Document:

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                                                                     Exhibit 4.3

                                                       SERIES 2 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 2 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.
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                  "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

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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.

                  "Floor Price" equals $2.93.

                  "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.

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                  "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.

                  "Series 2 Warrant Stock" means the Warrant Stock.

                  "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.

                  "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 Series 2 Warrant and all Series 2
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.

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                  2. EXERCISE OF WARRANT.

                  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

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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

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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,

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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

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                  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 greater of (i) the consideration per share paid for
         such Common Stock, or (ii) the Floor Price.

                           (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

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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,

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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 a 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 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 Holder, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, and each other Person, if any, who controls the Holders (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.

                                         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

                                       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<PAGE>   1
                                                                    Exhibit 10.1

                  COMMON STOCK AND WARRANTS PURCHASE AGREEMENT

                         DATED AS OF SEPTEMBER 29, 2000

                                      AMONG

                                   ALTEON INC.

                                       AND

                       THE PURCHASERS LISTED ON EXHIBIT A
<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                             Page
<S>                                                                                          <C>
ARTICLE I - PURCHASE AND SALE OF STOCK....................................................     1
         1.1   The Shares.................................................................     1
         1.2   Purchase Prices, Execution and Closing.....................................     2
         1.3   Warrants...................................................................     3

ARTICLE II - REPRESENTATIONS AND WARRANTIES...............................................     3
         2.1   Representations and Warranties of the Company..............................     3
         2.2   Representations and Warranties of the Purchasers...........................    15

ARTICLE III - COVENANTS...................................................................    17
         3.1   Securities Compliance......................................................    17
         3.2   Registration and Listing...................................................    17
         3.3   Participation Rights.......................................................    18
         3.4   Compliance with Laws.......................................................    19
         3.5   Keeping of Records and Books of Account....................................    19
         3.6   Increase of Authorized Capital.............................................    19
         3.7   Filing of Current Report with Respect to this Transaction..................    20
         3.8   Other Agreements...........................................................    20
         3.9   Reports and Access to Records..............................................    20
         3.10  Full Disclosure............................................................    21
         3.11  Intentionally Omitted......................................................    21
         3.12  Regulation S...............................................................    21
         3.13  Intentionally omitted......................................................    21
         3.14  Exemption Under Rights Agreement...........................................    21
         3.15  Transfer Agent Instructions................................................    21

ARTICLE IV - CONDITIONS...................................................................    22
         4.1   Conditions Precedent to the Obligation of the Company to Sell the Shares at
                        Closing...........................................................    22
         4.2   Conditions Precedent to the Obligation of the Purchasers to Purchase the
                        Shares at the Closing.............................................    23

ARTICLE V - REGISTRATION RIGHTS...........................................................    25

ARTICLE VI - STOCK CERTIFICATE LEGEND.....................................................    25

ARTICLE VII - TERMINATION.................................................................    26
         7.1   Termination by Mutual Consent..............................................    26
         7.2   Other Termination..........................................................    27
         7.3   Termination of Closing.....................................................    27
         7.4   Effect of Termination......................................................    27
</TABLE>

                                       -i-
<PAGE>   3
<TABLE>
<S>                                                                                          <C>
ARTICLE VIII - INDEMNIFICATION............................................................    27
         8.1.  Indemnification Generally..................................................    27
         8.2   Registration...............................................................    28
         8.3   Procedure..................................................................    29
         8.4   Contribution...............................................................    30
         8.5   Survival of Indemnification................................................    30

ARTICLE IX - MISCELLANEOUS................................................................    31
         9.1   Fees and Expenses..........................................................    31
         9.2   Specific Enforcement, Consent to Jurisdiction..............................    31
         9.3   Entire Agreement; Amendment................................................    32
         9.4   Notices....................................................................    32
         9.5   Waivers....................................................................    33
         9.6   Headings...................................................................    33
         9.7   Successors and Assigns.....................................................    33
         9.8   No Third Party Beneficiaries...............................................    34
         9.9   Governing Law..............................................................    34
         9.10  Survival...................................................................    34
         9.11  Counterparts...............................................................    34
         9.12  Publicity..................................................................    34
         9.13  Severability...............................................................    34
         9.14  Further Assurances.........................................................    35
         9.15  Investigation..............................................................    35
         9.16  Certain Definitions........................................................    35
</TABLE>

                                      -ii-
<PAGE>   4
                                          TABLE OF EXHIBITS AND SCHEDULES

<TABLE>
<S>                      <C>
Exhibit A                List of Purchasers
Exhibit B-1              Form of Series 1 Warrant
Exhibit B-2              Form of Series 2 Warrant
Exhibit C                [Intentionally omitted]
Exhibit D                Form of Registration Rights Agreement
Exhibit E                Form of Company Counsel's Legal Opinion

Schedule 2.1(a)          Specification of Location of Information in SEC Documents
Schedule 2.1(c)          Authorized, Issued and Outstanding Capital Stock of the Company
Schedule 2.1(i)          Undisclosed Liabilities
Schedule 2.1(k)          Defaults on Indebtedness
Schedule 2.1(m)          Litigation
Schedule 2.1(o)          Taxes
Schedule 2.1(u)          Material Agreements (including Breaches and Non-compliance)
Schedule 2.1(v)          Certain Transactions with Affiliates
Schedule 2.1(y)          Employment Agreements
Schedule 2.1(z)          Certain New Developments
Schedule 2.2(i)          Company Securities Owned by Purchasers Prior to First Tranche
                               Closing
Schedule 9.16(b)(vi)     Certain Additional SEC Documents
</TABLE>

                                      -iii-
<PAGE>   5
         This COMMON STOCK AND WARRANTS PURCHASE AGREEMENT (the "Agreement") is
dated as of September 29, 2000, by and among Alteon Inc., a corporation
organized under the laws of the State of Delaware (the "Company," which term
includes any subsidiary hereafter organized or acquired) (AMEX: "ALT"), and each
of the Purchasers whose names are set forth on Exhibit A hereto (individually, a
"Purchaser" and collectively, the "Purchasers").

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchasers
and the Purchasers shall purchase (i) Two Million Eight Hundred Thirty-four
Thousand Eighty-eight(2,834,088) shares of the Company's common stock, $0.01 par
value per share (the "Common Stock"), (ii) the Company's Series 1 Warrants to
purchase One Million Thirty-three Thousand Six Hundred Thirty-six(1,033,636)
shares (subject to adjustment in certain circumstances) of Common Stock, in
substantially the form attached hereto as Exhibit B-1 (singularly a "Series 1
Warrant" and collectively, the "Series 1 Warrants"), and (iii) the Company's
Series 2 Warrants to purchase One Hundred Thousand (100,000) shares (subject to
adjustment in certain circumstances) of Common Stock, in substantially the form
attached hereto as Exhibit B-2 (singularly a "Series 2 Warrant" and
collectively, the "Series 2 Warrants"); reference to the "Warrants" includes the
Series 1 Warrants and the Series 2 Warrants unless otherwise expressly
indicated; and

         WHEREAS, such purchase and sale will be made in reliance upon the
provisions of Section 4(2) and Rule 506 of Regulation D ("Regulation D") of the
United States Securities Act of 1933 as amended, and regulations promulgated
thereunder (the "Securities Act"), or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the purchases of Common Stock and Warrants to be made
hereunder.

         The parties hereto agree as follows:

                     ARTICLE I - PURCHASE AND SALE OF STOCK

         Purchase and Sale of Common Shares. Upon the following terms and
subject to the conditions contained herein, the Company shall issue and sell to
the Purchasers, and each of the Purchasers, severally and not jointly, shall
purchase from the Company an aggregate of Two Million Eight Hundred Thirty-four
Thousand Eighty-eight (2,834,088) shares (the "Common Shares") of authorized but
heretofore unissued Common Stock, at a price per share of $2.20, and the
Warrants. The aggregate price of the Common Shares shall be Six Million Two
Hundred Thirty-four Thousand Nine Hundred Ninety-three and 60/100
($6,234,993.60) Dollars, and the aggregate purchase price for the Warrants shall
be One Hundred and 00/100 ($100.00) Dollars.

         Section 1.1 The Shares. (a) For purposes of this Agreement: any shares
of Common Stock issuable upon exercise of the Series 1 Warrants (and such shares
when issued) are herein referred to as the "Series 1 Warrant Shares"; any shares
of Common Stock issuable upon exercise of the Series 2 Warrants (and such shares
when issued) are herein referred to as the "Series 2 Warrant Shares"; and the
Series 1 Warrant Shares and Series 2 Warrant Shares may be referred to
hereinafter as the"Warrant Shares"; the Common Shares and the Warrant Shares are
sometimes collectively referred to as the "Shares".

                                        1
<PAGE>   6
                  (b) The Company has authorized and has reserved, and covenants
to continue to reserve, free of preemptive rights and other similar contractual
rights of stockholders (including without limitation the rights of the holders
of the Company's Series G and Series H Preferred Stocks (as defined in Schedule
2.1(c)), a sufficient number of its authorized but unissued shares of its Common
Stock, to effect the sale of Common Shares at the Second Tranche Closing.

                  (c) On the date hereof, the Company has reserved out of its
Available Unissued Shares for issuance under the Warrants the number of shares
of Common Stock required under Section 4.2(j).

         Section 1.2 Purchase Prices, Execution and Closing. In consideration of
and in express reliance upon the representations, warranties, covenants, terms
and conditions of this Agreement, the Company agrees to issue and sell to the
Purchasers and the Purchasers, severally but not jointly, agree to purchase the
Common Shares and Warrants exercisable for that number of Warrant Shares set
forth opposite their respective names on Exhibit A. The aggregate purchase price
of the Common Shares and the Warrants being acquired by each Purchaser is set
forth opposite such Purchaser's name on Exhibit A (for each such Purchasers, a
"Purchase Price", and collectively referred to as the "Purchase Prices"). The
closing of the purchase and sale of the Common Shares and Warrants (the
"Closing") to be acquired by the Purchasers from the Company shall take place at
the offices of Kane Kessler, P.C. 1350 Avenue of the Americas, 26th Floor, New
York, NY 10019.

