Document:

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                                                                     Exhibit 4.1

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of September 29, 2000 among Alteon Inc., a Delaware corporation
(the "Company"), and each of the purchasers executing this Agreement and listed
on Exhibit A attached hereto (collectively, the "Purchasers")

         This Agreement is being entered into pursuant to the Common Stock and
Warrant Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers (the "Purchase Agreement").

         The Company and the Purchasers hereby agree as follows:

         1. Definitions Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:

                  "Advice" shall have the meaning set forth in Section 3(m).

                  "Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.

                  "Blackout Period" shall have the meaning set forth in Section
3(n).

                  "Board" shall have the meaning set forth in Section 3(n).

                  "Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of California generally are authorized or required by law or other
government actions to close.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the Company's Common Stock, par value
$0.01 per share.

                  "Effectiveness Date" means with respect to the Registration
Statement the 120th day following the date of the First Tranche closing pursuant
to the Purchase Agreement (the "First Tranche Closing Date").

                  "Effectiveness Period" shall have the meaning set forth in
Section 2.

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                  "Event" shall mean any one or more of the following:

                           (i) the Registration Statement is not filed on or
         prior to the Filing Date, or is not declared effective by the
         Commission on or prior to the Effectiveness Date (or in the event an
         additional Registration Statement is filed because the actual number of
         Shares and Warrant Shares exceeds the number of shares of Common Stock
         initially registered is not filed and declared effective within the
         time periods set forth in Section 2) (such an Event called a
         "Non-Registration Event"), or

                           (ii) the Company fails to file with the Commission a
         request for acceleration in accordance with Rule 12dl-2 promulgated
         under the Exchange Act within five (5) Business Days of the date that
         the Company is notified (orally or in writing, whichever is earlier) by
         the Commission that a Registration Statement will not be "reviewed," or
         not subject to further review, or

                           (iii) the Registration Statement is filed with and
         declared effective by the Commission but thereafter ceases to be
         effective as to all Registrable Securities at any time prior to the
         expiration of the Effectiveness Period, without being succeeded
         immediately by a subsequent Registration Statement filed with and
         declared effective by the Commission, or

                           (iv) trading in the Common Stock is suspended for any
         reason for more than three (3) Business Days in the aggregate, or

                           (v) the rights of the Holders of the Warrants are
         suspended for any reason, or

                           (vi) the Company has breached Section 3(n) of this
         Agreement.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Filing Date" means the 45th day following the First Tranche
Closing Date.

                  "Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities, including without
limitation the Purchasers and their assignees.

                  "Losses" shall have the meaning set forth in Section 5(a).

                  "Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
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.

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                  "Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.

                  "Purchase Agreement" has the meaning set forth in the preamble
of this Agreement.

                  "Registrable Securities" means (i) the Shares (as defined in
the Purchase Agreement), and upon any stock split, stock dividend,
recapitalization or similar event with respect to such Shares (ii) any other
dividend or other distribution with respect to, conversion or exchange of, or in
replacement of, Registrable Securities, and (iii) any Common Stock issued as
liquidated damages hereunder.

                  "Registration Statement" means the registration statements and
any additional registration statements contemplated by Section 2, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre-and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.

                  "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.

                  "Rule 158" means Rule 158 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.

                  "Rule 415" means Rule 415 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.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.

         2. Registration. On or prior to the Filing Date, the Company shall
prepare and file with the Commission a "shelf" Registration Statement covering
all Registrable Securities for an offering to be made by the Holders on a
continuous basis pursuant to Rule 415. The Registration Statement

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shall be on Form S-1 (or on another form appropriate for such registration in
accordance herewith). The Company shall (i) not permit any securities other than
the Registrable Securities to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act (including filing with the Commission a
request for acceleration of effectiveness in accordance with Rule 12dl-2
promulgated under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed," or not be
subject to further review) prior to the Effectiveness Date and to keep such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the date on which
all the Registrable Securities may be sold without any restriction pursuant to
Rule 144 as determined by the counsel to the Company pursuant to a written
opinion letter, addressed to the Company's transfer agent to such effect (the
"Effectiveness Period").

         3. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:

                  (a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-1 (or on another form
appropriate for such registration in accordance herewith) in accordance with the
method or methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders), and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall (i) furnish to the Holders and any Special
Counsel, copies of all such documents proposed to be filed, which documents
(other than those incorporated by reference) will be subject to the review of
such Holders and such Special Counsel, and (ii) at the request of any Holder
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing within
three (3) Business Days of their receipt thereof.

                  (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto

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and as promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

                  (c) Notify the Holders of Registrable Securities to be sold
and any Special Counsel as promptly as possible but, in the event of any filing
by the Company, no less than five (5) Business Days prior to such filing, and
confirm such notice in writing no later than one (1) Business Day following such
filing:

                           (A) when a Prospectus or any Prospectus supplement or
         post-effective amendment to the Registration Statement is proposed to
         be filed;

                           (B) when the Commission notifies the Company whether
         there will be a "review" of such Registration Statement and whenever
         the Commission comments in writing on such Registration Statement; and

                           (C) with respect to the Registration Statement or any
         post-effective amendment, when the same has become effective:

                                    (i) of any request by the Commission or any
                                    other Federal or state governmental
                                    authority for amendments or supplements to
                                    the Registration Statement or Prospectus or
                                    for additional information;

                                    (ii) of the issuance by the Commission of
                                    any stop order suspending the effectiveness
                                    of the Registration Statement covering any
                                    or all of the Registrable Securities or the
                                    initiation of any Proceedings for that
                                    purpose;

                                    (iii) if at any time any of the
                                    representations and warranties of the
                                    Company contained in any agreement
                                    contemplated hereby ceases to be true and
                                    correct in all material respects;

                                    (iv) of the receipt by the Company of any
                                    notification with respect to the suspension
                                    of the qualification or exemption from
                                    qualification of any of the Registrable
                                    Securities for sale in any jurisdiction, or
                                    the initiation or threatening of any
                                    Proceeding for such purpose; and

                                    (v) of the occurrence of any event that
                                    makes any statement made in the Registration
                                    Statement or Prospectus or any document
                                    incorporated or deemed to be incorporated
                                    therein by reference untrue in

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                                    any material respect or that requires any
                                    revisions to the Registration Statement,
                                    Prospectus or other documents so that, in
                                    the case of the Registration Statement or
                                    the Prospectus, as the case may be, it will
                                    not contain any untrue statement of a
                                    material fact or omit to state any material
                                    fact required to be stated therein or
                                    necessary to make the statements therein, in
                                    the light of the circumstances under which
                                    they were made, not misleading.

                  (d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

                  (e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Holders shall reasonably request and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment.

                  (f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.

                  (g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.

                  (h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so

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qualified or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject.

                  (i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any Holder may request
(provided that issuance of certificates so registered would not violate the
Securities Act) at least two (2) Business Days prior to any sale of Registrable
Securities.

                  (j) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

                  (k) Use its reasonable best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on The American
Stock Exchange, NASDAQ (NML or Small Cap) or the New York Stock Exchange as and
when required pursuant to the Purchase Agreement.

                  (l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.

                  (m) (i) Require each selling Holder to furnish to the Company
         information regarding such Holder and the distribution of such
         Registrable Securities as is required by law to be disclosed in the
         Registration Statement, and the Company may exclude from such
         registration the Registrable Securities of any such Holder who fails to
         furnish such information within a reasonable time prior to the filing
         of each Registration Statement, supplemented Prospectus and/or amended
         Registration Statement.

                      (ii) If the Registration Statement refers to any Holder by
         name or otherwise as the holder of any securities of the Company, then
         such Holder shall have the right to require (if such reference to such
         Holder by name or otherwise is not required by the Securities Act or
         any similar federal statute then in force) the deletion of the
         reference to

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         such Holder in any amendment or supplement to the Registration
         Statement filed or prepared subsequent to the time that such reference
         ceases to be required.

                           (iii)  Each Holder covenants and agrees that:

                                    (A) it will not sell any Registrable
                                    Securities under the Registration Statement
                                    until it has received copies of the
                                    Prospectus as then amended or supplemented
                                    as contemplated in Section 3(g) and notice
                                    from the Company that such Registration
                                    Statement and any post-effective amendments
                                    thereto have become effective as
                                    contemplated by Section 3(c); and

                                    (B) it and its officers, directors or
                                    Affiliates, if any, will comply with the
                                    prospectus delivery requirements of the
                                    Securities Act as applicable to them in
                                    connection with sales of Registrable
                                    Securities pursuant to the Registration
                                    Statement.

