or dispose of any material assets of the Company, including
              intellectual property or other rights to the Company’s development stage,
              pre-clinical and/or diagnostic assets, including, without limitation,
              pursuant to any license, development, commercialization, distribution,
              marketing, co-marketing, collaboration, partnering or other agreement,
              other than licenses of immaterial technology in the ordinary course
              of
              business on commercially reasonable terms and consistent with past
              practices; 

          


     

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    	m)  	
            change
              the authorized number of directors of the
              Company;

          


     

    	n)  	
            amend
              or waive any material provision of the Amended and Restated Certificate
              of
              Incorporation or the Company’s By-Laws;

          


     

    	o)  	
            materially
              change the nature of the Company’s business from that engaged in on the
              date hereof; 

          


     

    	p)  	
            intentionally
              take any action which is reasonably likely to result in (i) the Common
              Stock of the Company no longer being approved for quotation on the
              American Stock Exchange or the Nasdaq Stock Market or (ii) the Common
              Stock of the Company ceasing to be registered pursuant to Section 12
              of
              the Exchange Act; or

          


     

    	q)  	
            agree,
              consent or acquiesce to any amendment, supplement or other modification
              to, or termination of, any of its material agreements, including, without
              limitation any Material License Agreement or any other agreement filed
              with the Commission pursuant to Item 601 of Regulation
              S-K.

          


     

    


     

    ARTICLE
      V.


    TERMINATION

     

    5.1  Termination.
      If the conditions to the Purchasers’ obligations at Closing have not been
      satisfied or waived on before the date that is fifteen (15) days after the
      applicable deadline for the Shareholder Meeting (i.e.,
      May 15,
      2007, unless the proxy statement relating to the Shareholder Meeting is reviewed
      by the Commission, in which case such date shall be extended to June 15, 2007),
      then this Agreement may be terminated at any time thereafter upon written notice
      to the Company by Purchasers representing at least a majority in interest of
      the
      Shares to be purchased hereunder. The provisions of Article VI shall survive
      the
      termination of this Agreement.

     

    


     

    ARTICLE
      VI.
MISCELLANEOUS

     

    6.1  Fees
      and
      Expenses. Except as expressly set forth in the Transaction Documents to the
      contrary, each party shall pay the fees and expenses of its advisers, counsel,
      accountants and other experts, if any, and all other expenses incurred by such
      party incident to the negotiation, preparation, execution, delivery and
      performance of this Agreement; provided that the Company shall reimburse the
      holders of Convertible Promissory Notes for all reasonable costs and expenses
      incurred in connection with this Agreement, the Proxy Statement and the
      Shareholder Meeting (including all reasonable legal fees and disbursements
      in
      connection therewith, documentation and implementation of the transactions
      contemplated by this Agreement and due diligence in connection therewith)
      subject to a maximum of One Hundred Thousand Dollars ($100,000), including
      any
      amounts previously reimbursed under the Note and Warrant Purchase Agreement.
      The
      Company shall pay all transfer agent fees, stamp taxes and other taxes and
      duties levied in connection with the delivery of any Securities to the
      Purchasers.

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    6.2  Entire
      Agreement. The Transaction Documents, together with the exhibits and schedules
      thereto, and the Note and Warrant Purchase Agreement and other agreements
      entered into and securities issued in connection therewith, contain the entire
      understanding of the parties with respect to the subject matter hereof and
      supersede all prior agreements and understandings, oral or written, with respect
      to such matters, which the parties acknowledge have been merged into such
      documents, exhibits and schedules.

     

    6.3  Notices.
      Any and all notices or other communications or deliveries required or permitted
      to be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile at the facsimile number set forth
      on
      the signature pages attached hereto prior to 5:30 p.m. (New York City time)
      on a
      Trading Day, (b) the next Trading Day after the date of transmission, if such
      notice or communication is delivered via facsimile at the facsimile number
      set
      forth on the signature pages attached hereto on a day that is not a Trading
      Day
      or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
      2nd
      Trading
      Day following the date of mailing, if sent by U.S. nationally recognized
      overnight courier service, or (d) upon actual receipt by the party to whom
      such
      notice is required to be given. The address for such notices and communications
      shall be as set forth on the signature pages attached hereto.

     

    6.4  Amendments;
      Waivers. No provision of this Agreement may be waived or amended except in
      a
      written instrument signed by the Company and Purchasers representing at least
      a
      majority in interest of the Shares to be purchased hereunder. No waiver of
      any
      default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of any party to exercise
      any
      right hereunder in any manner impair the exercise of any such
      right.