                  (a) The Closing shall take place in two stages (the "First
Tranche Closing" and the "Second Tranche Closing"; reference to the Closing
shall be construed to include both Closings unless only one closing is expressly
referred to). The First Tranche Closing shall take place on the date hereof.

                  (b) Except as provided in Section 4.2(g), the Second Tranche
Closing shall take place within 7 trading days after a registration statement
(the "Registration Statement"), registering the Common Shares and the Warrant
Shares pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), shall have been declared effective (the "Effective Date") by the
Securities and Exchange Commission (the "Commission"). The Company shall notify
the Purchasers of the Effective Date within one business day after the
effectiveness of the Registration Statement.

                  (c) When used herein, "Closing Date" refers to the date of the
First Tranche Closing and the Second Tranche Closing, unless expressly indicated
otherwise.

         Section 1.3 Warrants. The Warrants shall be exercisable for seven (7)
years from the Closing Date and entitle the holders thereof to purchase shares
of Common Stock at an exercise price of $3.40 per share (subject to adjustment
as more fully set forth herein and in the Warrants). The Series 1 Warrants shall
entitle the holders thereof to purchase an aggregate of 1,033,088 shares of
Common Stock and shall be substantially in the form of Exhibit B-1 attached
hereto. The Series 2 Warrants shall entitle the holders thereof to purchase an
aggregate of 100,000 shares of Common Stock and shall be substantially in the
form of Exhibit B-2 attached hereto.

                                        2
<PAGE>   7
                   ARTICLE II - REPRESENTATIONS AND WARRANTIES

         Section 2.1 Representations and Warranties of the Company. In order to
induce the Purchasers to enter into this Agreement and to purchase the Shares,
the Company hereby makes the following representations, warranties and covenants
to the Purchasers:

                  (a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted and to enter into this Agreement and to perform its
obligations hereunder. The Company does not have any subsidiaries or own
securities of any kind in any other entity. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined hereinafter) on the Company's financial condition,
business or business prospects. True and complete copies of the certificate or
articles of incorporation, all amendments thereto, and all certificates of
designation and similar documents defining the rights of holders of the
Company's capital stock (the "Charter Documents") have duly been filed with the
Commission and are included in the SEC Documents, in the items or as the
exhibits enumerated in Schedule 2.1(a).

                           For the purposes of this Agreement, "Material Adverse
Effect" means any adverse effect on the business, operations, properties,
prospects, assets or financial condition of the Company or which is likely to
materially hinder the performance by the Company of its obligation hereunder and
under the other Transaction Documents (as defined in Section 2.1(b) hereof).

                  (b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement attached hereto as Exhibit D (the "Registration
Rights Agreement") and the Warrants (collectively, the "Transaction Documents")
and to issue and sell the Shares in accordance with the terms hereof and the
Warrants. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action, and no further consent or authorization of the Company or its
Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Company. The Registration Rights Agreement will
have been duly executed and delivered by the Company on or before the Closing
Date. Each of the Transaction Documents constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.

                                        3
<PAGE>   8
                  (c) Capitalization.

                           (i) The authorized capital stock of the Company and
         the shares thereof currently issued and outstanding as of the date
         hereof are set forth on Schedule 2.1(c) hereto. All of the outstanding
         shares of the Company's Common Stock and any other security of the
         Company have been duly and validly authorized. Except as set forth in
         this Agreement and the Registration Rights Agreement and as set forth
         in the or on Schedule 2.1(c) hereto, no shares of Common Stock or any
         other securities issued by the Company are entitled to preemptive
         rights or registration rights and there are no outstanding options,
         warrants, scrip, rights to subscribe to, call or commitments of any
         character whatsoever relating to, or securities or rights convertible
         into, any shares of capital stock of the Company. Furthermore, except
         as set forth in this Agreement and the Registration Rights Agreement or
         on Schedule 2.1(c), there are no contracts, commitments,
         understandings, or arrangements by which the Company is or may become
         bound to issue additional shares of the capital stock of the Company or
         options, securities or rights convertible into shares of capital stock
         of the Company. Except for customary transfer restrictions contained in
         agreements entered into by the Company in order to sell restricted
         securities or as provided in Schedule 2.1 (c) hereto, the Company is
         not a party to or bound by any agreement or understanding granting
         registration or anti-dilution rights to any person with respect to any
         of its equity or debt securities. Except as set forth in Schedule
         2.1(c), the Company is not a party to, and it has no knowledge of, any
         agreement or understanding restricting the voting or transfer of any
         shares of the capital stock of the Company.

                           (ii) Except as set forth on Schedule 2.1(c) hereto,
         to the best of the Company's knowledge, the offer and sale of all
         capital stock, convertible securities, rights, warrants, or options of
         the Company issued prior to the Closing complied with all applicable
         federal and state securities laws, and no holder of such securities has
         a right of rescission or claim for damages with respect thereto which
         could have a Material Adverse Effect.

                           (iii) The Company's articles of incorporation, all
         amendments thereto and all certificates of designation and other
         similar instruments, and the Company's bylaws and amendments thereto,
         which have been filed with the Commission prior to the date hereof are
         true and complete copies of the Company's articles of incorporation and
         bylaws as in effect on the date hereof.

                           (iv) No person has any right to require the Company
         to register any Common Stock other than (i) as provided in the
         Registration Rights Agreement and (ii) as set forth on Schedule 2.1(c).

                  (d) Issuance of Shares. The Common Shares to be issued at the
Closing have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Common Shares shall
be validly issued and outstanding, fully paid and nonassessable and entitled to
all applicable rights and preferences set forth in the Articles. When the
Warrant Shares are issued in accordance with the terms of this Agreement and as
set forth in the Warrants, such shares will be duly authorized by all necessary
corporate action and validly issued

                                        4
<PAGE>   9
and outstanding, fully paid and non-assessable, and the holders shall be
entitled to all rights accorded to a holder of Common Stock.

                  (e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated herein and therein do not and will not (i) violate
any provision of the Company's Articles or Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party or by which any of its respective properties or
assets are bound, (iii) create or impose a lien, mortgage, security interest,
charge or encumbrance of any nature whatsoever on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected, except, in all cases
other than violations pursuant to clause (i) above, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The business of the Company is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation, nor under any judgment, order or consent of any
court or other tribunal, to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under the
Transaction Documents, or issue and sell the Common Shares and the Warrant
Shares in accordance with the terms hereof or thereof (other than any filings
which may be required to be made by the Company with the Commission or state
securities administrators subsequent to a Closing, and any registration
statement which may be filed pursuant hereto); provided that, for purposes of
the representation made in this sentence, the Company is assuming and relying
upon the accuracy of the relevant representations and agreements of the
Purchasers herein.

                  (f) Securities Laws; Financial Statements.

                                       5
<PAGE>   10
                           (i) The Company has timely filed all forms, reports,
         statements and documents required to be filed by it (A) with the
         Commission (collectively, together with any such forms, reports,
         statements and documents the Company may file subsequent to the date
         hereof until the Second Tranche Closing, the "Company Reports") and (B)
         with any other governmental or quasi-governmental authorities. Each
         Company Report (i) was and will be prepared in accordance with the
         requirements of the Securities Act and the Securities Exchange Act of
         1934, as amended, (the "Exchange Act") and (ii) did not or will not at
         the time it was or will be filed contain any untrue statement of a
         material fact or omit to state a material fact required to be stated
         therein or necessary in order to make the statements made therein, in
         the light of the circumstances under which they were made, not
         misleading. Each form, report, statement and document referred to in
         clause (B) of this paragraph was prepared in all material respects in
         accordance with the requirements of applicable law.

                           (ii) Each of the consolidated financial statements
         (including, in each case, any notes thereto) contained in the Company
         Reports was prepared in accordance with generally accepted accounting
         principles in the United States ("GAAP") (except as may be permitted by
         Form 10-Q under the Exchange Act) applied on a consistent basis
         throughout the periods indicated (except as may be indicated in the
         notes thereto) and each presented fairly, in all material respects, the
         consolidated financial position of the Company as at the respective
         dates thereof and for the respective periods indicated therein, except
         as otherwise noted therein (subject, in the case of unaudited
         statements, to normal and recurring immaterial year-end adjustments).

                           (iii) Except as and to the extent set forth or
         reserved against on the consolidated balance sheet of the Company as of
         June 30, 2000 as filed in the SEC Documents, including the notes
         thereto, the Company has no liabilities or obligations of any nature
         (whether accrued, absolute, contingent or otherwise) that would be
         required to be reflected on a balance sheet or in notes thereto
         prepared in accordance with GAAP.

                           (iv) Except as set forth on the Company's proxy
         statement filed with the Commission on or about April 28, 2000, no
         officer, director or other affiliate of Company holds any interest,
         directly or indirectly, in any property, real or personal, tangible or
         intangible, used in or pertaining to Company's business, including any
         interest in the Company's Intellectual Property (as defined in Section
         2.1(ee).

                           (v) Neither the Company nor any agent acting on
         behalf of the Company has taken or will take any action which might
         cause this Agreement or the issuance of the Shares or the Warrants to
         violate the Securities Act or the Securities Exchange Act of 1934, as
         amended, or any rules or regulations promulgated thereunder, as in
         effect on the Closing Date. All shares of capital stock and other
         securities issued by the Company prior to the date hereof, and the
         Shares and Warrants upon the issuance thereof, have been and will be
         issued in compliance with the Securities Act and all applicable state
         "blue sky" laws and in compliance with all applicable corporate laws.
         The representations with respect to the Securities Act and applicable
         state "blue sky" laws assume the correctness of the Purchasers'

                                       6
<PAGE>   11
         representations in Sections 2.2(d) and (e), and any certificates given
         at any time hereafter by any Purchaser in support of such provisions.