                           (iv) Each Holder agrees by its acquisition of such
         Registrable Securities that, upon receipt of a notice from the Company
         of the occurrence of any event of the kind described in Section
         3(c)(ii), 3(c)(iii), 3(c)(iv) or 3(c)(v), such Holder will forthwith
         discontinue disposition of such Registrable Securities under the
         Registration Statement until such Holder's receipt of the copies of the
         supplemented Prospectus and/or amended Registration Statement
         contemplated by Section 3(j), or until it is advised in writing (the
         "Advice") by the Company that the use of the applicable Prospectus may
         be resumed, and, in either case, has received copies of any additional
         or supplemental filings that are incorporated or deemed to be
         incorporated by reference in such Prospectus or Registration Statement.

                  (n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would then be required to
disclose under the Registration Statement, then the Company may postpone or
suspend the filing or effectiveness of a registration statement, or require the
holders to refrain from making sales under the Registration Statement (if it is
then effective) for a period not to exceed 20 consecutive days (a "Blackout
Period"), provided that the Company may not postpone or suspend its obligation
under this Section 3(n) for more than 45 days in the aggregate during any 12
month period; and provided, further, that any one Blackout Period must be
separated from each prior and subsequent Blackout Period by a period of at least
15 days.

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                  Neither the Board nor the Company may impose any Blackout
Period on the Holders unless trading by officers and directors of the Company in
securities of the Company is suspended during such period in accordance with
standard Company policy and procedures. Notwithstanding the foregoing, the
Company is not authorized or obligated to impose any Blackout Period on the
Purchasers on account of any similar restraints or prohibitions which may be
applicable to its executive officers or directors.

         4. Registration Expenses

                  All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with The American Stock Exchange and each other securities exchange,
quotation system, market or over-the-counter bulletin board on which Registrable
Securities are required hereunder to be listed, (B) with respect to filings
required to be made with the Commission, (C) with respect to filings required to
be made with The American Stock Exchange and any other securities exchange,
quotation system, market or over-the-counter bulletin board and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) Securities Act liability insurance, if the
Company so desires such insurance, and (v) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters) and legal counsel. In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.

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         5. Indemnification

         (a) Generally. (i) The Company agrees to indemnify and hold harmless
each Purchaser (which term, for purposes of this Section 5, includes each
Purchaser and its respective directors, partners, members, managers, officers
and employees), from and against (A) any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Purchaser in any manner relating to or arising out of any
breach or default of any representation, warranty, covenant or other obligation
of the Company under this Agreement, the Purchase Agreement or the Warrants, or
(B) any claim asserted against a Purchaser in such Purchaser's capacity as a
holder of the Shares or Warrants by a third party (other than another Purchaser)
resulting from or arising out of any acts or omissions by the Company; and the
Company will reimburse the Purchaser for any legal or other expenses reasonably
incurred in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have arisen out of or to have been based
upon (A) the Purchaser's gross negligence, bad faith or willful misconduct in
its capacity as a holder of the Shares or Warrants, or (B) any untrue statements
or omissions made by the Purchaser to the Company in writing for inclusion in
the a registration statement of the Company.

                           (ii) Each Purchaser, severally and not jointly,
agrees to indemnify and hold harmless the Company from and against any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses and disbursements of any kind which may
be imposed upon, incurred by or asserted against the Company in any manner
relating to or arising out of any breach or default of any representation,
warranty, covenant or other obligation of such Purchaser under this Agreement
and the Purchase Agreement; and each Purchaser, severally and not jointly, will
reimburse the Company for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that no
Purchaser shall be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have arisen out of or to have been based
upon (i) the Company's gross negligence, bad faith or willful misconduct, or
(ii) any untrue statements or omissions made by the Company in the a
registration statement of the Company.

         (b) Registration. (i) Upon the filing of the Registration Statement,
the Company agrees to indemnify and hold harmless the Purchaser, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, and each other Person, if any, who controls the Purchasers (or an
assignee thereof), within the meaning of the Securities Act, from and against
any and all losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which the Purchaser or such underwriter, broker
or dealer or controlling person may become subject under

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the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to such
Shares, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation under the Securities
Act applicable to the Company or relating to any action or inaction required by
the Company in connection with any such registration and will reimburse the
Purchaser, each such underwriter, broker or dealer and controlling Person, and
their respective directors, officers or employees, for any legal or other
expenses reasonably incurred by any such Person in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability are found in a
final non appealable judgment by a court to have arisen out of or to have been
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, such preliminary
prospectus, such final prospectus or such amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser or such underwriter, broker, dealer or controlling
Person for use in the preparation thereof.

                           (ii) Upon the filing of the Registration Statement,
each Purchaser, severally and not jointly, agrees to indemnify and hold harmless
the Company from and against any and all losses, claims, damages or liabilities
(or actions in respect thereof) to which the Company may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (A)
any untrue statement or alleged untrue statement of any material fact which was
provided by such Purchaser to the Company and is contained in any registration
statement under which such Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or (B) the omission or alleged omission to
state in any registration statement a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (C) any
violation by such Purchaser of any rule or regulation under the Securities Act
applicable to the Purchaser or relating to any action or inaction required by
the Purchaser in connection with any such registration, and such Purchaser will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that such Purchaser will not be liable in any such case to the extent that any
such loss, claim, damage or liability is found in a final non-appealable
judgment by a court not to have arisen out of or not to have been based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, such preliminary prospectus, such final
prospectus or such amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by the Purchaser.

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         (c) Procedure. (i) Any party entitled to indemnification under this
Section 5 (an "Indemnified Party") will give written notice to the party which
is required to indemnify it (the "Indemnifying Party") of any matters giving
rise to a claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 5
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice.

                           (ii) In case any action, proceeding or claim is
brought against an Indemnified Party in respect of which indemnification is
sought hereunder, the Indemnifying Party shall be entitled to participate in
and, unless in the reasonable judgment of the Indemnified Party a conflict of
interest between it and the Indemnifying Party may exist with respect of such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party. In the event that the
Indemnifying Party advises an Indemnified Party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its option, defend,
settle or otherwise compromise or pay such action or claim.

                           (iii) In any event, unless and until the Indemnifying
Party elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the Indemnified Party's costs and expenses arising
out of the defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder. The Indemnified
Party shall cooperate fully with the Indemnifying Party in connection with any
negotiation or defense of any such action or claim by the Indemnifying Party and
shall furnish to the Indemnifying Party all information reasonably available to
the Indemnified Party which relates to such action or claim. The Indemnifying
Party shall keep the Indemnified Party fully apprized at all times as to the
status of the defense or any settlement negotiations with respect thereto.

                           (iv) If the Indemnifying Party elects to defend any
such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. Provided that the Indemnifying Party has timely assumed the defense of
any action, claim or proceeding, the Indemnifying Party shall not be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent.

                           (v) Notwithstanding anything in this Section 5 to the
contrary, the Indemnifying Party shall not, without the Indemnified Party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
Indemnified Party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such claim. The indemnification
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
Indemnified Party

                                       12
<PAGE>   13
irrevocably agrees to refund such moneys if it is ultimately determined by a
court of competent jurisdiction that such party was not entitled to
indemnification. The indemnity agreements contained herein shall be in addition
to (A) any cause of action or similar rights of the Indemnified Party against
the Indemnifying Party or others, and (B) any liabilities the indemnifying party
may be subject to pursuant to the law.

         (d) Contribution. If the indemnification provided for in this Section 5
is unavailable to the Indemnified Party, in respect of any losses, claims,
damages or liabilities referred to herein, then the Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnifying Party as a result of such losses, claims, damages
or liabilities (A) as between the Indemnifying Party and the Indemnified Parties
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying and Indemnified Parties from the offering of the Shares, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Indemnifying and Indemnified Parties in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (B) as
between the Indemnifying and Indemnified Parties in such proportion as is
appropriate to reflect the relative fault of such parties in connection with
such statements or omissions, as well as any other relevant equitable
considerations.

         (e) Survival of Indemnification. The indemnity and contribution
agreements contained in this Section 5 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
Indemnified or Indemnifying Party or the consummation of the sale or successive
resales of the Shares or the Warrants.

         6. Rule 144. As long as any Holder owns Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act.

         7. Miscellaneous.

                                       13
<PAGE>   14
                  (a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.

                  (b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries is, as of the date hereof, a party to or bound by, nor shall
the Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement or other obligation, that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as set forth in the Purchase Agreement, neither the
Company nor any of its subsidiaries is a party to or bound by any agreement or
other obligation granting any registration rights with respect to any of its
securities to any Person. Without limiting the generality of the foregoing,
without the written consent of the Holders of a majority of the then outstanding
Registrable Securities, the Company shall not grant to any Person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Holders set forth herein, and are not otherwise in
conflict with the provisions of this Agreement.

                  (c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement, and
the Company shall not after the date hereof enter into any agreement providing
such right to any of its security holders, unless the right so granted is
subject in all respects to the prior rights in full of the Holders set forth
herein, and is not otherwise in conflict with the provisions of this Agreement.

                  (d) Intentionally omitted.

                  (e) Failure to File Registration Statement and Other Events.