     

    6.5  Headings.
      The headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.

     

    6.6  Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of
      the parties and their successors and permitted assigns. The Company may not
      assign this Agreement or any rights or obligations hereunder without the prior
      written consent of each Purchaser (other than by merger). Any Purchaser may
      assign any or all of its rights under this Agreement to any Person to whom
      such
      Purchaser assigns or transfers any Securities, provided such assignment is
      otherwise permitted by law, provided such transferee agrees in writing to be
      bound, with respect to the transferred Securities, by the provisions of the
      Transaction Documents that apply to the “Purchasers.”

     

    6.7  No
      Third-Party Beneficiaries. This Agreement is intended for the benefit of the
      parties hereto and their respective successors and permitted assigns and is
      not
      for the benefit of, nor may any provision hereof be enforced by, any other
      Person, except as otherwise set forth in Section 4.9.

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    6.8  Survival.
      The representations and warranties contained herein shall survive the Closing
      and the delivery of the Shares, the Conversion Shares and Warrant
      Shares.

     

    6.9  Governing
      Law. All questions concerning the construction, validity, enforcement and
      interpretation of the Transaction Documents shall be governed by and construed
      and enforced in accordance with the internal laws of the State of New York,
      without regard to the principles of conflicts of law thereof. 

     

    6.10  Execution.
      This Agreement may be executed in two or more counterparts, all of which when
      taken together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

     

    6.11  Severability.
      If any term, provision, covenant or restriction of this Agreement is held by
      a
      court of competent jurisdiction to be invalid, illegal, void or unenforceable,
      the remainder of the terms, provisions, covenants and restrictions set forth
      herein shall remain in full force and effect and shall in no way be affected,
      impaired or invalidated, and the parties hereto shall use their good faith
      commercially reasonable efforts to find and employ an alternative means to
      achieve the same or substantially the same result as that contemplated by such
      term, provision, covenant or restriction. It is hereby stipulated and declared
      to be the intention of the parties that they would have executed the remaining
      terms, provisions, covenants and restrictions without including any of such
      that
      may be hereafter declared invalid, illegal, void or unenforceable.

     

    6.12  Rescission
      and Withdrawal Right. Notwithstanding anything to the contrary contained in
      (and
      without limiting any similar provisions of) any of the other Transaction
      Documents, whenever any Purchaser exercises a right, election, demand or option
      under a Transaction Document and the Company does not timely perform its related
      obligations within the periods therein provided, then such Purchaser may rescind
      or withdraw, in its sole discretion from time to time upon written notice to
      the
      Company, any relevant notice, demand or election in whole or in part without
      prejudice to its future actions and rights.

     

    6.13  Replacement
      of Securities. If any certificate or instrument evidencing any Securities is
      mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
      issued in exchange and substitution for and upon cancellation thereof (in the
      case of mutilation), or in lieu of and substitution therefor, a new certificate
      or instrument, but only upon receipt of evidence reasonably satisfactory to
      the
      Company of such loss, theft or destruction. The applicant for a new certificate
      or instrument under such circumstances shall also pay any reasonable third-party
      costs (including customary indemnity) associated with the issuance of such
      replacement Securities.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    6.14  Remedies.
      In addition to being entitled to exercise all rights provided herein or granted
      by law, including recovery of damages, each of the Purchasers and the Company
      will be entitled to specific performance under the Transaction Documents. The
      parties agree that monetary damages will not be adequate compensation for any
      loss incurred by reason of any breach of obligations contained in the
      Transaction Documents and hereby agrees to waive and not to assert in any action
      for specific performance of any such obligation the defense that a remedy at
      law
      would be adequate, and hereby further agrees to waive any requirement that
      the
      other party post a bond as a condition for obtaining any such
      relief.

     

    6.15  Payment
      Set Aside. To the extent that the Company makes a payment or payments to any
      Purchaser pursuant to any Transaction Document or a Purchaser enforces or
      exercises its rights thereunder, and such payment or payments or the proceeds
      of
      such enforcement or exercise or any part thereof are subsequently invalidated,
      declared to be fraudulent or preferential, set aside, recovered from, disgorged
      by or are required to be refunded, repaid or otherwise restored to the Company,
      a trustee, receiver or any other person under any law (including, without
      limitation, any bankruptcy law, state or federal law, common law or equitable
      cause of action), then to the extent of any such restoration the obligation
      or
      part thereof originally intended to be satisfied shall be revived and continued
      in full force and effect as if such payment had not been made or such
      enforcement or setoff had not occurred.

     

    6.16  Independent
      Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser
      under any Transaction Document are several and not joint with the obligations
      of
      any other Purchaser, and no Purchaser shall be responsible in any way for the
      performance or non-performance of the obligations of any other Purchaser under
      any Transaction Document. Nothing contained herein or in any other Transaction
      Document, and no action taken by any Purchaser pursuant thereto, shall be deemed
      to constitute the Purchasers as a partnership, an association, a joint venture
      or any other kind of entity, or create a presumption that the Purchasers are
      in
      any way acting in concert or as a group with respect to such obligations or
      the
      transactions contemplated by the Transaction Documents. Each Purchaser shall
      be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Purchaser
      to
      be joined as an additional party in any proceeding for such
      purpose.