                           (vi) The Company has not provided to the Purchasers
         any material non-public information or other information which,
         according to applicable law, rule or regulation, should have been
         disclosed publicly by the Company but which has not been so disclosed,
         other than the transaction contemplated by this Agreement.

                  (g) Subsidiaries. The Company has no subsidiaries. For the
purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries.

                  (h) No Material Adverse Change. Since December 31, 1999, the
date through which the most recent audited financial statements of the Company
have been prepared and filed with the Commission (a copy of which is included in
the SEC Documents), the Company has not experienced or suffered any Material
Adverse Effect.

                  (i) No Undisclosed Liabilities. Except as disclosed on
Schedule 2.1(i) hereto, the Company does not have any liabilities, obligations,
claims or losses (whether liquidated or unliquidated, secured or unsecured,
absolute, accrued, contingent or otherwise) other than those incurred in the
ordinary course of business since December 31, 1999, and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect.

                  (j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

                  (k) Indebtedness. Schedule 2.1(k) hereto sets forth as of the
date hereof all outstanding secured and unsecured Indebtedness of the Company or
for which the Company has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $25,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company's balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (c)
the present value of any lease payments in excess of $25,000 due under leases
required to be capitalized in accordance with GAAP. Except as disclosed on
Schedule 2.1(k), the Company is not in default with respect to any Indebtedness.

                  (l) Title to Assets. The Company has good and marketable title
to all of its real and personal property, free of any mortgages, pledges,
charges, liens, security interests or other encumbrances, except as,
individually or in the aggregate, do not cause a Material Adverse Effect on

                                       7
<PAGE>   12
the Company's financial condition or operating results. All said leases of the
Company are valid and subsisting and in full force and effect.

                  (m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth on Schedule 2.1(m), there is no action,
suit, claim, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company or any of is properties or
assets. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any officers or directors of the Company in their capacities as such.

                  (n) Compliance with Law. The business of the Company has been
and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as,
individually or in the aggregate, the noncompliance therewith would not have a
Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

                  (o) Taxes. Except as set forth on Schedule 2.1(o) hereto, the
Company has accurately prepared and filed all federal, state and other tax
returns required by law to be filed by it, has paid or made provisions for the
payment of all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the financial statements of
the Company for all current taxes and other charges to which the Company is
subject and which are not currently due and payable. Except as disclosed on
Schedule 2.1(o) hereto, none of the federal income tax returns of the Company
have been audited by the Internal Revenue Service, and the Company has not
waived the expiration of any statute of limitations. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether pending or
threatened against the Company for any period, nor of any basis for any such
assessment, adjustment or contingency.

                  (p) Certain Fees. The Company has not employed any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' or structuring fees, financial advisory fees or other
similar fees in connection with the Transaction Documents or the transactions
contemplated thereby.

                  (q) Disclosure. To the best of the Company's knowledge,
neither this Agreement (including the Schedules hereto) nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of the
Company in connection with the transactions contemplated by this Agreement or
any of the other Transaction Document contain or will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made herein or therein, in the light of the circumstances
under which they were made herein or therein, not misleading.

                                       8
<PAGE>   13
                  (r) Operation of Business. The Company owns or possesses all
patents, trademarks, domain names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof, websites and
intellectual property rights relating thereto, service marks, trade names,
copyrights, licenses and authorizations and all rights with respect to the
foregoing, which are used in the conduct of its business as now conducted, and
the Company has received no notice from any person of any conflicts with the
rights of others.

                  (s) Environmental Compliance. The Company has all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company is
also in material compliance with all other limitations, restrictions,
conditions, standards, requirements, schedules and timetables required or
imposed under all Environmental Laws. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect, there are no
past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company that violate or may
violate any Environmental Law after any of the Closings or that may give rise to
any environmental liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the manufacture, processing,
distribution, use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge,
release or threatened release of any hazardous substance. "Environmental
Liabilities" means all liabilities of a person (whether such liabilities are
owed by such person to governmental authorities, third parties or otherwise)
whether currently in existence or arising hereafter which arise under or relate
to any Environmental Law.

                  (t) Books and Record Internal Accounting Controls. The records
and documents of the accurately reflect in all material respects the information
relating to the business of the Company, the location and collection of its
assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company. The Company maintains a system of internal
accounting controls sufficient, in the judgment of the Company's board of
directors, to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions is taken with respect to any
differences.

                                       9
<PAGE>   14
                  (u) Material Agreements. Except as set forth on Schedule
2.1(u) hereto, the Company is not a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the Commission as an exhibit to a
registration statement on Form S-1 or applicable form (collectively, "Material
Agreements") if the Company were registering securities under the Securities
Act. To its knowledge, the Company has in all material respects performed all
the obligations required to be performed to date under the foregoing agreements
and, except as set forth in Schedule 2.1(u), has received no notice of default
and is not in default under any Material Agreement now in effect, the result of
which could cause a Material Adverse Effect. No written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement of the
Company limits or shall limit the payment of dividends on the Company's Common
Stock.

                  (v) Transactions with Affiliates. Except as set forth in
Schedule 2.1(v) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (a) the Company, or any customer or
supplier on the one hand, and (b) on the other hand, any officer, employee,
consultant or director of the Company, or any person owning any capital stock of
the Company or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.

                  (w) Securities Act of 1933. The Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Common Shares, Warrant Shares and Warrants
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy any of the
Shares, or similar securities to, or solicit offers with respect thereto from,
or enter into any preliminary conversations or negotiations relating thereto
with, any person, or has taken or will take any action, so as to require the
registration of the issuance and sale of any of the Shares under the
registration provisions of the Securities Act and any other applicable federal
and state securities laws. Neither the Company nor any of its affiliates, nor
any person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with any of the Shares.

                  (x) Governmental Approvals. Except for the filing of any
notice prior or subsequent to the Closing that may be required under applicable
state or federal securities laws (which if required, shall be filed on a timely
basis), including, but not limited to, the filing of a registration statement or
statements pursuant to the Registration Rights Agreement, no authorization,
consent, approval, license exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Common Shares, or for the
performance by the Company of its obligations under the Transaction Documents.

                  (y) Employees. The Company has no collective bargaining
arrangements or agreements covering any of its employees, except as set forth on
Schedule 2.1(y) hereto. Except as set forth on Schedule 2.1(y) hereto, the
Company has no employment contract, agreement regarding

                                       10
<PAGE>   15
proprietary information, non-competition agreement, non-solicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company. Since December 31, 1999, no officer,
consultant or key employee of the Company whose termination, either individually
or in the aggregate, could have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company.

                  (z) Absence of Certain Developments. Except as provided in
Schedule 2.1(z) hereto, since December 31, 1999, the Company has not:

                           (i) issued any stock, bonds or other corporate
         securities or any rights, options or warrants with respect thereto;

                           (ii) borrowed any amount or incurred or become
         subject to any liabilities (absolute or contingent) except current
         liabilities incurred in the ordinary course of business which are
         comparable in nature and amount to the current liabilities incurred in
         the ordinary course of business during the comparable portion of its
         prior fiscal year, as adjusted to reflect the current nature and volume
         of the Company's business;

                           (iii) discharged or satisfied any lien or encumbrance
         or paid any obligation or liability (absolute or contingent), other
         than current liabilities paid in the ordinary course of business;

                           (iv) declared or made any payment or distribution of
         cash or other property to stockholders with respect to its stock, or
         purchased or redeemed, or made any agreements so to purchase or redeem,
         any shares of its capital stock;

                           (v) sold, assigned or transferred any other tangible
         assets, or canceled any debts or claims, except in the ordinary course
         of business;

                           (vi) sold, assigned or transferred any patent rights,
         trademarks, trade names, copyrights, trade secrets or other intangible
         assets or intellectual property rights, or disclosed any proprietary
         confidential information to any person except to customers in the
         ordinary course of business or to the Purchasers or their
         representatives;

                           (vii) suffered any substantial losses or waived any
         rights of material value, whether or not in the ordinary course of
         business, or suffered the loss of any material amount of prospective
         business;

                           (viii) made any changes in employee compensation
         except in the ordinary course of business and consistent with past
         practices;

                           (ix) made capital expenditures or commitments
         therefor that aggregate in excess of $100,000;

                                       11
<PAGE>   16
                           (x) entered into any other transaction other than in
         the ordinary course of business, or entered into any other material
         transaction, whether or not in the ordinary course of business;

                           (xi) made charitable contributions or pledges in
         excess of $25,000;

                           (xii) suffered any material damage, destruction or
         casualty loss, whether or not covered by insurance;

                           (xiii) experienced any material problems with labor
         or management in connection with the terms and conditions of their
         employment;

                           (xiv) effected any two (2) or more events of the
         foregoing kind which in the aggregate would be material to the Company;

                           (xv) entered into any single transaction involving
         more than $75,000 with any executive officer or director, or holder of
         5% or more of the capital stock of the Company, nor any transactions
         with such persons which, in the aggregate, involves more than $100,000;
         or

                           (xvi) entered into an agreement, written or
         otherwise, to take any of the foregoing actions.

                  (aa) Use of Proceeds. The proceeds from the sale of the Common
Shares and the Warrants will be used by the Company for working capital and
general corporate purposes.

                  (bb) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon any Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended,
assuming that no Purchaser which is an investment company will own sufficient
shares of Common Stock of the Company following the Closing to be deemed to
"control" the Company.