                           (i) The Company and the Holders agree that the
         Holders will suffer damages if the Registration Statement is not filed
         on or prior to the Filing Date and not declared effective by the
         Commission on or prior to the Effectiveness Date and maintained in the
         manner contemplated herein during the Effectiveness Period. The Company
         and the Holders further agree that it would not be feasible to
         ascertain the extent of such damages with precision. Accordingly, if an
         Event occurs on account of any material act or omission of the Company,
         then the Company shall pay in cash or Common Stock as liquidated
         damages for such failure and not as a penalty to each Holder an amount
         equal to two percent (2%) of such Holder's pro rata share of the
         purchase price paid at the First Tranche Closing by all Holders for
         Shares then held by them pursuant to the Purchase Agreement for the
         initial thirty (30)

                                       14
<PAGE>   15
         day period until the applicable Event has been cured, which shall be
         pro rated for such periods less than thirty (30) days, and two percent
         (2%) of such Holder's pro rata share of the purchase price paid at the
         First Tranche Closing by all Holders for Shares then held by them
         pursuant to the Purchase Agreement for each subsequent thirty (30) day
         period until the applicable Event has been cured which shall be pro
         rated for such periods less than thirty days (the "Periodic Amount").
         Payments to be made pursuant to this Section 7(e) shall be due and
         payable immediately upon demand in immediately available cash funds or,
         at the election of the Company if the Company then has sufficient
         authorized but unissued and unreserved shares of its Common Stock, in
         Common Stock.

                           (ii) The parties agree that the Periodic Amount
         represents a reasonable estimate on the part of the parties, as of the
         date of this Agreement, of the amount of damages that may be incurred
         by the Holders if the Registration Statement is not filed on or prior
         to the Filing Date or has not been declared effective by the Commission
         on or prior to the Effectiveness Date and maintained in the manner
         contemplated herein during the Effectiveness Period or if any other
         Event as described herein has occurred.

                           (iii) If a Non-Registration Event has occurred AND no
         other Event has occurred, then liquidated damages shall not accrue on
         such number of Shares as are eligible for sale under Rule 144 for such
         period or periods of eligibility.

                           (iv) Notwithstanding anything to the contrary
         contained herein or in the Purchase Agreement or the Warrants, if a
         Non-registration Event has occurred as a result of any action or
         omission by any Holder, then liquidated damages shall not accrue to any
         Holder as a result of such Event.

                           (v) If an Event has occurred other than on account of
         an act or omission by the Company or any Holder, then the liquidated
         damages payable under Subparagraph (i) above shall be calculated based
         upon one (1%) percent rather than two (2%).

                           (vi) If a Non-registration Event has occurred as a
         result of questions, issues or comments by the Commission regarding the
         two-tranche structure of the transactions contemplated by the Purchase
         Agreement, then no liquidated damages shall be payable under
         Subparagraph (i) above on account of such Event.

                                       15
<PAGE>   16
                  (f) Governing Law, Specific Enforcement, Consent to
Jurisdiction.

                           (i) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law thereof.

                           (ii) The Company and the Holders acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement or the Purchase Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement or
the Purchase Agreement and to enforce specifically the terms and provisions
hereof or thereof, this being in addition to any other remedy to which any of
them may be entitled by law or equity.

                           (iii) Each of the Company and the Holders (A) hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts located in New York City, New York for the purposes of any suit, action
or proceeding arising out of or relating to this Agreement or the Purchase
Agreement, and (B) hereby waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Holders consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7(f) shall affect or limit any right to serve
process in any other manner permitted by law.

                  (g) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the Registrable Securities to which
such waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in writing signed
by the Company and each of the Holders.

                  (h) 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 earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., pacific
time, on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice later than 5:00 p.m., pacific time, on any
date and earlier than 11:59 p.m., pacific time, on such date, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such

                                       16
<PAGE>   17
communications shall be with respect to each Holder at its address set forth
under its name on Exhibit A attached hereto, or with respect to the Company,
addressed to:

                  Alteon Inc.
                  170 Williams Drive
                  Ramsey, New Jersey 07446
                  Attn.: Kenneth I. Moch, President and Chief Executive Officer
                  Tel.: 201-934-5000
                  Fax: 201-934-8880

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Smith,
Stratton, Wise, Heher & Brennan, Att'n: Richard J. Pinto, Esq., Facsimile No.
609-987-6651. Copies of notices to any Holder shall be sent to the addresses
listed on Exhibit A attached hereto, if applicable. Copies of notices to the
Holder shall be sent to Kane Kessler, P.C., 1350 Avenue of the Americas, New
York, New York 10019, Attention: Robert L. Lawrence, Esq., Facsimile No.: (212)
245-3009.

                  (i) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Holder may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

                  (j) Assignment of Registration Rights. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Registrable Securities or Warrants if: (i) the Holder agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section 7(j), the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.

                                       17
<PAGE>   18
                  (k) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

                  (l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.

                  (m) Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, 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 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.

                  (n) 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.

                  (o) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.

                  (p) Notice of Effectiveness. Within two (2) business days
after the Registration Statement which includes the Registrable Securities is
ordered effective by the Commission, the Company shall deliver, and shall cause
legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such Registration Statement) confirmation that the Registration
Statement has been declared effective by the Commission in the form attached
hereto as Exhibit B.

                            [SIGNATURE PAGE FOLLOWS]

                                       18
<PAGE>   19
         IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.

<TABLE>
<CAPTION>
PURCHASERS:                                                THE COMPANY:
-----------                                                ------------
<S>                                                        <C>
NARRAGANSETT I, LP                                         ALTEON INC.

By: /S/ Joseph L. Dowling III                               By: /S/ Kenneth I. Moch
   ---------------------------------------                     ---------------------------------------
   Joseph L. Dowling III,                                      Kenneth I. Moch,
   Managing Member                                             Chief Executive Officer

NARRAGANSETT OFFSHORE, LTD.

By: /S/ Joseph L. Dowling III
   ---------------------------------------
   Joseph L. Dowling III,
   Managing Member

EGM MEDICAL TECHNOLOGY FUND, L.P.

By: /S/ Guy R. Scott
   ---------------------------------------
   Guy R. Scott, Chief Investment Officer

EGM MEDICAL TECHNOLOGY OFFSHORE FUND

By: /S/ Guy R. Scott
   ---------------------------------------
   Guy R. Scott, Chief Investment Officer

S.A.C. CAPITAL ASSOCIATES, LLC,

By:  S.A.C. Capital Advisors, LLC, its
investment advisor

By: /S/ Peter Nussbaum
   ---------------------------------------
   Peter Nussbaum, General Counsel

SDS MERCHANT FUND, LP

By: /S/ Steven Derby
   ---------------------------------------
   Steven Derby, Managing Member

HERRIOT TABUTEAU

By: /S/ Herriot Tabuteau
   ---------------------------------------
   Herriot Tabuteau
</TABLE>
<PAGE>   20
                                    EXHIBIT B
                         FORM OF NOTICE OF EFFECTIVENESS

                            OF REGISTRATION STATEMENT

[Name and Address of Transfer Agent]

                  RE:      ALTEON INC.

Dear [______]:

         We are counsel to Alteon Inc., a Delaware corporation (the "COMPANY"),
and have represented the Company in connection with that certain Common Stock
and Warrant Purchase Agreement (the "PURCHASE AGREEMENT") dated as of September
__, 2000 by and among the Company and the buyers named therein (collectively,
the "HOLDERS") pursuant to which the Company issued to the Holders shares of the
Company's common stock, par value $.0.01 per share (the "COMMON STOCK"), and
warrants to purchase shares of the Common Stock (the "WARRANTS"). Pursuant to
the Purchase Agreement, the Company has also entered into a Registration Rights
Agreement with the Holders (the "REGISTRATION RIGHTS AGREEMENT") pursuant to
which the Company agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement), including the
shares of Common Stock issued pursuant to the Purchase Agreement and issuable
upon exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 2000, the Company filed a Registration
Statement on Form S-1 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.

         In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                        Very truly yours,

                                        By:
                                            --------------------------------
cc:      [LIST NAMES OF HOLDERS]<PAGE>   1
                                                                     Exhibit 4.2

                                                       SERIES 1 WARRANT NO. ____

THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR
TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER SAID ACT IS NOT REQUIRED.

                                SERIES 1 WARRANT

                  To Purchase ______ Shares of Common Stock of

                                   ALTEON INC.

                  THIS IS TO CERTIFY THAT _____________________________________,
or registered assigns (the "Holder"), is entitled, at any time prior to the
Expiration Date (as hereinafter defined), to purchase from Alteon Inc. a
Delaware corporation (the "Company"), the Warrant Stock (as hereinafter defined
and subject to adjustment as provided herein), in whole or in part, at a
purchase price of $3.40 per share, all on and subject to the terms and
conditions hereinafter set forth.