     

    6.17  Liquidated
      Damages. The Company’s obligations to pay any partial liquidated damages or
      other amounts owing under the Transaction Documents is a continuing obligation
      of the Company and shall not terminate until all unpaid partial liquidated
      damages and other amounts have been paid notwithstanding the fact that the
      instrument or security pursuant to which such partial liquidated damages or
      other amounts are due and payable shall have been canceled.

     

    6.18  Construction.
      The parties agree that each of them and/or their respective counsel has reviewed
      and had an opportunity to revise the Transaction Documents and, therefore,
      the
      normal rule of construction to the effect that any ambiguities are to be
      resolved against the drafting party shall not be employed in the interpretation
      of the Transaction Documents or any amendments hereto.

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Series B Stock and Warrant
      Purchase Agreement to be duly executed by their respective authorized
      signatories as of the date first indicated above.

     

     

    
      	ALTEON INC.	 	 	
              Address
                for Notice:

            
	 	 	 	 
	 	 	 	
               

            
	By:/s/ Noah
              Berkowitz	 	 	
              221
                West Grand Avenue

              Montvale,
                NJ 07645

            
	
              

              Name:
                Noah Berkowitz

              Title:
                President

            	 	 	
            
	 	 	 	 
	
              With
                a copy to (which shall not constitute notice):

               

              Mintz
                Levin Cohn Ferris Glovsky and Popeo, P.C.

              One
                Financial Center

              Boston,
                MA 02110

              Attn:
                William T. Whelan, Esq.

            	 	 	 
	 	 	 	 


    

    
 

     

    


    


    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASER FOLLOWS]

    


    
      
         

      

      
        32

        
          

        

      

      
         

      

    



    


    IN
      WITNESS WHEREOF, the undersigned have caused this Series B Stock and Warrant
      Purchase Agreement to be duly executed by their respective authorized
      signatories as of the date first indicated above.

     

     

    
      	BAKER/TISCH INVESTMENTS,
              L.P.	Address for Notice:
	By: Baker/Tisch
              Capital, L.P.,	 
	
               its
                general partner 

            	667 Madison Avenue
	By: Baker/Tisch
              Capital (GP), LLC,	17th
              Floor
	
               its
                general partner 

            	New York, NY 10021
	 	Fax:
	By: /s/
              Feix Baker	 
	
               Name:
                Felix Baker, Ph.D

            	 
	
               Title:
                Managing Member

            	 


    

       

    BAKER
      BIOTECH FUND I, L.P.

    By:
       Baker
      Biotech Capital, L.P., 

    its
      general partner

    By:
       Baker
      Biotech Capital (GP), LLC, 

    its
      general partner

    


    By: _/s/
      Felix Baker____________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    


    Baker
      Brothers Life Sciences, L.P.

    By:
       Baker
      Brothers Life Sciences Capital, L.P.

    its
      general partner

    By:
       Baker
      Brothers Life Sciences Capital (GP), LLC 

    is
      general partner

    


    By: _/s/
      Felix Baker_____________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    


    14159,
      L.P.

    By:
       14159
      Capital, L.P., 

    its
      general partner

    By:
       14159
      Capital (GP), LLC, 

    is
      general partner

    


    By:__/s/
      Felix Baker________________

    Name:
      Felix Baker, Ph.D.

    Title:
      Managing Member

    


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Series B Stock and Warrant
      Purchase Agreement to be duly executed by their respective authorized
      signatories as of the date first indicated above.

     

    
      
        	
                Atticus
                  Global Advisors,
                  Ltd. 

              	Address for Notice:
	 	 
	
                 

              	
                c/o
                  Atticus Capital LP

              
	 	152
                West 57th
                Street
	
                By:
                  /s/ Mathhew Edmonds

              	New
                York, NY 10019 
	Name: Matthew Edmonds 	Attn:
                Legal Department
	Title:
                Director 	Fax:
                (212) 373-0871
	
                 

              	 
	
                 

              	 


      

       

    

     

    Green
      Way Managed Account Series, Ltd.,
      

    in
      respect to its segregated account, Green Way Portfolio D

    


    


    By:_/s/Dominique
      Ould-Ferhat ___

           
      Name: Dominique Ould-Ferhat

           
      Title: President and Director

    


    


    


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    



    SCHEDULE
      A

    


    LIST
      OF
      PURCHASERS

    


     

    


    
      	 	 Subscription
              Amount	 	 
	 

              Name
                of Purchaser

            	 
              Cash
                at Closing 

            	
               Conversion of Convertible

              Promissory Notes (plus 

              interest)

            	
              Series
                B Preferred Stock

              Purchased 

            	 
              Warrants

              Purchased

            
	
               

              Atticus
                Global Advisors, Ltd.