                  (cc) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company which is
or would have a Material Adverse Effect. The execution, delivery and performance
of this Agreement and the other Transaction Documents and the issue and sale of
the Common Shares and the Warrants will not involve any transaction which is
subject to the prohibitions of Section 406 of ERISA or in connection with which
a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of
1986, as amended, provided that, if any of the Purchasers, or any person or
entity that owns a beneficial interest in any of the Purchasers, is an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) with respect
to which the Company is a "party in interest" (within the meaning of Section
3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of ERISA, if
applicable, are met. As used in this Section 2.1(ac), the term "Plan" shall mean
an "employee pension benefit plan" (as

                                       12
<PAGE>   17
defined in Section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or by any trade
or business, whether or not incorporated, which, together with the Company is
under common control, as described in Section 414(b) or (c) of the Code.

                  (dd) Dilutive Effect. The Company understands and acknowledges
that the number of the Warrant Shares issuable upon exercise of the Warrants
will increase in certain circumstances. The Company further acknowledges that
its obligations to issue the Warrant Shares upon the exercise of the Warrants in
accordance with this Agreement and the Warrants, is, in each case, absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interest of other stockholders of the Company.

                  (ee) Intellectual Property.

                           (i) Except as disclosed in the SEC Documents, at the
         items thereof listed in Schedule 2.1(ee): (A) the Company is the sole
         and exclusive owner of, or has the right to use all Intellectual
         Property used by the Company in its business as now conducted and as
         expected to be conducted; (B) the Financial Statements of the Company
         have not failed or neglected to account for the royalties or fees
         (license or otherwise) payable by the Company to any person by reason
         of the ownership or use of any of the Intellectual Property; (C) there
         have been no claims made against the Company asserting the invalidity,
         abuse, misuse, or unenforceability of any of the Intellectual Property,
         and there are no reasonable grounds for any such claims; (D) the
         Company has not made any claim of any violation or infringement by
         others of its rights in the Intellectual Property, and has no knowledge
         of any basis for the assertion of any such claims; (E) the Company has
         not received any written notice or other type of overt notice that it
         is in conflict with or infringing upon the asserted rights of others in
         connection with the Intellectual Property, and, to the knowledge of the
         Company, neither the use of the Intellectual Property by the Company,
         the operation of its business, nor any formula, method, process, part
         or material employed by the Company in connection therewith, is
         infringing or has infringed upon any rights of others; (F) the
         Intellectual Property includes all rights necessary for the Company to
         be legally entitled to conduct its business as presently being
         conducted; (G) the consummation of the transactions contemplated hereby
         will not alter or impair any of the Intellectual Property; (H) no
         interest of the Company's Intellectual Property has been assigned,
         transferred, licensed or sublicensed by the Company to third parties;
         (I) to the extent that any item constituting part of the Intellectual
         Property has been registered with, filed in or issued by, as the case
         may be, any governmental or other regulatory authority, such
         registrations, filings were duly made and remain in full force and
         effect; (J) there is no act or failure to act by the Company or any of
         its directors, officers, employees, attorneys or authorized agents
         during the prosecution or registration of, or any other proceeding
         relating to, any of the Intellectual Property or of any other fact
         which could render invalid or unenforceable, or negate the right to any
         of the Intellectual Property.

                           (ii) For purposes of this representation,
         "Intellectual Property" means any foreign and domestic patent, patent
         right, trademark, service mark, trade name, brand,

                                       13
<PAGE>   18
         copyright (whether or not registered and, if applicable, including
         pending applications for registration), invention, software, trade
         secret, technology, product, composition, formula, method or process
         owned, used or controlled by the Company.

                  (ff) FDA. Without limiting the generality of the foregoing,
the Company and its business as now conducted and expected to be conducted is in
compliance with the terms of all rules and regulations of the United States Food
and Drug Administration ("FDA"). The Company has not engaged in any activity
that would cause revocation or suspension of any FDA license, authorization or
approval. The FDA has not notified the Company of any adverse findings or
information with respect to the Company's business, and the Company has no
knowledge of any facts which could reasonably be expected to cause it to believe
that the FDA licenses, authorizations and approvals will not be renewed in the
ordinary course. Neither the execution, delivery nor performance of this
Agreement shall adversely affect the status of any license, authorization or
approval granted or issued by the FDA.

                  (gg) Option Forbearance Letter. The Option Forbearance Letter
is in full force and effect as of the Closing Date. The Company has furnished
the Purchasers with a true and complete copy thereof.

         Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company with respect solely to itself and not with respect to any other
Purchaser:

                  (a) Organization and Standing of the Purchasers. If the
Purchaser is an entity, such Purchaser is a corporation, limited liability
company or partnership duly incorporated or organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and such Purchaser was not formed for the specific purpose of
acquiring the Shares.

                  (b) Authorization and Power. The Purchaser has the requisite
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Common Shares and the Warrants
being sold to it hereunder. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the documents contemplated
hereby by such Purchaser and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate, limited liability company or partnership action, as applicable (if
the Purchaser is an entity), and no further consent or authorization of such
Purchaser or its Board of Directors, stockholders, members, managers or
partners, as the case may be, is required. Each of this Agreement and the
Registration Rights Agreement will have been duly executed and delivered by the
Purchasers on the Closing Date. Each of this Agreement and the Registration
Rights Agreement constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, or similar laws relating to, or affecting generally the
enforcement of, creditor's rights, remedies or by other equitable principles of
general application.

                                       14
<PAGE>   19
                  (c) No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, and the documents
contemplated hereby and thereby and the consummation by such Purchaser of the
transactions contemplated hereby and thereby or relating hereto do not and will
not (i) result in a violation of such Purchaser's charter documents, bylaws,
partnership agreement, operating agreement or other organizational documents, or
(ii) conflict with, constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which such Purchaser is a party, or result in a violation of
any law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to such Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on such Purchaser). Such Purchaser is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement, or the documents contemplated hereby and thereby
or to purchase the Common Shares and the Warrants in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
such Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.

                                       15
<PAGE>   20
                  (d) Acquisition for Investment. Such Purchaser is purchasing
the Common Shares and the Warrants solely for its own account for the purpose of
investment and not with a view to or for sale in connection with distribution.
Such Purchaser does not have a present intention to sell the Common Shares or
the Warrants, nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Common Shares or the Warrants to or
through any person or entity; provided, however, that by making the
representations herein, such Purchaser does not agree to hold the Common Shares
or the Warrants for any minimum or other specific term and reserves the right to
dispose of the Common Shares or the Warrants at any time in accordance with
federal securities laws applicable to such disposition. Such Purchaser
acknowledges that it is able to bear the financial risks associated with an
investment in the Common Shares or the Warrants and that it has been given full
access to such records of the Company and to the officers of the Company as it
has deemed necessary or appropriate to conduct its due diligence investigation.
If the Registration Statement is not effective at the time of the exercise of
any Warrant, or if the resale of the Warrant Shares is not then exempt from the
registration requirements of the Securities Act, then such Purchaser covenants,
as a condition of exercise of any of such Purchaser's Warrants, to certify that
this representation is true as of the time that such Purchaser exercises such
Purchaser's Warrants.

                  (e) Accredited Purchasers. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act and is
a resident of the jurisdiction indicated on Exhibit A hereto. Purchaser has such
knowledge and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of Purchaser's investment in the
Company. If the Registration Statement is not effective at the time of the
exercise of any Warrant, or if the resale of the Warrant Shares is not then
exempt from the registration requirements of the Securities Act, then such
Purchaser covenants, as a condition of exercise of any of such Purchaser's
Warrants, to certify that this representation is true as of the time that such
Purchaser exercises such Purchaser's Warrants.

                  (f) General. Such Purchaser understands that the Shares are
being offered and sold in reliance on a transactional exemption from the
registration requirement of federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Shares. Purchaser understands that
no United States federal or state agency or any government or governmental
agency has passed upon or made any recommendation or endorsement of the Common
Shares and the Warrants.

                  (g) No General Solicitation. Such Purchaser acknowledges that
the Common Shares and Warrants were not offered to such Purchaser by means of
any form of general or public solicitation or general advertising, or publicly
disseminated advertisements or sales literature, including (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
(ii) any seminar or meeting to which such Purchaser was invited by any of the
foregoing means of communications.

                  (h) No Commissions or Similar Fees. In connection with the
purchase of the Common Shares and Warrants by such Purchaser, such Purchaser has
not and will not pay, and has no knowledge of the payment of, any commission or
other direct or indirect remuneration to any

                                       16
<PAGE>   21
person or entity for soliciting or otherwise coordinating the purchase of such
securities, except to such persons or entities as are duly licensed and/or
registered to engage in securities offering and selling activities (or are
exempt from such licensing and/or registration requirements) under applicable
federal laws and the laws of the state(s) in which such activities have taken
place in connection with the transaction contemplated by this agreement.

                  (i) Other Shares of Company Common Stock. The Purchaser does
not own any securities of the Company other than (i) its rights to acquire the
Common Shares, Warrants and Warrant Shares pursuant to this Agreement and (ii)
as set forth on Schedule 2.2(i).

                             ARTICLE III - COVENANTS

         The Company covenants with each of the Purchasers, which covenants are
for the benefit of each of the Purchasers and their permitted assignees (as
defined herein) as follows:

         Section 3.1 Securities Compliance.

                  (a) The Company shall notify the Commission in accordance with
their rules and regulations, of the transactions contemplated by any of the
Transaction Documents, including filing a Form D with respect to the Common
Shares, Warrants and Warrant Shares as may be required under Regulation D, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Common Shares and the Warrant Shares to the Purchasers or
subsequent holders.

                  (b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Purchasers set forth herein in order to determine the applicability of
federal and state securities laws exemptions and the suitability of such
Purchasers to acquire the Shares and the Warrants.