                  1. DEFINITIONS. As used in this Warrant, the following terms
have the respective meanings set forth below:

                  "Additional Shares of Common Stock" means any shares of Common
Stock issued by the Company after the Closing Date other than Warrant Stock.

                  "Appraised Value" means, in respect of any share of Common
Stock on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Company may have no class of equity registered under the Exchange
Act) as of the last day of the most recent fiscal month ending prior to such
date specified, based on the value of the Company, as determined by a nationally
recognized investment banking firm selected by the Company's Board of Directors
and having no prior relationship with the Company, divided by the number of
Fully Diluted Outstanding shares of Common Stock.

                  "Business Day" means any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the State of
New York.
<PAGE>   2
                  "Change of Control" means the sale, conveyance, or other
disposition of all or substantially all of the property or business of the
Company or the merger into or consolidation with any other corporation (other
than a wholly owned subsidiary corporation) or effectuation of any transaction
or series of related transactions in which more than 50% of the voting power of
the Company is disposed of.

                  "Closing Date" means September 29, 2000.

                  "Commission" means the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.

                  "Common Stock" means (except where the context otherwise
indicates) the Common Stock, $0.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed or converted, and shall also include (i) capital stock of
the Company of any other class (regardless of how denominated) issued to the
Holders of shares of Common Stock upon any reclassification thereof which is
also not preferred as to dividends or assets on liquidation over any other class
of stock of the Company and which is not subject to redemption and (ii) shares
of common stock of any successor or acquiring corporation received by or
distributed to the Holders of Common Stock of the Company in the circumstances
contemplated by Section 4.8.

                  "Convertible Securities" means evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.

                  "Current Market Price" means, in respect of any share of
Common Stock on any date herein specified, if there shall not then be a public
market for the Common Stock, the Appraised Value per share of Common Stock at
such date, or if there shall then be a public market for the Common Stock, the
average of the daily market prices for 20 consecutive Business Days commencing
30 days before such date. The daily market price for each such Business Day
shall be (i) the last sale price on such day on the principal stock exchange on
which such Common Stock is then listed or admitted to trading, (ii) if no sales
take place on such day on any such exchange, the average of the last reported
closing bid and asked prices on such day as officially quoted on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading on
any stock exchange, the average of the last reported closing bid and asked
prices on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automatic Quotation System or the National
Quotation Bureau, Inc., or (iv) if neither such corporation at the time is
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business.

                  "Current Warrant Price" means, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this

                                       2
<PAGE>   3
Warrant on such date. Until the Current Warrant Price is adjusted pursuant to
the terms herein, the initial Current Warrant Price shall be $3.40 per share.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

                  "Exercise Period" means the period during which this Warrant
is exercisable pursuant to Section 2.1.

                  "Expiration Date" means the seventh anniversary of the Closing
Date, or such later date to which the Expiration Date has been extended pursuant
to the terms hereof.

                  "Fully Diluted Outstanding" means, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of the Warrants and Convertible Securities
that would be deemed outstanding in accordance with GAAP for purposes of
determining book value or net income per share.

                  "GAAP" means generally accepted accounting principles in the
United States of America as from time to time in effect.

                  "NASD" means the National Association of Securities Dealers,
Inc., or any successor corporation thereto.

                  "Other Property" has the meaning set forth in Section 4.9.

                  "Outstanding" means, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.

                  "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).

                  "Purchase Agreement" means the Common Stock and Warrant
Purchase Agreement, dated the Closing Date, among the Company, the Holder of
this Warrant (or such Holder's predecessor in interest with respect to this
Warrant) and certain other Persons.

                                       3
<PAGE>   4
                  "Restricted Common Stock" means shares of Common Stock which
are, or which upon their issuance on the exercise of any Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
3.2.

                  "Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

                  "Series 1 Warrant Stock" means the Warrant Stock.

                  "Terminating Transaction" means any transaction in which (i)
the Company shall (A) reorganize its capital, reclassify its capital stock, or
(B) consolidate or merge with or into another corporation where the Company is
not the surviving corporation or where there is a change in or distribution with
respect to the Common Stock of the Company, or (C) sell, transfer or otherwise
dispose of all or substantially all its property, assets or business to another
corporation, and (ii) pursuant to the terms of such reorganization,
reclassification, merger, consolidation or sale, transfer or other disposition
of assets, the holders of 90% or more of the Common Stock of the Company are to
receive shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation (all such
property, the "Terminating Transaction Consideration").

                  "Transfer" means any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
thereof within the meaning of the Securities Act.

                  "Warrants" means this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.

                  "Warrant Price" means an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price.

                  "Warrant Stock" means the shares of Common Stock to be
purchased upon the exercise hereof, subject to adjustment as provided herein.

                  Terms not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement.

                  2. EXERCISE OF WARRANT.

                                       4
<PAGE>   5
                  2.1. Manner of Exercise. From and after the issuance of this
Warrant, and until 5:00 P.M., New York time, on the Expiration Date (the
"Exercise Period"), the Holder may exercise this Warrant, on any Business Day,
for all or any part of the number of shares of Warrant Stock purchasable
hereunder.

                  In order to exercise this Warrant, in whole or in part, the
Holder shall deliver to the Company at its principal office or at the office or
agency designated by the Company pursuant to Section 12, (i) a written notice of
Holder's election to exercise this Warrant, which notice shall specify the
number of shares of Warrant Stock to be purchased, (ii) payment of the Warrant
Price as provided herein, and (iii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of this
Warrant as Exhibit A, duly executed by the Holder or its agent or attorney. Upon
receipt thereof, the Company shall, as promptly as practicable, and in any event
within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of full shares of Warrant Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as the Holder
shall request in the notice and shall be registered in the name of the Holder
or, such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and the Holder or any other Person so designated to
be named therein shall be deemed to have become a Holder of record of such
shares for all purposes, as of the date when the notice, together with the
payment of the Warrant Price and this Warrant, is received by the Company as
described above. If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock, deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or at the request of the Holder, appropriate notation may be made on
this Warrant and the same returned to the Holder.

                           Payment of the Warrant Price may be made at the
option of the Holder by: (i) certified or official bank check, or (ii) the
cancellation of a portion of Warrant Stock otherwise acquirable under the
Warrants then held by the Holder, which shall be valued and credited toward the
total Warrant Price due the Company for the exercise of the Warrant based upon
the Current Market Price of the Common Stock. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued and, upon payment of the Warrant Price, shall be fully paid and
nonassessable and not subject to any preemptive rights. The Company shall pay
all expenses in connection with, and all transfer, stamp or similar taxes and
other governmental charges that may be imposed with respect to, the issue or
delivery thereof.

                  2.2. Fractional Shares. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay a cash adjustment in

                                       5
<PAGE>   6
respect of such final fraction in an amount equal to the Current Market Price
per share of Common Stock on the date of exercise multiplied by such fraction.

                  2.3. Continued Validity. A Holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
Holder who acquires such shares after the same have been publicly sold pursuant
to a Registration Statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as the Holder under Sections 10
and 13 of this Warrant.

                  2.4. Restrictions on Exercise. (a) Notwithstanding anything to
the contrary contained herein, in no event shall the Warrant be exercisable for
an amount of Warrant Stock where such exercisability would result in the
Holder's becoming the beneficial owner, directly or indirectly, of more than 10%
of the outstanding shares of Common Stock.

                           (b) Notwithstanding anything to the contrary
contained herein, if at any time that this Warrant is exercised, in whole or in
part, the Registration Statement contemplated by the Purchase Agreement is not
then effective, and the Warrant Stock in the hands of the Holder is not then
exempt from the registration requirements of the Securities Act, then the Holder
shall furnish to the Company the representations contemplated by Sections 2.2(d)
and (e) of the Purchase Agreement (with respect to investment intent and
accredited investor status).

                  3. TRANSFER, DIVISION AND COMBINATION.

                  3.1. Transfer. The Warrants and the Warrant Stock shall be
freely transferable, subject to compliance with all applicable laws, including,
but not limited to the Securities Act. Transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to the
assignor a new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be canceled. Notwithstanding anything herein to
the contrary, this Warrant may not be transferred or assigned in whole or in
part without compliance with applicable federal and state securities laws.
Following a transfer that complies with the requirements of this Section 3.1,
the Warrant may be exercised by a new Holder for the purchase of shares of
Common Stock regardless of whether the Company issued or registered a new
Warrant on the books of the Company.

                  3.2. Restrictive Legend. Unless such stock has been
registered, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant

                                       6
<PAGE>   7
Stock issued to any subsequent transferee of any such certificate, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:

                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
                  NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
                  AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR
                  TRANSFERRED, IN THE ABSENCE OF AN EFFECTIVE
                  REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE
                  COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO THE COMPANY THAT REGISTRATION UNDER
                  SAID ACT IS NOT REQUIRED."

                  3.3. Division and Combination; Expenses; Books. This Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with
Section 3.1 as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3. The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.