            	
               

              $3,500,000

            	
               

              N/A

            	
               

              (4)

            	
               

              (5)

            
	 	 	 	 	 
	
              Green
                Way Managed Account Series, Ltd., in respect to its segregated account,
                Green Way Portfolio D

            	
               

              $500,000

            	
               

              N/A

            	
               

              (4)

            	
               

              (5)

            
	
               

              Total

            	
               

              $22,000,000
                (2)

            	
               

              3,000,000
                (3)

            	
               

              (4)

            	
               

              (5)

            


    

    


    


     

     

      
        

      

    

    

      1.
        Baker
        Brothers Investments includes investments by the following funds: Baker/Tisch
        Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences,
        L.P., 14159,L.P., Baker Bros. Investments II, L.P.

      1.
        To be
        amended at Closing. The aggregate cash paid at closing by Baker Brothers
        Investments shall be reduced by the aggregate accrued and unpaid interest
        on the
        Convertible Promissory Notes through the Closing. 

      2.
        To be
        amended at closing to reflect the accrued and unpaid interest on the Convertible
        Promissory Notes. 

      2.
        To be
        completed at Closing. The number of shares of Series B Preferred Stock allocated
        to each Purchaser shall be determined at the Closing based upon each Purchaser's
        respective Subscription Amount divided by the Per Share Purchase Price.


      3.
        To be
        completed at Closing. The number of Warrants shall represent 25% of total
        Subscription Amount divided by the Per Share Purchase
        Price.




    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
      A

    


    Form
      of
      Amended and Restated Certificate of Incorporation

    


    


    
      
         

      

      
         

        
          

        

      

      
         

      

    



    


    Exhibit
      B

    


    Form
      of
      Registration Rights Agreement

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    



    


    Exhibit
      C

    


    Form
      of
      Warrant

    


    


    
      
         

      

      
         

        
          

        

      

      
         

      

    



    


    Exhibit
      D

    


    Form
      of
      Opinion of Company Counsel

    


    


    1.
       The
      Company and the Subsidiary are corporations duly incorporated, validly existing
      and in good standing under the Delaware Law and have all requisite corporate
      power and authority to conduct their business as described in the Company’s
      Annual Report on Form 10-K for its fiscal year ended December 31, 2006, as
      amended.

    


    2.
       The
      Company has the requisite corporate power and authority to enter into
      and

    perform
      its obligations under the Transaction Documents and to issue the Series B
      Preferred Stock and the Warrants in accordance with their terms. The execution
      and delivery of the Transaction Documents by the Company have been duly
      authorized by all necessary corporate action. Each of the Transaction Documents
      has been duly executed and delivered, and each of the Transaction Documents
      constitute valid and binding obligations of the Company, enforceable against
      it
      in accordance with their respective terms.

     

    3.
       The
      shares of Series B Preferred Stock to be issued to you at the Closing have
      been
      duly and validly authorized, and, when issued and delivered against payment
      therefor pursuant to the Purchase Agreement, will be duly and validly issued,
      fully paid and nonassessable. 

    


    4. The
      number of shares of Series B Preferred Stock initially issuable upon exercise
      of
      the Warrants has been duly and validly authorized and reserved for issuance
      and,
      upon issuance in accordance with the terms of the Warrants, will be duly and
      validly issued, fully paid and nonassessable. 

    


    5. The
      number of shares of Common Stock initially issuable upon conversion of the
      Series B Prefered Stock, including the Series B Preferred Stock issuable upon
      exercise of the Warrants, has been duly and validly authorized and reserved
      for
      issuance and, upon issuance in accordance with the terms of the Transaction
      Documents, will be duly and validly issued, fully paid and
      nonassessable.

    


    6.
       The
      execution and delivery of the Transaction Documents by the Company will not
      (i)
      result in a violation of the Company’s Certificate of Incorporation or By-Laws;
      or (ii) to our knowledge, violate, breach or constitute a default under, or
      (except as created pursuant to the terms of the Transaction Documents) result
      in
      the creation of any lien, charge or encumbrance on any property or assets of
      the
      Company, pursuant to the terms of any material agreement, indenture or
      instrument to which the Company is a party.

    


    7.
       Based
      upon your representations, warranties and covenants contained in the Transaction
      Documents, the shares of Series B Preferred Stock, Warrants and underlying
      shares of Common Stock may be issued to you without registration under the
      Securities Act of 1933, as amended.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8.
       No
      registration with, consent or approval of, notice to, or other action by, any
      governmental entity is required on the part of the Company for the execution
      or
      delivery by the Company of the Transaction Documents, or if required, such
      registration has been made, such consent or approval has been obtained, such
      notice has been given or such other appropriate action has been
      taken.