         Section 3.2 Registration and Listing. The Company will cause a
registration statement registering the Common Shares and the Warrant Shares to
be filed no later than 45 days after the Closing Date and will use its best
efforts to cause the registration statement to be declared effective within (i)
120 days after the Closing Date or (ii) five (5) business days of the date on
which the Commission informs the Company that it may request the acceleration of
the effectiveness of the registration statement, whichever date is the earlier
(the "Effectiveness Date"). The Company will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement or the Registration Rights Agreement, and will not take any action or
file any document (whether or not permitted by the Securities Act or the rules
promulgated thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company will take all action
(other than action which the Board of Directors reasonably determines is opposed
to the best interests of the stock holders of the Company) necessary to continue
the listing or trading of its Common Stock on the American

                                       17

<PAGE>   22
Stock Exchange or, without lapse of time following any delisting from the
American Stock Exchange, to effect the listing or trading of its Common Stock on
NASDAQ (NML or Small Cap) or the New York Stock Exchange.

         Section 3.3 Participation Rights.

                  (a) For a period commencing on the date hereof and ending one
year following the Effective Date, each Purchaser, severally, shall have the
right to purchase its pro rata portion of any Common Stock (or any options,
warrants, or rights of any nature to purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (collectively, "Convertible
Securities")) whether or not currently authorized, whenever the Company shall
issue any such Common Stock or Convertible Securities. A Purchaser's pro rata
portion, for purposes hereof, shall be the ratio of (i) the number of Shares
(including Warrant Shares, whether or not issued and outstanding) then owned by
such Purchaser to (ii) the total number of shares of Common Stock then
outstanding, without giving effect to the proposed issuance of Common Stock or
Convertible Securities.

                  (b) For a period commencing on the date hereof and ending one
year following the Effective Date, no shares of Common Stock or Convertible
Securities shall be issued by the Company unless the Company has simultaneously
offered, at the same price and, as nearly as may be practicable, on the same
terms and conditions, a pro rata portion of such Common Stock or Convertible
Securities to each Purchaser in accordance with this Section. In connection with
any such issuance, each Purchaser shall be entitled to review any offering
materials provided to any other potential investor in connection with such
proposed issuance.

                  (c) The provisions of this Section shall not apply to:

                           (i) the sale or issuance of 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 filed prior to the date
         hereof with the Commission 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) the issuance of shares of Common Stock or
         Convertible Securities pursuant to any merger transaction in which the
         Company is the surviving corporation or as consideration for the
         acquisition by the Company of assets or securities of another business
         entity;

                           (iii) any issuance of shares of Common Stock or
         Convertible Securities pursuant to the exercise or conversion of
         Convertible Securities outstanding on the date hereof (or issued as
         dividends on such Convertible Securities);

                           (iv) the issuance of Common Stock or Convertible
         Securities for no consideration in respect of outstanding shares of
         Common Stock or Convertible Securities in connection with any stock
         split or stock dividend by the Company or any similar event;

                                       18
<PAGE>   23
                           (v) the issuance of Common Stock or Convertible
         Securities in connection with any Strategic Alliance (as hereinafter
         defined);

                           (vi) the issuance of Common Stock or Convertible
         Securities in a registered public offering in which the gross proceeds
         are not less than $15,000,000.

         Section 3.4 Compliance with Laws . The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
have a Material Adverse Effect.

         Section 3.5 Keeping of Records and Books of Account. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company , and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.

         Section 3.6 Increase of Authorized Capital.

                  (a) At the next regularly scheduled annual meeting of
stockholders, but in no event later than June 30, 2001 (the earlier of such
dates being the "Increased Authorized Common Stock Deadline" or "IACS
Deadline"), or at any other meeting of stockholders (for any purpose) to be
called prior to the earlier of (i) such next regularly schedule annual meeting
or (ii) the IACS Deadline, the Company shall present for approval of the
stockholders an amendment of the Company's charter increasing the authorized
Common Stock to no less than 80,000,000 shares, and to solicit proxies in
support of such amendment, and take all other steps necessary to effect such
amendment or otherwise comply with this covenant.

                  (b) If at any time in the period commencing on the
Effectiveness Date (as defined in the Registration Rights Agreement) and ending
on the IACS Deadline:

                           (i) any claim on the shares reserved for issuance as
                  the Warrant Shares is lawfully enforced (other than by or for
                  the benefit of the holders of the Warrants), and

                           (ii) the Current Market Price (as defined in the
                  Warrant) of the Common Stock is not less than the Warrant
                  Exercise Price (as defined in the Warrant),

then the Company shall take all necessary action to increase its authorized
capital to enable the Company to be authorized to issue the Warrant Shares,
including without limitation the calling of a special meeting of stockholders
and the solicitation of proxies in support of action to authorize any necessary
increase in the authorized Common Stock of the Company.

                  (c) Notwithstanding any contrary or inconsistent
representation, warranty or other provision hereof or in the Warrants, if at any
time after the IACS Deadline (i) the shares of Common Stock reserved for
issuance as the Warrant Shares are, in whole or in part, subject to a reserve
for any other or additional purpose, or (ii) the Company has failed or refused
to establish or maintain a

                                       19
<PAGE>   24
reserve of shares of Common Stock for issuance of the Warrant Shares, whether
voluntarily or otherwise, then the Company shall use its best efforts to
increase the authorized capital stock of the Company so that it shall be able to
fully reserve shares of Common Stock for issuance as Warrant Shares.

                           After the First Tranche Closing Date, and so long as
any Warrants are outstanding, the Company will reserve for issuance under the
outstanding Warrants a number of shares of Common Stock equal to the lesser of
(i) 100% of the Warrant Shares acquirable under the outstanding Warrants or (ii)
the Available Unissued Shares. The Company understands that the reservation of
shares of Common Stock required hereby is subject to change every business day
that there is a change in the Current Market Price of the Common Stock (as
defined in the Warrants).

         Section 3.7 Filing of Current Report with Respect to this Transaction.
Without limiting the generality of any other covenants or representations and
warranties set forth herein, the Company will timely disclose this transaction
and its material terms, including copies of the Transaction Documents, in a
Current Report on Form 8-K to be filed with the Commission.

         Section 3.8 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company under any Transaction Document.

         Section 3.9 Reports and Access to Records. To the extent that the
Company is no longer required to provide information pursuant to the Exchange
Act, the Company, at its expense, shall provide the Purchasers with (i) (within
45 days after the close of each fiscal quarter in each fiscal year of the
Company) an unaudited consolidated balance sheet of the Company, a consolidated
statement of income of the Company, and a consolidated statement of cash flows
of the Company, as at the end of and for the period commencing at the end of the
previous fiscal year and ending with such month, prepared in accordance with
GAAP; and (ii) (within 90 days after the close of each fiscal year then ended of
the Company) a consolidated balance sheet of the Company, a consolidated
statement of income of the Company, and a consolidated statement of cash flows
of the Company, as at the end of and for the fiscal year then ended, setting
forth the corresponding figures of the previous fiscal year in comparative form,
and certified (without any qualification or exception deemed material by the
Purchasers) by the independent certified public accountants of the Company.

         Section 3.10 Full Disclosure. To the extent that any material
information set forth in any Schedule referred to in Section 2.1 has not been
fully disclosed in the SEC Documents, the Company will disclose such information
(i) in the Registration Statement to be filed under the Registration Rights
Agreement, and (ii) in the Current Report on Form 8-K to be filed by the Company
disclosing this Agreement and the transactions contemplated hereby or in Part II
of the next Quarterly Report on Form 10-Q to be filed in lieu of such a Current
Report.

         Section 3.11 Intentionally Omitted.

         Section 3.12 Regulation S. The Company covenants and agrees that if the
Company fails to register the Common Shares and the Warrant Shares under the
terms and conditions of the

                                       20
<PAGE>   25
Registration Rights Agreement attached hereto as Exhibit D or such registration
shall no longer be effective, then for so long as any of the Shares remain
outstanding and continue to be "restricted securities" within the meaning of
Rule 144 under the Securities Act, the Company shall, in order to permit resales
of the Shares pursuant to Regulation S under the Securities Act, (a) continue to
file all material required to be filed pursuant to Section 13(a) or 15(d) of the
Exchange Act and (b) not knowingly engage in directed selling efforts in
connection with the resale of securities by any Purchaser under Regulation S.

         Section 3.13 Intentionally omitted.

         Section 3.14 Exemption Under Rights Agreement. The opinion to be
delivered by the Company's counsel at the Closing shall expressly indicate that
the Closing of the transactions contemplated hereby will not result in a
distribution under the Stockholders' Rights Agreement dated July 27, 1995, as
amended, as set forth in the SEC Documents.

         Section 3.15 Transfer Agent Instructions. Prior to registration of the
Common Shares and the Warrant Shares under the Securities Act, all such
certificates shall bear the restrictive legend specified in Section 6.1 of this
Agreement. The Company covenants that no instruction other than the usual
stop-transfer instructions applicable to unregistered shares will be given by
the Company to its transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 3.15 shall affect in any way each Purchaser's obligations and
agreements set forth in Section 6.1 to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Shares may be
made without registration under the Securities Act or the Purchaser provides the
Company with reasonable assurances that the Shares can be sold pursuant to Rule
144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company shall permit the
transfer, and, in the case of the Common Shares and the Warrant Shares, promptly
instruct its transfer agent to issue one (1) or more certificates in such name
and in such denominations as specified by such Purchaser and without any
restrictive legend. The Company acknowledges that a breach by it of its
obligations under this Section 3.15 will cause irreparable harm to the
Purchasers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.15 will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 3.15, that the Purchasers shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

                                       21
<PAGE>   26
                             ARTICLE IV - CONDITIONS

         Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Shares at Closing. The obligation hereunder of the Company to issue and
sell the Common Shares and Warrants to the Purchasers at the Closing is subject
to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.

                  (a) Accuracy of Each Purchaser's Representations and
Warranties. The representations and warranties of each Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which shall be true
and correct in all material respects as of such date.