                  4. ADJUSTMENTS. The number of shares of Common Stock for which
this Warrant is exercisable, and the price at which such shares may be purchased
upon exercise of this Warrant, shall be subject to adjustment from time to time
as set forth in this Section 4. The Company shall give the Holder notice of any
event described below which requires an adjustment pursuant to this Section 4 in
accordance with Sections 5.1 and 5.2.

                  4.1. Stock Dividends, Subdivisions and Combinations. If at any
time the Company shall:

                           (a) take a record of the holders of its Common Stock
         for the purpose of entitling them to receive a dividend payable in, or
         other distribution of, Additional Shares of Common Stock,

                           (b) subdivide its outstanding shares of Common Stock
         into a larger number of shares of Common Stock, or

                           (c) combine its outstanding shares of Common Stock
         into a smaller number of shares of Common Stock,

                                       7
<PAGE>   8
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.

                  4.2. Certain Other Distributions. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:

                           (a) cash (other than a cash dividend payable out of
         earnings or earned surplus legally available for the payment of
         dividends under the laws of the jurisdiction of incorporation of the
         Company),

                           (b) any evidences of its indebtedness, any shares of
         stock of any class or any other securities or property of any nature
         whatsoever (other than cash, Convertible Securities or Additional
         Shares of Common Stock), or

                           (c) any warrants or other rights to subscribe for or
         purchase any evidences of its indebtedness, any shares of stock of any
         class or any other securities or property of any nature whatsoever
         (other than cash, Convertible Securities or Additional Shares of Common
         Stock),

                           then (i) the number of shares of Common Stock for
                  which this Warrant is exercisable shall be adjusted to equal
                  the product of the number of shares of Common Stock for which
                  this Warrant is exercisable immediately prior to such
                  adjustment multiplied by a fraction (A) the numerator of which
                  shall be the Current Market Price per share of Common Stock at
                  the date of taking such record and (B) the denominator of
                  which shall be such Current Market Price per share of Common
                  Stock minus the amount allocable to one share of Common Stock
                  of any such cash so distributable and of the fair value (as
                  determined in good faith by the Board of Directors of the
                  Company and supported by an opinion from an investment banking
                  firm of recognized national standing acceptable to the Holder)
                  of any and all such evidences of indebtedness, shares of
                  stock, other securities or property or warrants or other
                  subscription or purchase rights so distributable, and (ii) the
                  Current Warrant Price shall be adjusted to equal (A) the
                  Current Warrant Price multiplied by the number of shares of
                  Common Stock for which this Warrant is exercisable immediately
                  prior to the adjustment divided by (B) the number of shares of
                  Common Stock for which this Warrant is exercisable immediately
                  after such adjustment. A reclassification of the Common Stock
                  (other than a change in par value, or from par

                                       8
<PAGE>   9
                  value to no par value or from no par value to par value) into
                  shares of Common Stock and shares of any other class of stock
                  shall be deemed a distribution by the Company to the holders
                  of its Common Stock of such shares of such other class of
                  stock within the meaning of this Section 4.2 and, if the
                  outstanding shares of Common Stock shall be changed into a
                  larger or smaller number of shares of Common Stock as a part
                  of such reclassification, such change shall be deemed a
                  subdivision or combination, as the case may be, of the
                  outstanding shares of Common Stock within the meaning of
                  Section 4.1; provided, however, that if the Company believes
                  that the rules of the American Stock Exchange or any other
                  exchange or automated quotation system on which the Common
                  Stock is then quoted require, then in lieu of the adjustment
                  required by this Section 4.2 the Company may deliver to each
                  Holder the amount of cash, evidences of indebtedness,
                  securities or other property or warrants or other rights to
                  which such Holder would have been entitled if it had exercised
                  its Warrants immediately prior to the date such adjustment
                  would otherwise be required to be made.

                  4.3. Issuance of Additional Shares of Common Stock.

                           (a) In the event the Company shall, at any time, from
         time to time, issue or sell any Additional Shares of Common Stock
         (including Treasury Shares) for a consideration per share less than the
         Current Warrant Price in effect for the Warrant immediately prior to
         the time of such issue or sale, then, forthwith upon such issue or
         sale, the Current Warrant Price for the Warrants shall be reduced to a
         price equal to the consideration per share paid for such Common Stock.

                           (b) The provisions this Section 4.3 shall not apply
         to any issuance of Additional Shares of Common Stock for which an
         adjustment is provided under Section 4.1 or 4.2. No adjustment of the
         Current Warrant Price shall be made under this Section 4.3 upon the
         issuance of any Additional Shares of Common Stock which are issued
         pursuant to the exercise of any warrants or other subscription or
         purchase rights or pursuant to the exercise of any conversion or
         exchange rights in any Convertible Securities, if any such adjustment
         shall previously have been made upon the issuance of such warrants or
         other rights or upon the issuance of such Convertible Securities (or
         upon the issuance of any warrant or other rights therefor) pursuant to
         Section 4.4 or Section 4.5.

                  4.4. Issuance of Warrants or Other Rights. If at any time the
Company shall take a record of the Holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible Securities shall be less than the Current Warrant Price in effect

                                       9
<PAGE>   10
immediately prior to the time of such issue or sale, then the Current Warrant
Price shall be adjusted as provided in Section 4.3 on the basis that the Company
shall have received all of the consideration payable therefor, if any, as of the
date of the actual issuance of such warrants or other rights. No adjustments of
the Current Warrant Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such warrants or other
rights or upon the actual issue of such Common Stock upon such conversion or
exchange of such Convertible Securities.

                  4.5. Issuance of Convertible Securities. If at any time the
Company shall take a record of the Holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Current Warrant Price in effect immediately
prior to the time of such issue or sale, then the Current Warrant Price shall be
adjusted as provided in Section 4.3 on the basis that the Company shall have
received all of the consideration payable therefor, if any, as of the date of
actual issuance of such Convertible Securities. No further adjustment of the
Current Warrant Price shall be made under this Section 4.5 upon the issuance of
any Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No further adjustments of the Current
Warrant Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.

                  4.6. Superseding Adjustment. If, at any time after any
adjustment of the Current Warrant Price shall have been made pursuant to Section
4.4 or Section 4.5 as the result of any issuance of warrants, other rights or
Convertible Securities, and (i) such warrants or other rights, or the right of
conversion or exchange in such other Convertible Securities, shall expire, and
all or a portion of such warrants or other rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible Securities,
as the case may be shall not have been exercised, or (ii) the consideration per
share for which shares of Common Stock are issuable pursuant to such warrants or
other rights, or the terms of such other Convertible Securities, shall be
increased solely by virtue of provisions therein contained for an automatic
increase in such consideration per share upon the occurrence of a specified date
or event, then for each outstanding Warrant such previous adjustment shall be
rescinded and annulled and the Additional Shares of Common Stock which were
deemed to have been issued by virtue of the computation made in connection with
the adjustment so rescinded and annulled shall no longer be deemed to have been
issued by virtue of such computation.

                           Upon the occurrence of an event set forth in this
Section 4.6 above, there shall be a recomputation made of the effect of such
warrants, other rights or options or other Convertible Securities on the basis
of: (i) treating the number of Additional Shares of Common Stock or other
property, if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or other rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,

                                       10
<PAGE>   11
and (ii) treating any such warrants or other rights or any such other
Convertible Securities which then remain outstanding as having been granted or
issued immediately after the time of such increase of the consideration per
share for which shares of Common Stock or other property are issuable under such
warrants or other rights or other Convertible Securities; whereupon a new
adjustment of the Current Warrant Price shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.

                  4.7. Other Provisions applicable to Adjustments under this
Section. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:

                           (a) Computation of Consideration. To the extent that
         any Additional Shares of Common Stock or any Convertible Securities or
         any warrants or other rights to subscribe for or purchase any
         Additional Shares of Common Stock or any Convertible Securities shall
         be issued for cash consideration, the consideration received by the
         Company therefor shall be the amount of the cash received by the
         Company therefor, or, if such Additional Shares of Common Stock or
         Convertible Securities are offered by the Company for subscription, the
         subscription price, or, if such Additional Shares of Common Stock or
         Convertible Securities are sold to underwriters or dealers for public
         offering without a subscription offering, the initial public offering
         price (in any such case subtracting any amounts paid or receivable for
         accrued interest or accrued dividends and without taking into account
         any compensation, discounts or expenses paid or incurred by the Company
         for and in the underwriting of, or otherwise in connection with, the
         issuance thereof). To the extent that such issuance shall be for a
         consideration other than cash, then, except as herein otherwise
         expressly provided, the amount of such consideration shall be deemed to
         be the fair value of such consideration at the time of such issuance as
         determined in good faith by the Board of Directors of the Company. In
         case any Additional Shares of Common Stock or any Convertible
         Securities or any warrants or other rights to subscribe for or purchase
         such Additional Shares of Common Stock or Convertible Securities shall
         be issued in connection with any merger in which the Company issues any
         securities, the amount of consideration therefor shall be deemed to be
         the fair value, as determined in good faith by the Board of Directors
         of the Company, of such portion of the assets and business of the
         nonsurviving corporation as such Board in good faith shall determine to
         be attributable to such Additional Shares of Common Stock, Convertible
         Securities, warrants or other rights, as the case may be. The
         consideration for any Additional Shares of Common Stock issuable
         pursuant to any warrants or other rights to subscribe for or purchase
         the same shall be the consideration received by the Company for issuing
         such warrants or other rights plus the additional consideration
         payable to the Company upon exercise of such warrants or other rights.
         The consideration for any Additional Shares of Common Stock issuable
         pursuant to the terms of any Convertible Securities shall be the
         consideration received by the Company for issuing warrants or other
         rights to subscribe for or purchase such Convertible Securities, plus
         the consideration paid or payable to the Company in respect of the
         subscription for or purchase

                                       11
<PAGE>   12
         of such Convertible Securities, plus the additional consideration, if
         any, payable to the Company upon the exercise of the right of
         conversion or exchange in such Convertible Securities. In case of the
         issuance at any time of any Additional Shares of Common Stock or
         Convertible Securities in payment or satisfaction of any dividends upon
         any class of stock other than Common Stock, the Company shall be deemed
         to have received for such Additional Shares of Common Stock or
         Convertible Securities a consideration equal to the amount of such
         dividend so paid or satisfied.

                           (b) When Adjustments to Be Made. The adjustments
         required by this Section 4 shall be made whenever and as often as any
         specified event requiring an adjustment shall occur, except that any
         adjustment of the number of shares of Common Stock for which this
         Warrant is exercisable that would otherwise be required may be
         postponed (except in the case of a subdivision or combination of shares
         of the Common Stock, as provided for in Section 4.1) up to, but not
         beyond the date of exercise if such adjustment either by itself or with
         other adjustments not previously made adds or subtracts less than 1% of
         the shares of Common Stock for which this Warrant is exercisable
         immediately prior to the making of such adjustment. Any adjustment
         representing a change of less than such minimum amount (except as
         aforesaid) which is postponed shall be carried forward and made as soon
         as such adjustment, together with other adjustments required by this
         Section 4 and not previously made, would result in a minimum adjustment
         or on the date of exercise. For the purpose of any adjustment, any
         specified event shall be deemed to have occurred at the close of
         business on the date of its occurrence.

                           (c) Fractional Interests. In computing adjustments
         under this Section 4, fractional interests in Common Stock shall be
         taken into account to the nearest 1/100th of a share.

                           (d) When Adjustment Not Required. If the Company
         shall take a record of the holders of its Common Stock for the purpose
         of entitling them to receive a dividend or distribution or subscription
         or purchase rights and shall, thereafter and before the distribution to
         stockholders thereof, legally abandon its plan to pay or deliver such
         dividend, distribution, subscription or purchase rights, then
         thereafter no adjustment shall be required by reason of the taking of
         such record and any such adjustment previously made in respect thereof
         shall be rescinded and annulled. In addition, no adjustment shall be
         required under Section 4.3 (a) or (b) hereof in the event the Company
         issues or sells Additional Shares in a transaction whose primary
         purpose is to establish a Strategic Alliance (as defined in paragraph
         (g) below).

                           (e) Escrow of Warrant Stock. If after any property
         becomes distributable pursuant to this Section 4 by reason of the
         taking of any record of the holders of Common Stock, but prior to the
         occurrence of the event for which such record is taken, and the Holder
         exercises this Warrant, any shares of Common Stock issuable upon
         exercise by reason of such adjustment shall be deemed the last shares
         of Common Stock for which this Warrant is exercised (notwithstanding
         any other provision to the contrary herein) and such shares or other
         property shall be held in escrow for the Holder by the Company to be
         issued to the

                                       12
<PAGE>   13
         Holder upon and to the extent that the event actually takes place, upon
         payment of the Current Warrant Price. Notwithstanding any other
         provision to the contrary herein, if the event for which such record
         was taken fails to occur or is rescinded, then such escrowed shares
         shall be cancelled by the Company and escrowed property returned.

                           (f) Challenge to Good Faith Determination. Whenever
         the Board of Directors of the Company shall be required to make a
         determination in good faith of the fair value of any item under this
         Section 4, such determination may be challenged by the Holder, and any
         dispute shall be resolved by either (i) an investment banking or
         accounting firm of recognized national standing selected by the Holder
         and reasonably acceptable to the Company in a manner customary for such
         evaluations and no arbitration or similar hearings shall be conducted
         in connection therewith or (ii) any other method mutually agreed to by
         the parties hereto.

                           (g) Existing Obligations. Notwithstanding any
         contrary or inconsistent provision of Sections 4.3, 4.4 or 4.5, no
         adjustment shall be made on account of the issuance of Additional
         Shares of Common Stock pursuant to (i) options or other rights to
         acquire Common Stock or Convertible Securities pursuant to the
         Company's existing stock option plans, employee benefit plans,
         employment contracts or other similar benefit or incentive programs or
         agreements in effect on the date hereof or approved after the date
         hereof by the stockholders of the Company, where the primary purpose of
         such plan, contract or program or agreement is not to raise capital for
         the Company, (ii) any other outstanding options, warrants, Convertible
         Securities or other rights to the issuance of Additional Shares of
         Common Stock which are outstanding on the First Tranche Closing Date or
         are issued after the First Tranche Closing Date upon Convertible
         Securities that were outstanding on the First Tranche Closing Date, or
         (iii) a Strategic Alliance. As used herein "Strategic Alliance" means a
         transaction in which (i) the acquirer of the Company's capital stock
         has a business relationship with the Company which is (A) material to
         the Company independent of such acquirer's acquisition of the Company's
         capital stock, and (B) arises out of the transaction in which the
         acquirer acquired the Company's capital stock.

                  4.8. Terminating Transaction (Reorganization,
Reclassification, Merger, Consolidation or Disposition of Assets); Redemption.

                                       13
<PAGE>   14
                  (a) If the Company agrees to a Terminating Transaction, then
the Holder of this Warrant shall have the right thereafter to receive, upon
exercise of this Warrant, the Terminating Transaction Consideration that would
have been receivable as a result of such Terminating Transaction if the Warrant
Stock acquirable hereunder had been outstanding prior to the record date of the
Terminating Transaction. The successor or acquiring corporation (if other than
the Company) in the Terminating Transaction shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company, and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors of the
Company) in order to provide for adjustments of shares of the Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4; provided,
however, that if the successor or acquiring corporation fails or refuses to
expressly assume the obligations as set forth in the preceding sentence, the
Company shall redeem the Warrants as provided in paragraph (b) below. For
purposes of this Section 4.8, common stock of the successor or acquiring
corporation shall include stock of such corporation of any class which is not
preferred as to dividends or assets on liquidation over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 4.8 shall similarly apply to successive
Terminating Transactions.

                  (b) This Warrant shall be redeemed by the Company if and only
if the Company agrees to and thereafter carries out a Terminating Transaction in
which the surviving or acquiring corporation does not expressly assume the
obligations with respect to the Warrants as provided in paragraph (a) above. To
effect such redemption, the Company shall:

                           (i) give to each Holder notice of its intent to
         redeem this Warrant (the "Redemption Notice") not less than thirty (30)
         days prior to the closing of the Terminating Transaction; and

                           (ii) redeem all the Warrants in the series of which
         this Warrant is a part, in accordance with the Redemption Notice and
         the provisions of this paragraph (b) for the full consideration
         specified in paragraph (c) below immediately prior to or simultaneously
         with the closing of the Terminating Transaction.

                  (c) The redemption price for all the Warrants (the "Redemption
Price") shall equal the Intrinsic Value plus the Time Value, each as defined
below.

                           (i) The Intrinsic Value equals (A) the total number
         of shares of Warrant Stock, multiplied by (B) the Fair Market Value of
         consideration that would be receivable by the holders of the Warrant
         Stock if it were outstanding as of the closing time of the Terminating
         Transaction, reduced by (C) the aggregate Warrant Price for all of the
         Warrant

                                       14
<PAGE>   15
         Stock. For purposes hereof, "Fair Market Value" means the value
         assigned to or utilized in the agreement by which the Company has
         agreed to a Terminating Transaction.

                           (ii) The Time Value equals (A) the aggregate Warrant
         Price for all of the Warrant Stock, multiplied by (B) the applicable
         Time Value Percentage specified in subparagraph (iii) below.

                           (iii)    The Time Value Percentage shall be:

                                    10% if the Redemption Notice is given
                                            less than 366 days prior to the
                                            Expiration Date;

                                    15% if the Redemption Notice is given
                                            less than 731 days and more than 365
                                            days prior to the Expiration Date;

                                    20% if the Redemption Notice is given
                                            less than 1096 days and more than
                                            730 days prior to the Expiration
                                            Date;

                                    25% if the Redemption Notice is given
                                            more than 1095 days prior to the
                                            Expiration Date.