                  (b) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing, including the
payment by wire transfer of funds in accordance with this Agreement in the
amount of the Purchase Price set forth opposite such Purchaser's name on Exhibit
A under the heading "Purchase Prices" for the First or Second Tranche Closing,
as applicable; such Purchaser shall have executed and delivered this Agreement
and the Registration Rights Agreement to the Company.

                  (c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

         Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares at the Closing. The obligation hereunder of each Purchaser
to acquire and pay for the applicable Common Shares and Warrants at the Closing
is subject to the satisfaction or waiver, at or before the Closing, of each of
the conditions set forth below. These conditions are for each Purchaser's sole
benefit and may be waived by such Purchaser at any time only in its sole
discretion.

                  (a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a particular date), which shall be true and correct in all material
respects as of such date.

                  (b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing. Without limiting the
generality of the foregoing, with respect to the Second Tranche Closing, the
Company shall have timely filed the Current Report on Form 8-K required under
Article 3.

                                       22
<PAGE>   27
                  (c) No Suspension, Etc. From the date hereof to the Closing
Date, trading in the Company's Common Stock shall not have been suspended by the
Commission, and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets ("Bloomberg") shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States, or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Common Shares.

                  (d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.

                  (e) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.

                  (f) Opinion of Counsel, Etc. At the Closing, the Purchasers
shall have received an opinion of counsel to the Company, dated the date of such
Closing, in the form of Exhibit E hereto, and the such other legal opinions,
certificates and documents as the Purchaser or its counsel shall reasonably
require incident to the Closing.

                  (g) Registration of the Shares. Prior to the First Tranche
Closing, the Company shall have executed and delivered the Registration Rights
Agreement to the Purchasers. Prior to the Second Tranche Closing, the
Registration Statement shall have become effective in accordance with the
requirements of the Registration Rights Agreement, and the Shares shall then be
listed for trading on the American Stock Exchange (or, if the Common Stock is
then listed on the New York Stock Exchange, or NASDAQ NML, or NASDAQ Small Cap,
the Shares shall be listed on such other exchange or quotation system). If the
Registration Statement shall not have become effective, and the Shares are not
so listed, on or before the One Hundred Twentieth Day (120th) day after the
First Tranche Closing, then, at the election of the Purchasers, the Purchasers
shall no longer be obligated to purchase the Second Tranche Common Shares and
Second Tranche Warrants; provided, however, that an election not to purchase the
Second Tranche Common Shares or the Second Tranche Warrants under the provisions
of this Section shall not in any way terminate or otherwise diminish the
obligations of the Company under this Agreement or the Registration Rights
Agreement with respect to the First Tranche Common Shares and the Warrant Shares
underlying the First Tranche Warrants.

                                       23
<PAGE>   28
                  (h) Stock Certificates. At the First Tranche Closing, the
Company shall have executed and delivered to each Purchaser the certificates (in
such denominations as such Purchaser shall request) for the Common Shares and
the Warrants being purchased by such Purchaser at the First Tranche Closing. At
the Second Tranche Closing, the Company shall have executed and delivered to
each Purchaser the certificates (in such denominations as such Purchaser shall
request) for the Common Shares and the Warrants being purchased by such
Purchaser at the Second Tranche Closing.

                  (i) Resolutions. Prior to the Closing, the Board of Directors
of the Company shall have adopted resolutions consistent with Section 2.1(b)
above in a form reasonably acceptable to each Purchaser (the "Resolutions").

                  (j) Reservation of Shares. As of the First Tranche Closing
Date, the Company shall have reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the issuance of the Common Shares due
at the Second Tranche Closing and the exercise of the Warrants, a number of
shares of Common Stock equal to at least (i) 100% of the Common Shares due at
the Second Tranche Closing and (ii) as many Warrant Shares as possible not in
excess of the lesser of (A) 100% of the Warrant Shares acquirable on exercise of
the Warrants at the First and Second Tranche Closings or (B) the Available
Unissued Shares. Nothing herein shall be construed to relieve the Company of any
of its obligations to issue the Warrants and, so long as any of the Warrants are
outstanding, its continuing obligations upon exercise of any Warrants to issue
the Warrant Shares, it being intended that the Company shall increase its
authorized but unissued Common Stock to such amounts as shall be necessary to
issue the Warrant Shares so long as any Warrants are outstanding. Such
reservation of Shares shall be and remain in full force and effect as a
condition of the Purchasers to complete the Second Tranche Closing.

                           After the First Tranche Closing Date, and so long as
any Warrants are outstanding, the Company will reserve for issuance under the
outstanding Warrants a number of shares of Common Stock equal to the lesser of
(i) 100% of the Warrant Shares acquirable under the outstanding Warrants or (ii)
the Available Unissued Shares. The Company understands that the reservation of
shares of Common Stock required hereby is subject to change every business day
that there is a change in the Current Market Price of the Common Stock (as
defined in the Warrants).

                  (k) Intentionally omitted.

                  (l) Secretary's Certificate. At the Closing, the Company shall
have delivered to each Purchaser a secretary's certificate, dated as of such
Closing Date, as to (i) the Resolutions, (ii) the Articles and (iii) the Bylaws,
each as in effect at the Closing, and (iv) the authority and incumbency of the
officers of the Company executing the Transaction Documents and any other
documents required to be executed or delivered in connection therewith.

                  (m) Intentionally omitted.

                  (n) Officer's Certificate. At the Closing, the Company shall
have delivered to such Purchaser a certificate of an executive officer of the
Company, dated as of the Closing Date,

                                       24
<PAGE>   29
confirming the accuracy of the Company's representations, warranties and
covenants as of the Closing Date and confirming the compliance by the Company
with the conditions precedent set forth in this Section 4.2 as of the Closing
Date. The certificate shall in such form as the Purchasers shall reasonably
request. The Company understands that the certificate to be required at the
Second Tranche Closing may, in the absolute discretion of the Purchasers, be in
a different form as required at the First Tranche Closing.

                         ARTICLE V - REGISTRATION RIGHTS

         At the Closing, the Company and each of the Purchasers shall enter into
a Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement").

                      ARTICLE VI - STOCK CERTIFICATE LEGEND

         Each certificate representing the Common Shares, the Warrants, and the
securities issued upon exercise thereof, as applicable and appropriate, shall be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required by applicable federal, provincial or state securities or
"blue sky" laws):

                  THE    SECURITIES    REPRESENTED   BY   THIS
                  CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933,
                  AS AMENDED (THE  "SECURITIES  ACT") OR STATE
                  SECURITIES   LAWS   AND  MAY  NOT  BE  SOLD,
                  TRANSFERRED,     ASSIGNED,     PLEDGED    OR
                  HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
                  REGISTERED   UNDER   THAT   ACT  AND   UNDER
                  APPLICABLE  STATE  SECURITIES LAWS OR ALTEON
                  INC. (THE "COMPANY")  SHALL HAVE RECEIVED AN
                  OPINION   OF   LEGAL   COUNSEL    REASONABLY
                  ACCEPTABLE TO THE COMPANY THAT  REGISTRATION
                  OF SUCH SECURITIES  UNDER THE SECURITIES ACT
                  AND APPLICABLE  STATE SECURITIES LAWS IS NOT
                  REQUIRED.

         The Company agrees to reissue certificates representing the Shares or
the Warrants, without the legend set forth above if at such time, prior to
making any transfer of any Shares or the Warrants such holder thereof shall give
written notice to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request and such holder otherwise
complies with the terms of the Transaction Documents. The legend set forth above
shall be removed and the Company shall issue a certificate without such legend
to the holder of any Shares or Warrants upon which it is stamped if, unless
otherwise required by federal or state securities laws, (a) the sale of such
Shares or Warrants is registered under the Securities Act (including
registration pursuant to Rule 415 thereunder) as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a sale or transfer of
such Shares or Warrants may be made without registration under the Securities
Act; or (c) such holder provides

                                       25
<PAGE>   30
the Company with reasonable assurances that such Shares or Warrants can be sold
under Rule 144(k). Each Purchaser agrees that it will only sell Shares or
Warrants, including those represented by a certificate(s) from which the legend
has been removed, pursuant to an effective registration statement, under an
exemption from the registration requirements of the Securities Act or in
accordance with Rule 144(k). In the event the above legend is removed from any
Shares or Warrants and the effectiveness of a registration statement covering
such Shares or Warrants is suspended or the Company determines, based upon an
opinion of counsel, that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to such
Purchaser the Company may require that the above legend be placed on any such
Shares or Warrants that cannot then be sold pursuant to an effective
registration statement, under an exemption from the registration requirements of
the Securities Act or under Rule 144(k) and such Purchaser shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Shares or Warrants may again be sold pursuant to an effective registration
statement, under an exemption from the registration requirements of the
Securities Act or under Rule 144(k). The restrictions on transfer contained in
Section 6.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Agreement.

                            ARTICLE VII - TERMINATION

         Section 7.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to any Closing by the mutual written consent of the
Company and the Purchasers.

         Section 7.2 Other Termination. This Agreement may be terminated by the
action of the Board of Directors of the Company or by any one or more of the
Purchasers at any time if the Closing shall not have been consummated by the
Closing Date, as long as the failure to so consummate is not the fault of the
terminating party.

         Section 7.3 Termination of Closing. If the Second Tranche Closing has
not occurred on or prior to the date called for in Sections 1.2(b) and 4.2(g),
those sections and provisions in this Agreement relating to the Second Tranche
Closing may be terminated by the action of the Board of Directors of the Company
or by any one or more of the Purchasers as long as the failure to consummate the
Closing is not the fault of the terminating party.