                  (d) In the period commencing with the giving of the Redemption
Notice and ending with the closing of the Terminating Transaction, the Holder of
this Warrant shall continue without interruption to have the right to exercise
this Warrant on the same basis as if no Redemption Notice had been given,
including without limitation by paying the exercise price in cash or by cashless
exercise as provided in this Warrant.

                  4.9. Other Action Affecting Common Stock. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than the payment of dividends permitted by Section 4.2(a) or any
other action described in this Section 4, then, unless such action will not have
a materially adverse effect upon the rights of the Holder, the number of shares
of Common Stock or other stock for which this Warrant is exercisable and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances.

                  4.10 Certain Other Limitations. Notwithstanding anything
herein to the contrary, the Company agrees not to enter into any transaction
which, by reason of any adjustment hereunder, would cause the Current Warrant
Price to be less than the par value per share of Common Stock.

                  5. NOTICES TO WARRANT HOLDERS.

                  5.1. Notice of Adjustments. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of this
Warrant, shall be adjusted pursuant to Section 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the

                                       15
<PAGE>   16
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company determined the fair
value of any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights referred to in
Section 4.2 or 4.8), specifying the number of shares of Common Stock for which
this Warrant is exercisable and (if such adjustment was made pursuant to Section
4.9 or 4.10) describing the number and kind of any other shares of stock or
Other Property for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to the Holder in accordance with Section 16.2. The Company shall keep
at its principal office or agency designated pursuant to Section 12 copies of
all such certificates and cause the same to be available for inspection at said
office during normal business hours by the Holder or any prospective purchaser
of this Warrant designated by the Holder.

                  5.2. Notice of Corporate Action. If at any time:

                           (a) the Company shall take a record of the holders of
         its Common Stock for the purpose of entitling them to receive a
         dividend (other than a cash dividend payable out of earnings or earned
         surplus legally available for the payment of dividends under the laws
         of the jurisdiction of incorporation of the Company) or other
         distribution, or any right to subscribe for or purchase any evidences
         of its indebtedness, any shares of stock of any class or any other
         securities or property, or to receive any other right, or

                           (b) there shall be any capital reorganization of the
         Company, any reclassification or recapitalization of the capital stock
         of the Company or any consolidation or merger of the Company with, or
         any sale, transfer or other disposition of all or substantially all the
         property, assets or business of the Company to, another corporation, or

                           (c) there shall be a voluntary or involuntary
         dissolution, liquidation or winding up of the Company; then, in any one
         or more of such cases, the Company shall give to the Holder (i) at
         least 30 days' prior written notice of the date on which a record date
         shall be selected for such dividend, distribution or right or for
         determining rights to vote in respect of any such reorganization,
         reclassification, merger, consolidation, sale, transfer, disposition,
         dissolution, liquidation or winding up, and (ii) in the case of any
         such reorganization, reclassification, merger, consolidation, sale,
         transfer, disposition, dissolution, liquidation or winding up, at least
         30 days' prior written notice of the date when the same shall take
         place. Such notice in accordance with the foregoing clause also shall
         specify (i) the date on which any such record is to be taken for the
         purpose of such dividend, distribution or right, the date on which the
         holders of Common Stock shall be entitled to any such dividend,
         distribution or right, and the amount and character thereof, and (ii)
         the date on which any such reorganization, reclassification, merger,
         consolidation, sale, transfer, disposition, dissolution, liquidation or
         winding up is to take place and the time, if any such time is to be
         fixed, as of which the holders of Common Stock shall be entitled to
         exchange their shares of Common

                                       16
<PAGE>   17
         Stock for securities or other property deliverable upon such
         reorganization, reclassification, merger, consolidation, sale,
         transfer, disposition, dissolution, liquidation or winding up. Each
         such written notice shall be sufficiently given if addressed to the
         Holder at the last address of the Holder appearing on the books of the
         Company and delivered in accordance with Section 16.2.

                  5.3. Notice to Stockholders. The Holder shall be entitled to
the same rights to receive notice of corporate action as any holder of Common
Stock.

                  6. NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of the Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form satisfactory to the
Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.

                  7. RESERVATION AND AUTHORIZATION OF COMMON STOCK: REGISTRATION
WITH APPROVAL OF ANY GOVERNMENTAL AUTHORITY. Except as provided in the Purchase
Agreement, from and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights. Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted Current Warrant Price. Before taking any action which would result
in an adjustment in the number of shares of Common Stock for which this Warrant
is exercisable or in the Current Warrant Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon exercise
of Warrants require registration or qualification with any

                                       17
<PAGE>   18
governmental authority under any federal or state law before such shares may be
so issued (other than as a result of a prior or contemplated distribution by the
Holder of this Warrant), the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.

                  8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS. In the
case of all dividends or other distributions by the Company to the holders of
its Common Stock with respect to which any provision of Section 4 refers to the
taking of a record of such holders, the Company will in each such case take such
a record and will take such record as of the close of business on a Business
Day. The Company will not at any time, except upon dissolution, liquidation or
winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.

                  9. REGISTRATION RIGHTS. The Warrant Stock shall be registered
in accordance with the terms and conditions contained in that certain
Registration Rights Agreement dated as of the Closing Date between the Holder
and the Company.

                  10. SUPPLYING INFORMATION. Upon the occurrence of an Event as
defined in the Registration Rights Agreement, the Company shall cooperate with
the Holder in supplying such information as may be reasonably necessary for such
Holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant or Restricted
Common Stock.

                  11. LOSS OR MUTILATION. Upon receipt by the Company from the
Holder of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it (it being understood that the written agreement of the
original Holder shall be sufficient indemnity) and in case of mutilation upon
surrender and cancellation hereof, the Company will execute and deliver in lieu
hereof a new Warrant of like tenor to the Holder; provided, however, that in the
case of mutilation, no indemnity shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.

                  12. OFFICE OF THE COMPANY. As long as any of the Warrants
remain outstanding, the Company shall maintain an office or agency (which may be
the principal executive offices of the Company) where the Warrants may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant.

                  13. FINANCIAL AND BUSINESS INFORMATION. The Company will file
on or before the required date all regular or periodic reports (pursuant to the
Exchange Act) with the Commission and the securities exchanges on which shares
of Common Stock are listed.

                  14. LIMITATION OF LIABILITY. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of the Holder for the purchase price

                                       18
<PAGE>   19
of any Common Stock or as a stockholder of the Company, whether such liability
is asserted by the Company or by creditors of the Company.

                  15. MISCELLANEOUS.

                  15.1. Nonwaiver and Expenses. No course of dealing or any
delay or failure to exercise any right hereunder on the part of the Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.

                  15.2. Notice Generally. All notices, requests, demands or
other communications provided for herein shall be in writing and shall be deemed
to have been given three days after being sent by registered or certified mail,
return receipt requested, or when personally delivered, or successfully sent by
facsimile transmission as evidenced by a fax machine confirmation report there
of, addressed, as the case may be, to the Holder at the address set forth on the
cover page hereof, with a copy to Kane Kessler, P.C., 1350 Avenue of the
Americas, New York, New York 10019, Attention: Robert L. Lawrence, Esq.,
Facsimile No. (212) 245-3009; or to the Company, Inc. at Alteon Inc., 170
Williams Drive, Ramsey, New Jersey 07446, Attention: Kenneth I. Moch, President
and Chief Executive Officer, Facsimile No. 201-934-8880; with a copy to Smith,
Stratton, Wise, Heher & Brennan, 600 College Road East, Princeton, New Jersey
08540, Attention: Richard J. Pinto, Esq., Facsimile No. 609-987-6651, or to such
other person or address as either party shall designate to the other from time
to time in writing forwarded in like manner.

                  15.3 Indemnification.

                                       19
<PAGE>   20
                  (a) Generally. (i) The Company agrees to indemnify and hold
harmless each Holder (which term, for purposes of this Section 15.3, includes
each Holder and its respective directors, partners, members, managers, officers
and employees), from and against (A) any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holder in any manner relating to or arising out of any
breach or default of any representation, warranty, covenant or other obligation
of the Company under this Agreement, the Registration Rights Agreement or the
Purchase Agreement, or (B) any claim asserted against a Holder in such Holder's
capacity as a holder of the Shares or Warrants by a third party (other than
another Holder) resulting from or arising out of any acts or omissions by the
Company; and the Company will reimburse the Holder for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company will not be liable hereunder to the extent
that any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a final non-appealable judgment by a court to have arisen out of or to
have been based upon (A) the Holder's gross negligence, bad faith or willful
misconduct in its capacity as a holder of the Shares or Warrants, or (B) any
untrue statements or omissions made by the Holder to the Company in writing for
inclusion in the registration statement of the Company.

                           (ii) Each Holder, severally and not jointly, agrees
to indemnify and hold harmless the Company from and against any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses and disbursements of any kind which may be
imposed upon, incurred by or asserted against the Company in any manner relating
to or arising out of any breach or default of any representation, warranty,
covenant or other obligation of such Holder under this Agreement and the
Registration Rights Agreement; and each Holder, severally and not jointly, will
reimburse the Company for any legal or other expenses reasonably incurred in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that no
Holder shall be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have arisen out of or to have been based
upon (i) the Company's gross negligence, bad faith or willful misconduct, or
(ii) any untrue statements or omissions made by the Company in the registration
statement of the Company.

                  (b) Registration. (i) Upon the filing of the Registration
Statement, the Company agrees to indemnify and hold harmless the Holder, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, and each other Person, if any, who controls the Holder (or an
assignee thereof), within the meaning of the Securities Act, from and against
any and all losses, claims, damages or liabilities (or actions in respect
thereof), joint or several, to which the Holder or such underwriter, broker or
dealer or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of

                                       20
<PAGE>   21
any material fact contained in any registration statement under which such
Shares were registered under the Securities Act, any preliminary prospectus or
final prospectus relating to such Shares, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of any
rule or regulation under the Securities Act applicable to the Company or
relating to any action or inaction required by the Company in connection with
any such registration and will reimburse the Holder, each such underwriter,
broker or dealer and controlling Person, and their respective directors,
officers or employees, for any legal or other expenses reasonably incurred by
any such Person in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability are found in a final non appealable
judgment by a court to have arisen out of or to have been based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, such preliminary prospectus, such final prospectus
or such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Holder or such underwriter,
broker, dealer or controlling Person for use in the preparation thereof.

                           (ii) Upon the filing of the Registration Statement,
each Holder, severally and not jointly, agrees to indemnify and hold harmless
the Company from and against any and all losses, claims, damages or liabilities
(or actions in respect thereof) to which the Company may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (A)
any untrue statement or alleged untrue statement of any material fact which was
provided by such Holder to the Company and is contained in any registration
statement under which such Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or (B) the omission or alleged omission to
state in any registration statement a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (C) any
violation by such Holder of any rule or regulation under the Securities Act
applicable to the Holder or relating to any action or inaction required by the
Holder in connection with any such registration, and such Holder will reimburse
the Company for any legal or other expenses reasonably incurred by the Company
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that such
Holder will not be liable in any such case to the extent that any such loss,
claim, damage or liability is found in a final non-appealable judgment by a
court not to have arisen out of or not to have been based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, such preliminary prospectus, such final prospectus
or such amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Holder.

                  (c) Procedure. (i) Any party entitled to indemnification under
this Section 15.3 (an "Indemnified Party") will give written notice to the party
which is required to indemnify it (the "Indemnifying Party") of any matters
giving rise to a claim for indemnification; provided, that the failure of any
party entitled to indemnification hereunder to give notice as provided herein
shall

                                       21
<PAGE>   22
not relieve the Indemnifying Party of its obligations under this Section 15.3
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice.

                           (ii) In case any action, proceeding or claim is
brought against an Indemnified Party in respect of which indemnification is
sought hereunder, the Indemnifying Party shall be entitled to participate in
and, unless in the reasonable judgment of the Indemnified Party a conflict of
interest between it and the Indemnifying Party may exist with respect of such
action, proceeding or claim, to assume the defense thereof with counsel
reasonably satisfactory to the Indemnified Party. In the event that the
Indemnifying Party advises an Indemnified Party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its option, defend,
settle or otherwise compromise or pay such action or claim.

                           (iii) In any event, unless and until the Indemnifying
Party elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the Indemnified Party's costs and expenses arising
out of the defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder. The Indemnified
Party shall cooperate fully with the Indemnifying Party in connection with any
negotiation or defense of any such action or claim by the Indemnifying Party and
shall furnish to the Indemnifying Party all information reasonably available to
the Indemnified Party which relates to such action or claim. The Indemnifying
Party shall keep the Indemnified Party fully apprized at all times as to the
status of the defense or any settlement negotiations with respect thereto.

                           (iv) If the Indemnifying Party elects to defend any
such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. Provided that the Indemnifying Party has timely assumed the defense of
any action, claim or proceeding, the Indemnifying Party shall not be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent.

                           (v) Notwithstanding anything in this Section 15.3 to
the contrary, the Indemnifying Party shall not, without the Indemnified Party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof which imposes any future obligation on the
Indemnified Party or which does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such claim. The indemnification
required by this Section 15.3 shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so long as the
Indemnified Party irrevocably agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to indemnification. The indemnity agreements contained herein shall be in
addition to (A) any cause of action or similar rights of the Indemnified Party

                                       22
<PAGE>   23
against the Indemnifying Party or others, and (B) any liabilities the
indemnifying party may be subject to pursuant to the law.

                  (d) Contribution. If the indemnification provided for in this
Section 15.3 is unavailable to the Indemnified Party, in respect of any losses,
claims, damages or liabilities referred to herein, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnifying Party as a result of such losses, claims,
damages or liabilities (A) as between the Indemnifying Party and the Indemnified
Parties in such proportion as is appropriate to reflect the relative benefits
received by the Indemnifying and Indemnified Parties from the offering of the
Shares, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Indemnifying and Indemnified Parties in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations and (B)
as between the Indemnifying and Indemnified Parties in such proportion as is
appropriate to reflect the relative fault of such parties in connection with
such statements or omissions, as well as any other relevant equitable
considerations.

                  (e) Survival of Indemnification. The indemnity and
contribution agreements contained in this Section 15.3 shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Indemnified or Indemnifying Party or the consummation of the sale
or successive resales of the Shares or the Warrants.

                  15.4. Successors and Assigns. Subject to compliance with the
provisions of Section 3.1, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of the Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant,
and shall be enforceable by any such Holder.

                  15.5. Amendment. This Warrant may be modified or amended or
the provisions of this Warrant waived with the written consent of the Company
and the Holder.

                  15.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be modified to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.

                  15.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant

                  15.8. Governing Law. This Warrant and the transactions
contemplated hereby shall be deemed to be consummated in the State of New York
and shall be governed by and interpreted in accordance with the local laws
thereof without regard to the provisions thereof relating to conflict of

                                       23
<PAGE>   24
laws. The Company and each Holder hereby irrevocably consents to the exclusive
jurisdiction of the State and Federal courts located in New York City, New York,
in connection with any action or proceeding arising out of or relating to this
Warrant. In any such litigation the Company and each Holder waives personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail directed at its address set
forth in Section 15.2. Within 30 days after such mailing, the party so served
shall appear or answer to such summons, complaint or other process. Should the
party so served fail to appear or answer within said 30-day period, such party
shall be deemed in default and judgment may be entered against such party for
the amount as demanded in any summons, complaint or other process so served.

             [THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

                                       24
<PAGE>   25
                  IN WITNESS WHEREOF, Alteon Inc. has caused this Warrant to be
executed by its duly authorized officer and attested by its Secretary.

<TABLE>
<CAPTION>
<S>                                                                    <C>
                                                                       ALTEON INC.

Dated: ___________________, 2000                                       By: /S/ Kenneth I. Moch
                                                                          ----------------------------------------
                                                                          Kenneth I. Moch, President and Chief
                                                                                Executive Officer

Attest:

By: /S/ Elizabeth O'Dell
   -------------------------------
   Name:   Elizabeth O'Dell
   Title:  Secretary
</TABLE>

                                       25
<PAGE>   26
                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

The undersigned registered owner of this Warrant exercises this Warrant for the
purchase of shares of Common Stock of, and herewith makes payment therefor, all
at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased (and
any securities or other-property issuable upon such exercise) be issued in the
name of and delivered to and whose address is           . [And, if such shares
of Common Stock shall not include all of the shares of Common Stock issuable as
provided in this Warrant, that a new Warrant of like tenor and date for the
balance of the shares of Common Stock issuable hereunder be delivered to the
undersigned.]

                           (Name of Registered Owner)

                           (Signature of Registered Owner)

                           (Street Address)

                           (State) (Zip Code)

NOTICE:  The signature on this subscription must correspond with the name as
         written upon the face of the Warrant in every particular, without
         alteration or enlargement or any change whatsoever.

                                       26
<PAGE>   27
                                    EXHIBIT B

                                 ASSIGNMENT FORM

FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
common Stock set forth below:

Name and Address of Assignee

No. of Shares of Common Stock

and does hereby irrevocably constitute and appoint _______________
attorney-in-fact to register such transfer on the books of the Company,
maintained for the purpose, with full power of substitution in the premises.

Dated: _______________________________________________

Print Name: __________________________________________

Signature: ___________________________________________

Witness: _____________________________________________

NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the Warrant in every particular, without alteration or
enlargement or any change whatsoever.

                                       27

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