         Section 7.4 Effect of Termination. In the event of termination by the
Company or any one or more of the Purchasers of this Agreement or any part
hereof, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement and the Registration Rights
Agreement shall be terminated without further action by either party. If this
Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement
shall become void and of no further force and effect, except for Sections 9.1
and 9.2, and Article VIII herein. Nothing in this Section 7.4 shall be deemed to
release the Company or any Purchaser from any liability for any breach under
this Agreement or the Registration Rights Agreement, or to impair the rights of
the Company and the Purchasers to compel specific performance by the other party
of its obligations under this Agreement and the Registration Rights Agreement.

                                       26
<PAGE>   31
                         ARTICLE VIII - INDEMNIFICATION

         Section 8.1. Indemnification Generally. (a) The Company agrees to
indemnify and hold harmless each Purchaser (which term, for purposes of this
Article VIII, includes each Purchaser and its respective directors, partners,
members, managers, officers and employees), from and against (i) 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
Registration Rights Agreement or the Warrant, or (ii) 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 (i) the Purchaser's gross
negligence, bad faith or willful misconduct in its capacity as a holder of the
Shares or Warrants, or (ii) any untrue statements or omissions made by the
Purchaser to the Company in writing for inclusion in the a registration
statement of the Company.

                  (b) 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
Registration Rights 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.

         Section 8.2 Registration. (a) 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 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

                                       27
<PAGE>   32
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.

                  (b) 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 (i)
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 (ii) 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 (iii) 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.

         Section 8.3 Procedure. (a) Any party entitled to indemnification under
this Article VIII (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

                                       28
<PAGE>   33
not relieve the Indemnifying Party of its obligations under this Article VIII
except to the extent that the Indemnifying Party is actually prejudiced by such
failure to give notice.

                  (b) 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.

                  (c) 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.

                  (d) 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.

                  (e) Notwithstanding anything in this Article VIII 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 Article VIII 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 (i) any cause of action or similar rights of the Indemnified Party
against the Indemnifying Party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

                                       29
<PAGE>   34
         Section 8.4 Contribution. If the indemnification provided for in this
Article 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 (i) 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 (ii)
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.

         Section 8.5 Survival of Indemnification. The indemnity and contribution
agreements contained in this Article 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.

                           ARTICLE IX - MISCELLANEOUS

         Section 9.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement, provided,
however, that the Company shall pay, from the aggregate Purchase Prices due at
the First Tranche Closing, all attorneys' fees and expenses (exclusive of
disbursements and out-of-pocket expenses) incurred by the Purchasers in
connection with the preparation, negotiation, execution and delivery of this
Agreement, the other Transaction Documents and the consummation of the
transactions contemplated hereunder and thereunder to the extent such fees and
expenses do not exceed $40,000. The Purchasers shall deliver to the Company
copies of bills, in such attorneys' usual form, for their fees and expenses, at
the First Tranche Closing. In addition, the Company shall pay all reasonable
fees and expenses incurred by the Purchasers in connection with any amendments,
modifications or waivers of this Agreement or any of the other Transaction
Documents, or incurred in connection with the enforcement of this Agreement or
any of the other Transaction Documents (provided that the Purchasers are the
prevailing parties, in whole or in part, in such enforcement), including,
without limitation, all reasonable attorneys fees and expenses. The Company
shall pay all stamp or other similar taxes and duties levied in connection with
issuance of the Shares pursuant hereto.

                                       30
<PAGE>   35
         Section 9.2 Specific Enforcement, Consent to Jurisdiction.

                  (a) The remedies provided in this Agreement and the
Registration Rights Agreement shall be cumulative and in addition to all other
remedies available under this Agreement and the Registration Rights Agreement,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Purchaser's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement or the Registration Rights
Agreement. Amounts set forth or provided for herein and therein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Purchasers thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder and thereunder will cause irreparable harm to the holders
of the Common Shares and Warrants that the remedy at law for any such breach may
be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holders of the Common Shares and Warrants shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

                  (b) Each of the Company and the Purchasers (i) hereby
irrevocably submits to the jurisdiction of the United States District Court
sitting in the Southern District of New York and the courts of the State of New
York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or any of the other
Transaction Documents or the transactions contemplated hereunder or thereunder
and (ii) 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 Purchasers 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 9.2 shall affect or limit any right to serve
process in any other manner permitted by law.

         Section 9.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding and agreement of the parties with respect to the matters
covered hereby and, except as specifically set forth herein or in the
Transaction Documents, neither the Company nor any of the Purchasers makes any
representations, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended other than by a written instrument signed by the
Company and the Purchasers (or the Purchasers' respective
successors-in-interest, other than successors acquiring Shares in a registered
offering or sales under Rule 144) of at least two-thirds (2/3) of the Common
Shares then outstanding, and no provision hereof may be waived other than by a
written instrument signed by the party (or such party's
predecessors-in-interest) against whom enforcement of any such amendment or
waiver is sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders (other than persons acquiring Shares in
a registered offering or sales under Rule 144) of the

                                       31
<PAGE>   36
Common Shares then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration is also offered to
all of the parties to the Transaction Documents or holders of Common Shares, as
the case may be.

         Section 9.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

If to the Company:         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

with copies to:            Smith, Stratton, Wise, Heher & Brennan
                           600 College Road East
                           Princeton, New Jersey 08540
                           Attn:  Richard J. Pinto, Esq.
                           Telephone No.: 609-924-6000
                           Facsimile No. : 609-987-6651

If to any Purchaser:       At the address of such Purchaser as set forth on
                           Exhibit A to this Agreement, with copies as specified
                           in writing by such Purchaser, and

with copies to:            Kane Kessler, P.C.
                           1350 Avenue of the Americas - 26th Floor
                           New York, New York 10019
                           Attention:  Robert L. Lawrence, Esq.
                           Tel No.:  (212) 541-6222
                           Fax No.: (212) 245-3009

Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.

         Section 9.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in

                                       32
<PAGE>   37
the future or a waiver of any other provisions, condition or requirement hereof,
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it thereafter.

         Section 9.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.

         Section 9.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns;
provided, however, that persons who acquire Shares from a Purchaser which have
been registered in accordance with the Registration Rights Agreement or sold by
a Purchaser under Rule 144, and which Shares are not required to be legended
with respect to the Securities Act, shall not succeed to any rights of the
Purchaser hereunder other than such successor's capacity as a holder of Common
Stock of the Company. After each Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement. Without limiting the generality of any of the foregoing
provisions of this Section, a bona fide pledgee for value of any Shares of any
Purchaser shall be deemed a successor of the Purchaser and have all of the
rights of such Purchaser hereunder unless and until such Shares are sold by such
pledgee in a registered offering or pursuant to Rule 144.

         Section 9.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

         Section 9.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.

         Section 9.10 Survival. The representations and warranties of the
Company and the Purchasers contained in: (i) Sections 2.1(o) and (s) shall
survive indefinitely and (ii)those contained in Article II, with the exception
of Sections 2.1(o) and (s), shall survive the execution and delivery hereof and
the applicable Closing until the date three (3) years from the Closing Date; and
(iii) the agreements and covenants set forth in Articles I, III, V, VII, VIII
and IX of this Agreement shall survive the execution and delivery hereof and any
Closing hereunder, as applicable, until the number of Shares beneficially held
by the Purchasers in the aggregate(determined in accordance with Rule 13d-3
under the Exchange Act) constitute less than 2% of the total combined voting
power of all voting securities then outstanding, provided, that Sections 3.1,
3.2, 3.4, 3.5, 3.7, 3.8, 3.9, 3.10 and 3.12 shall not expire until the
Registration Statement required by Section 2 of the Registration Rights
Agreement is no longer required to be effective under the terms and conditions
of Registration Rights Agreement. If at any time hereafter the Company is not
subject to the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act, the provisions of Section 3.9 shall be applicable to the Company
so long as any Purchaser or any of its assigns owns any Warrants or Shares.

                                       33
<PAGE>   38
         Section 9.11 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional executed signature pages to be physically
delivered to the other parties within five (5) days of the execution and
delivery hereof.

         Section 9.12 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Purchasers,
unless and until such disclosure is required by law or applicable regulation or
requirements of the American Stock Exchange or other exchange on which the
Common Stock is then listed or qualified for trading, and then only to the
extent of such requirement. In addition to the foregoing, any disclosure by the
Company of the name of the Purchasers shall be subject to review and comment by
the Purchasers prior to disclosure, except with respect to exhibits to be filed
with the Company's Current Report on Form 8-K regarding this transaction.

         Section 9.13 Severability. The provisions of this Agreement and the
Registration Rights Agreement are severable; in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions contained in this Agreement or the Registration Rights
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement or the Registration
Rights Agreement, and this Agreement or the Registration Rights Agreement, as
applicable shall be construed and enforceable as if such invalid or illegal or
unenforceable provision, or part of such provision, had never been contained
herein or therein, so that such provisions would be valid, legal and enforceable
to the maximum extent possible.

         Section 9.14 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Common Shares, the Warrants, the Warrant Shares, and the Registration Rights
Agreement.

         Section 9.15 Investigation. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Company under this Agreement or the
Transaction Documents (including under any certificate furnished pursuant to
this Agreement or any of the Transaction Documents) shall not in any way
diminish any liability hereunder.

         Section 9.16 Certain Definitions. As used in this Agreement:

                                       34
<PAGE>   39
         "Available Unissued Shares" means the number of shares of the Company's
Common Stock which is not issued and outstanding and not reserved for issuance
under (i) the Company's stock option plans and the outstanding warrants, each as
identified in Schedule 2.1(c), Capitalization, and (ii) the conversion rights
with respect to the Series G Preferred Stock and Series H Preferred Stock. The
Available Unissued Shares shall be determined on a daily basis based upon the
Current Market Price of the Common Stock as defined in the Warrants.

                  "Knowledge" of the Company, whether or not such term is
capitalized, means actual knowledge of any officer of the Company, and any
information of which an officer should have had knowledge by making due inquiry.

                  "Material Adverse Effect" means any adverse effect on the
business, operations, properties, prospects, assets or financial condition of
the Company or which is likely to materially hinder the performance by the
Company of its obligations hereunder and under the other Transaction Documents
(as defined in Section 2.1(b) hereof).

                  "Option Forbearance Letter" means that certain letter
agreement dated on or about the date hereof between the Company and Kenneth I.
Moch (the "Optionee") with respect to his agreement not to exercise options in
certain circumstances specified therein.

                  "SEC Documents" means only the following documents filed by
the Company with the Commission:

                           (i)      Annual Report on Form 10-K for the year end
                                    December 31, 1999;

                           (ii)     Quarterly Report on Form 10-Q for the
                                    Quarter Ended March 31, 2000;

                           (iii)    Quarterly Report on Form 10-Q for the
                                    Quarter Ended June 30, 2000;

                           (iv)     Definitive Proxy Statement filed with
                                    respect to the 2000 Annual Meeting of
                                    Stockholders held June 12, 2000;

                           (v)      Current Reports on Form 8-K filed on the
                                    following dates:
                                            January 7, 2000 (2 separate reports)
                                            March 17, 2000 (1 report)
                                            April 12, 2000 (2 separate reports)

                           (vi)     All exhibits filed with any of the foregoing
                                    documents; provided, however, that exhibits
                                    incorporated by reference into such
                                    documents shall not be considered "SEC
                                    Documents" for purposes hereof, unless
                                    listed on Schedule 9.16(b)(vi).

                                       35
<PAGE>   40
                  "Strategic Alliance" shall mean a transaction approved by the
Board of Directors of the Company in which the acquirer of the Company's capital
stock has a business relationship with the Company which is (i) material to the
Company independent of such acquirer's acquisition of the Company's capital
stock, and (ii) arises out of the transaction in which the acquirer acquired the
Company's capital stock.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       36
<PAGE>   41
         IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be duly executed by their respective authorize officer as of the
date first above written.

<TABLE>
<S>                                         <C>
NARRAGANSETT I, LP                          ALTEON INC.

By: /S/ Joseph L. Dowling III                By: /S/ Kenneth I. Moch
   ---------------------------------            --------------------------------
     Joseph L. Dowling III, Managing            Kenneth I. Moch, Chief Executive
     Member                                     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>   42
                                   EXHIBIT A
                                     TO THE
                  COMMON STOCK AND WARRANTS PURCHASE AGREEMENT

                                  ALTEON INC.

                               LIST OF PURCHASERS

<TABLE>
<CAPTION>
                                        First Tranche                                  Second Tranche
Name and Address of Purchaser
                                                                           Price                                          Price
                                                       Series 1  Series 2  (Series 1                  Series 1  Series 2  (Series 1
                                        Shares  Price  Warrants  Warrants  and 2)      Shares  Price  Warrants  Warrants  and 2)
<S>                                     <C>     <C>    <C>       <C>       <C>         <C>     <C>    <C>       <C>       <C>

EGM MEDICAL TECHNOLOGY FUND, L.P.,
c/o Emerging Growth Management,
One Embarcadero Center, Ste. 2410,
San Francisco, CA 94111,
Attn: Marc Pentopoulos

EGM MEDICAL TECHNOLOGY OFFSHORE FUND,
c/o Emerging Growth Management

NARRAGANSETT I, LP
375 Park Avenue, 14th Floor,
New York, NY 10152,
Attn: CFO

NARRAGANSETT OFFSHORE, LTD.
375 Park Avenue, 14th Floor,
New York, NY 10152,
Attn: CFO

S.A.C. CAPITAL ASSOCIATES, LLC
c/o SAC Capital Advisors, LLC,
777 Long Ridge Road,
Stamford, Conn.06902,
Attn: General Counsel
</TABLE>
<PAGE>   43
<TABLE>
<CAPTION>
                                        First Tranche                                  Second Tranche
Name and Address of Purchaser
                                                                           Price                                          Price
                                                       Series 1  Series 2  (Series 1                  Series 1  Series 2  (Series 1
                                        Shares  Price  Warrants  Warrants  and 2)      Shares  Price  Warrants  Warrants  and 2)
<S>                                     <C>     <C>    <C>       <C>       <C>         <C>     <C>    <C>       <C>       <C>

SDS MERCHANT FUND, LP
375 Park Avenue, 14th Floor,
New York, NY 10152,
Attn: Steve Derby

HERRIOT TABUTEAU
401 East 64th Street, Apt. 4D
New York, NY 10021

         Totals
</TABLE>
<PAGE>   44
                                SCHEDULE 2.1 (a)

                                  Organization

                  See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7 and 3.8 to the
Company's annual report on Form 10-K for the year ended December 31, 1999.
<PAGE>   45
                                SCHEDULE 2.1 (c)

                                 Capitalization

(i)               Authorized capital stock as of September 29, 2000:

                          Preferred Stock:              1,993,086 shares
                          Common Stock:                40,000,000 shares

                  Shares currently issued and outstanding as of September 29,
2000:

                          Series G Preferred Stock:         874 shares
                          Series H Preferred Stock:       2,626 shares
                          Common Stock:              19,400,201 shares

                  Pre-emptive and registration rights and other rights to obtain
     capital stock are set forth in the following Exhibits to the Company's
     Annual Report on Form 10-K for the year ended December 31, 1999: 3.2, 3.4,
     3.5, 3.6, 3.7, 4.1, 4.2, 4.3, 4.4, 4.5, 10.1, 10.2, 10.23.

                  As of September 29, 2000, options to purchase 5,004,521 shares
of Common Stock were outstanding pursuant to Exhibits 10.1 and 10.2.

                  As of September 29, 2000 warrants to purchase 60,000 shares of
common stock, at an exercise price of 4.025 per share and an expiration date of
April 24, 2004, were outstanding.
<PAGE>   46
                                SCHEDULE 2.1 (i)

                             Undisclosed Liabilities

                  The Company does not have any liabilities, obligations, claims
or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) except as reflected in its quarterly report on
Form 10-Q for the quarter ended June 30, 2000 and other than those incurred in
the ordinary course of business since June 30, 2000, and which, individually or
in the aggregate, do not or would not have a Material Adverse Effect.
<PAGE>   47
                                SCHEDULE 2.1 (k)

                                  Indebtedness

                  See the financial statements contained in the Company's annual
report on Form 10-K for the year ended December 31, 1999 and quarterly report on
Form 10-Q for the quarter ended June 30, 2000.

                  The Company is not in default with respect to any
Indebtedness.
<PAGE>   48
                                SCHEDULE 2.1 (m)

                                   Litigation

                  A former enrollee in one of the Company's clinical trials has
brought suit against the Company in federal and state court in North Carolina
claiming unspecified damages for injuries allegedly sustained as a result of his
participation in the trial. The Company's liability insurance carrier is
defending these actions.
<PAGE>   49
                                SCHEDULE 2.1 (o)

                                      Taxes

                  The Company's federal income tax returns for 1992 and 1993
were audited by the Internal Revenue Service. No taxes, penalties, interest or
other payments with respect to such years are owed to the Internal Revenue
Service and not reflected on the June 30, 2000 balance sheet.
<PAGE>   50
                                SCHEDULE 2.1 (u)

                               Material Agreements

All existing material agreements have been filed as Exhibits to the Company's
annual report on Form 10-K for the year ended December 31, 1999 and to the
Company's quarterly reports on Forms 10-Q for the quarters ended March 31, 2000
and June 30, 2000.
<PAGE>   51
                                SCHEDULE 2.1 (v)

                          Transactions with Affiliates

                  As set forth in the Company's Proxy Statement for its 2000
Annual Meeting of Stockholders in the section entitled "Employment Agreements
and Termination of Employment Arrangements with Executive Officers," in Exhibit
10.1 to the Company's quarterly report on Form 10-Q for the quarter ended March
31, 2000 and in the following Exhibits to the Company's annual report on Form
10-K for the year ended December 31, 1999: 10.3, 10.12, 10.15, 10.16, 10.17,
10.18, 10.19, 10.22, 10.23, 10.28 and 10.30.

                  The Company has no knowledge as to whether any of its
customers or suppliers have relationships with any of its officers, directors,
stockholders or other affiliates.
<PAGE>   52
                                SCHEDULE 2.1 (y)

                                    Employees

                  Employment, confidentiality and similar agreements are as set
forth in Exhibit 10.1 on the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 2000 and in the following Exhibits to the Company's
annual report on Form 10-K for the year ended December 31, 1999: 10.3, 10.12,
10.15, 10.16, 10.17, 10.18, 10.19, 10.22, 10.28, and 10.30. All employees are
subject to propriety information and confidentiality agreements.
<PAGE>   53
                                SCHEDULE 2.1 (z)

                              Certain Developments

                  Options to purchase 690,020 shares of common stock were
granted subsequent to December 31, 1999.

                  Options to purchase 210,500 shares of common stock were
exercised subsequent to December 31, 1999.

                  The number of outstanding shares of Series G and Series H
Convertible Preferred Stock as of June 30, 2000, as reported on Schedule 2.1(c),
reflects dividends declared thereon on June 30, 2000 in accordance with the
terms of such stock.

<PAGE>   54
                                 SCHEDULE 2.2(i)

      COMPANY SECURITIES OWNED BY PURCHASERS PRIOR TO FIRST TRANCHE CLOSING

<TABLE>
<S>                                            <C>
         S.A.C. Capital Associates, LLC:       30,000 shares of Common Stock

         Herriott Tabuteau:                    33,000 shares of Common Stock
</TABLE>
<PAGE>   55
                              SCHEDULE 9.16 (b)(vi)

   Exhibits Incorporated by Reference which Constitute a Part of SEC Documents

                  All Exhibits to SEC Documents which are referred to in the
Schedules to the agreement to which this Schedule 9.16(b)(vi) is attached shall
be considered SEC Documents.

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